On January 4, 2010, the SEC settled charges against William Keith Phillips for aiding and abetting and causing Morgan Stanley & Co. Incorporated’s Advisers Action violation. According to the SEC, from at least 2000 through April 2006, Mr. Phillips worked as a financial adviser at Morgan Stanley, which serviced individual retail advisory clients as well as several institutional brokerage customers.
During the relevant time period, Morgan Stanley offered advisory clients a program called Vision I. Morgan Stanley’s disclosure materials regarding Vision I described the advisory services it provided which included assisting clients in identifying money managers to manage clients’ assets. Morgan Stanley disclosed the detailed due diligence process it followed to select and approve money managers for participation in Vision I. According to its disclosure materials, Morgan Stanley financial advisers selected money managers from this approved list of managers to recommend to clients based on the client’s investment profile and objectives.
According to the SEC, Mr. Phillips recommended to certain advisory clients of Morgan Stanley certain money managers who were not approved for participation in Vision I and had not been subject to the firm’s due diligence review, which fact was not disclosed to those advisory clients. The SEC also found that Mr. Phillips had undisclosed relationships with the money managers who had not been approved by Morgan Stanley from which Mr. Phillips and Morgan Stanley received substantial brokerage commissions and/or fees. As a result of these actions, Mr. Phillips agreed to pay an $80,000 penalty.