The Financial Industry Regulatory Authority said that Morgan Stanley Smith Barney, LLC (MS) and Scottrade, Inc. will pay fines of $650K and $300K, respectively. The firms are settling claims accusing them of not putting into place supervisory systems that could reasonably monitor customer funds transmitted to third-party accounts. The self-regulatory organization cited both financial firms for having weak supervisory systems a few years back, but they purportedly did not take the necessary steps to remedy the deficiencies.<\/p>\n
The SRO contends that from 10\/08 to 6\/13, three Morgan Stanley-registered representatives in two of the firm’s branch offices converted $494,000 from thirteen customers by setting up fraudulent wire transfer orders and branch checks from the clients\u2019 accounts to third-party accounts. One example of such an instance involves representatives transferring funds from several customer accounts into their own bank accounts.<\/p>\n
FINRA said that Morgan Stanley should have put into place systems and procedures that would have allowed it to review and monitor such transmissions. The regulator said that instead, the supervisory failures let the conversions occur without detection.<\/p>\n