7.20.2009 The SEC charged Morgan Stanley and one of the firm’s former investment adviser representatives with securities law violations for misleading clients about the money managers being recommended to them and failing to disclose conflicts of interest. According to the SEC, Morgan Stanley breached its fiduciary duty to advisory clients in its Nashville, Tennessee branch office by making material misstatements about a program through which the firm assisted clients in developing investment objectives and in selecting properly vetted money managers. The SEC states that contrary to Morgan Stanley’s disclosures, it recommended some money managers who had not been approved for participation in the firm’s advisory programs and had not been subject to the firm’s due diligence review. William Keith Phillips of Nashville, then a top producer at Morgan Stanley, steered clients to three unapproved managers in particular. Unbeknownst to investors, Morgan Stanley and Phillips received substantial brokerage commissions or fees from these three unapproved managers. Morgan Stanley has agreed to settle the SEC’s charges and pay a $500,000 penalty. A separate proceeding continues against Phillips for allegedly aiding and abetting and/or causing Morgan Stanley’s violations.
Click http://www.sec.gov/news/press/2009/2009-164.htm to access the SEC press release.