The Financial Industry Regulatory Authority (FINRA) on Monday fined Morgan Stanley Smith Barney $650,000 and Scottrade $300,000 for not implementing reasonable supervisory systems to monitor the transmittal of customer funds to third-party accounts. This comes after both firms were cited for having inadequate supervisory systems in 2011. Executive Vice President and Chief of Enforcement, Brad Bennett, was quoted as saying: “firms must have robust supervisory systems to monitor and protect the movement of customer funds. Morgan Stanley and Scottrade had been alerted to significant gaps in their systems by FINRA staff, yet years went by before either firm implemented sufficient corrective measures.”
Morgan Stanley registered representatives allegedly converted a total of $494,400 from 13 customers by creating fraudulent wire transfer orders and branch checks from the customers’ accounts to third-party accounts. Some of these transfers and checks were moved to the representative’s personal bank accounts.
Scottrade also failed to establish supervisory systems to monitor for wires to third-party accounts from October 2011 until October 2013. The firm did not obtain confirmations for wire transfers of less than $200,000, as well as transfers between $200,000 and $500,000. In total, during this time period, Scottrade processed 17,000 third party wire transfers for a total of $880 million.
You may sue Morgan Stanley Smith Barney or Scottrade for failing to supervise their registered representatives if you invested money with either firm. Stoltmann Law Offices can help. Please call us at 312-332-4200 for a free consultation with an attorney about your options.
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