Morgan Stanley Pays $7.5Mln Fine for Secret Trades With Client Cash - Regulator

The Wall Street investment firm Morgan Stanley violated the US Securities and Exchange Commission (SEC) customer protection rule that is intended to safeguard customers’ cash and securities should the broker-dealer fail, according to media reports.

WASHINGTON (Sputnik) — The Wall Street investment firm Morgan Stanley has agreed to pay $7.5 million to settle charges that it used its customers’ cash to cover unrelated security trades, the US Securities and Exchange Commission (SEC) announced in a press release on Tuesday.

In doing so, Morgan Stanley violated SEC’s customer protection rule that is intended to safeguard customers’ cash and securities should the broker-dealer fail, the release explained.

"The customer protection rule establishes crucial safeguards for investors to ensure that their cash and securities are secure when held by a broker-dealer," SEC Enforcement Division’s Complex Financial Instruments Unit chief Michael Osnato said in the release.

Osnato also noted that Morgan Stanley used a complex trading scheme involving an affiliated company to artificially reduce the amount needed to set aside in customer reserve accounts.

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