Morgan Stanley will pay $500,000 to settle SEC charges that it recommended unapproved money managers to clients without any due diligence review. From 2000 to April 2006, Morgan Stanley made “material misrepresentations about a program through which the firm assigned clients in developing investment objectives and in selecting properly vetted money managers,” according to the SEC. “Morgan Stanley said one thing and did another when recommending managers who had not been approved for participation in the firm’s advisory programs and had not been subject to its due-diligence review,” added Scott W. Friestad, associate director of SEC’s enforcement division. Morgan Stanley, which received brokerage commissions or fees from the unapproved managers, said through a spokesperson that it is “pleased to settle this matter.”
Atlanta attorney J. Boyd Page of Page Perry in Atlanta applauded the SEC’s action. ‘I believe that this an extremely noteworthy action by the Commission” Page said. “This action makes it clear that brokerage firms can be liable to customers for inappropriately or recklessly recommending money managers to the customer.”
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