Morgan Stanley will pay $17 million to settle charges by the Securities and Exchange Commission that it failed to supervise four former financial advisers accused of market timing and other deceptive trading practices.
Without admitting or denying the charges, Morgan Stanley consented to pay a penalty of $11,880,000 and prejudgment interest of $5,120,000, for a total of $17 million.
“Morgan Stanley is pleased to settle this matter involving the behavior of four financial advisers that occurred more than four years ago,” said a Morgan Stanley spokesperson in a statement. “We have since adopted new policies and procedures to detect and prevent market timing and late trading.”
The SEC said the four advisers engaged in deceptive practices that included trading in multiple brokerage accounts, trading using different financial adviser identification numbers and trading through variable annuity contracts.
Between January 2002 and August 2003, the advisers used 11 different identification numbers, opened 122 brokerage accounts, opened 64 variable annuity contracts and placed more than 4,000 market-timing trades totaling more than $4.8 billion in volume, according to the complaint.
The lawsuit named Darryl A. Goldstein, Christopher O’Donnell and Marc H. Plotkin, but did not name the fourth former adviser.
Plotkin agreed to pay a civil penalty of $90,000 and is barred from association with any broker, dealer or investment advisor for one year.