Morgan Stanley has agreed to pay a fine of $7.5m to the Securities and Exchange Commission (SEC) to settle allegations of customer protection rule violations.
The securities watchdog alleged that from March 2013 to May 2015, the bank’s affiliate- Morgan Stanley Equity Financing- served as a customer of its US broker-dealer, which allowed the affiliate to use margin loans from the US broker-dealer to fund the costs of hedging swap trades with customers.
Go deeper with GlobalData
The margin loans helped to lower borrowing costs on swap trades as well as lowered the US broker dealer’s daily customer-reserve requirement by up to several hundred million dollars.
However, SEC noted that the bank “provided substantial cooperation” during its probe and agreed to adopt measures to enhance its calculation processes.
The regulator also added that the bank increased the amount of excess funds in its reserve account.
SEC enforcement division complex financial instruments unit chief Michael Osnato said: “The Customer Protection Rule establishes crucial safeguards for investors to ensure that their cash and securities are secure when held by a broker-dealer.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“Complex trading schemes designed to artificially reduce the amount a broker-dealer must maintain in its customer reserve account run contrary to these basic obligations.”
Morgan Stanley neither admitted to nor denied the allegations.
