Morgan Stanley has agreed to pay US$100,000 to the New Jersey Bureau of Securities for violating state securities laws and regulations by selling non-traditional Exchange-Traded Funds (ETFs) to investors.
The payment includes US$65,000 in civil penalties, US$25,000 to reimburse the bureau’s investigative costs and US$10,000 for the bureau to use for investor education.
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Morgan Stanley has previously paid US$96,940 in restitution to New Jersey investors.
The state Bureau of Securities claimed that the bank violated the state’s Uniform Securities Act by failing to provide adequate training its advisers about non-traditional ETFs and providing lax supervision for the sale of the funds.
The Bureau’s investigation has revealed that some of the firm’s investment advisers recommended non-traditional ETFs to elderly investors with a primary investment objective of income. These ETF transactions were unsuitable for these investors and resulted in losses.
ETF’s typically are registered unit investment trusts, with shares representing an interest in a portfolio or securities that track an underlying benchmark or index. Non-traditional ETF’s reset daily and are intended to achieve their stated objectives only on a daily basis.
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By GlobalDataAbbe Tiger, chief of the New Jersey Bureau of Securities, said: "Investors depend upon their investment advisors to offer them securities that are appropriate for their level of risk tolerance."
