Wednesday, August 3, 2005

NASD Fines Morgan Stanley $1.5 Million for Fee Based Accounts

With a 1.5 million dollar fine, and 4.6 million dollars in restitution, Morgan Stanley puts the fee based account controversy behind it.

The problem with fee based accounts is demonstrated by this case. with well over 100,000 small accounts in the fee based programs, MS was apparently not monitoring whether those accounts *should* be in the program.

The NASD said that Morgan Stanley allowed 3,549 of its customers to continue using Choice accounts without adequately reassessing whether the accounts remained appropriate for them.

These customers, who either conducted no trades in their Choice accounts for at least two consecutive years or had Choice accounts whose assets averaged below $25,000 for at least one full year, or both, will be receiving restitution under the settlement announced today.

The NASD is continuing to focus on fee based accounts. Brokers and firms are cautioned to insure that their use of these accounts is consistent with the needs of the clients.

In April, NASD fined Raymond James & Associates Inc. $750,000 and ordered the firm to pay $138,000 in restitution for fee-based account violations.
Post a Comment