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Tuesday, December 10, 2019

N.J. AG announces $100,000 settlement with Morgan Stanley

By Bryan Cohen | Jul 30, 2013


NEWARK, N.J. (Legal Newsline) - New Jersey Acting Attorney General John Hoffman announced a $100,000 settlement Tuesday with Morgan Stanley & Co. LLC to resolve allegations of state security law violations.

Morgan Stanley allegedly violated the state's Uniform Securities Act by failing to provide adequate training to its financial advisers about non-traditional exchange-traded funds, allowing its financial advisers to solicit unsuitable investors to buy non-traditional ETFs and failing to put a reasonable system in place for supervision of the sale of non-traditional ETFs.

"When investors are not told all material facts about financial investment opportunities, they often suffer losses they might otherwise have avoided," Hoffman said. "This case clearly illustrates this point and underscores how our Bureau of Securities works to protect investors when our regulations are not followed."

In some instances, Morgan Stanley's investment advisers recommended non-traditional ETFs to elderly investors with a primary investment objective of income. The ETF transactions were unsuitable for the investors and led to losses.

Morgan Stanley took actions to correct the alleged violations.

Under the terms of the settlement, Morgan Stanley will pay the New Jersey Bureau of Securities $65,000 in civil penalties, $25,000 for reimbursement of court and attorney costs and $10,000 for use in investor education. Morgan Stanley previously paid New Jersey investors $96,940.34 in restitution.

Exchange-traded funds are typically registered unit investment trusts with shares that represent an interest in securities or a portfolio that tracks an underlying index or benchmark. Non-traditional ETFs reset daily and are meant to achieve stated objectives on a daily basis. When held longer than a day, ETFs can generate returns that are significantly different from the performance of an underlying index or benchmark.

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Morgan Stanley