Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, July 20, 2009

Morgan Stanley Settles SEC Charges Involving Recommendations about Money Managers

The SEC and Morgan Stanley settled charges that the firm and one of its former investment adviser representatives misled clients about the money managers being recommended to them and failing to disclose conflicts of interest.  According to the SEC’s orders in the case, Morgan Stanley breached its fiduciary duty to advisory clients in its Nashville, Tenn., branch office by making material misstatements about a program through which the firm assisted clients in developing investment objectives and in selecting properly vetted money managers. Contrary to its disclosures, Morgan Stanley recommended some money managers who had not been approved for participation in the firm’s advisory programs and had not been subject to the firm’s due diligence review. William Keith Phillips of Nashville, then a top producer at Morgan Stanley, steered clients to three unapproved managers in particular. Unbeknownst to investors, Morgan Stanley and Phillips received substantial brokerage commissions or fees from these three unapproved managers.

Morgan Stanley has agreed to pay a $500,000 penalty.

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