Friday, November 18, 2011

SEC Charges Morgan Stanley Investment Management for Improper Fee Arrangement

The SEC charged Morgan Stanley Investment Management (MSIM) with violating securities laws. This occurred in a fee arrangement that repeatedly charged a fund and its investors for advisory services from a third party that they weren’t actually receiving.

The SEC’s investigation found that MSIM represented to investors and the fund’s board of directors that it contracted a Malaysian-based sub-adviser to provide advice, research and assistance to MSIM. In reality, the sub-adviser did not provide these purported advisory services, yet the fund’s board annually renewed the contract based on these ghost services for more than a decade. The total cost was $1.845 million to investors.

MSIM has agreed to pay more than $3.3 million to settle the charges.

“We want to take the advisory fee setting process out of the shadows by scrutinizing the role of investment advisers and fund board members in vetting fee arrangements with registered funds,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

SEC Charges Morgan Stanley Investment Management for Improper Fee Arrangement
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