Morgan Stanley and Co. has agreed to pay $100,000 to the New Jersey Bureau of Securities. This came after Bureau investigators found the company was in violation of state securities laws and regulations in its sale of non-traditional exchange-traded funds to investors.
Included in the settlement is $65,000 in civil penalties, $25,000 for reimbursement of the Bureau's investigative costs and $10,000 for Bureau use in investor education. New Jersey investors previously received $96,940.34 in restitution from Morgan Stanley.
"When investors are not told all material facts about financial investment opportunities, they often suffer losses they might otherwise have avoided. This case clearly illustrates this point and underscores how our Bureau of Securities works to protect investors when our regulations are not followed," Acting Attorney General John J. Hoffman said in a statement.
Some of the violations by Morgan Stanley against the state's Uniform Securities Act included: failure to provide adequate training to its financial advisors regarding non-traditional accounts; failure to implement a reasonable system for supervision of the sale of non-tradional ETFs and allowing its financial advisors to solicit unsuitable investors to purchase non-traditional ETFs.
Morgan Stanley has since taken actions to correct these violations.
"Investors depend upon their investment advisors to offer them securities that are appropriate for their level of risk tolerance, and with full disclosure of all relevant terms. In this matter, we found that Morgan Stanley's staff lacked proper training about non-traditional ETFs, and that the company failed to adequately supervise its personnel handling ETF transactions, to the detriment of investors," said Abbe R. Tiger, Chief of the New Jersey Bureau of Securities in a statement.
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