SEC Charges Morgan Stanley in Connection With Failure to Detect or Prevent Misappropriation of Client Funds

The Securities and Exchange Commission today announced that Morgan Stanley Smith Barney (MSSB) has agreed to pay a $3.6 million penalty and to accept certain undertakings for its failure to protect against its personnel misusing or misappropriating funds from client accounts. The SEC’s order finds that MSSB failed to have reasonably designed policies and procedures in place to prevent its advisory representatives from misusing or misappropriating funds from client accounts. The order further finds that although MSSB’s policies provided for certain reviews of disbursement requests, the reviews were not reasonably designed to detect or prevent such potential misconduct. According to the SEC’s order, MSSB’s insufficient policies and procedures contributed to its failure to detect or prevent one of its advisory representatives, Barry F.