Morgan Stanley to Pay $13 Million Over UIT Supervision
September 25 2017 - 3:17PM
Dow Jones News
By Dick Streuly
Wall Street's self-regulator ordered Morgan Stanley to pay $13
million in fines and restitution to clients for failing to properly
supervise trades that increased charges and fees to customers of
certain investment funds.
The Financial Industry Regulatory Authority said Monday that the
investment bank provided insufficient guidance to its staff on how
to detect unsuitable short-term trades of unit investment trusts,
or UITs.
From January 2012 through June 2015, Morgan Stanley
representatives advised thousands of customers to sell their UITs
before their maturity date and roll their investment into a new
trust, according to the regulator.
A representative from the bank said it is pleased to have
resolved this matter and to have been recognized by Finra for its
cooperation.
By selling their UIT position before the maturity date and then
rolling the funds over into a new trust, clients may pay higher
sale charges over time, Finra said.
UITs are a type of investment fund that offers units in a
portfolio of securities. At the end of the trust's life, investors
can receive cash equal to the net asset value of the units or they
can roll the current value of their investments into another
trust.
Finra fined Morgan Stanley $3.25 million, while the bank will
have to pay about $9.78 million in restitution to more than 3,000
customers.
"Due to the long-term nature of UITs, their structure, and
upfront costs, short-term trading of UITs may be improper and
raises suitability concerns," said Susan Schroeder, Finra executive
vice president and head of enforcement.
In settling the investigation, Morgan Stanley neither admitted
nor denied the charges, but consented to the entry of Finra's
findings.
(END) Dow Jones Newswires
September 25, 2017 15:02 ET (19:02 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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