Morgan Stanley Fined for Failure to Supervise Commission Sharing Program For Retired Brokers

Posted on August 5th, 2014 at 9:00 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

FINRA has fined Morgan Stanley $1 million for failing to supervise a commission-sharing program for retired brokers.

According to FINRA, Morgan Stanley did not fulfill certification requirements designed to make sure its retired brokers were not advising clients.

From June 2009 to December 2011, the program paid more than $100 million in commissions to about 780 retired registered representatives. In January 2010, the program was merged under a single Morgan Stanley system. The program was permissible under terms of a no-action letter issued by the SEC in 2008.

The SEC required MSSB to obtain annual certifications from the retired brokers affirming that they had not contacted customers for investment purposes. And the firmwas required to contact a sample of the retired representatives' former customers to confirm that the reps had not provided investment advice or solicited trades.        

However, MSSB failed to create or maintain the required certifications for a significant proportion of the retired representatives to whom it paid continuing commissions. And Morgan Stanley did not have its certification process documented in written procedures, and instead left the annual certifications up to branch offices.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston


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