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Wednesday, April 12, 2017 - Morgan Stanley settles sales contest probe with $1m payout
Morgan Stanley
Source -
Where - United States of America
Cost - 1,000,000 USD
Business line - Retail Brokerage

The New York Post reports that Morgan Stanley has settled a sales contest probe from securities regulators with a US$1m pay out.

According to the consent order from the SEC’s Massachusetts Securities Division, Morgan Stanley allegedly violated the Massachusetts Uniform Securities Act when it ran a sales contest designed to increase its securities-based loans book in the wake of the 2008 financial crisis.

At the time, Morgan Stanley entered into an arrangement with Morgan Stanley’s private banking unit, MSPB, which lent money to Morgan Stanley’s brokerage and advisory clients.

Between 2013 and 2015, Morgan Stanley compensated and incentivised its financial advisors to cross-sell by updating its compensation plan to promote the sale of lending products and services, including securities-based lending products. Brokers were split into “teams” and rewarded 35 to 50 basis points of their increase in loans once they reached certain thresholds – an incentive of which senior managers were apparently aware.

These types of sales contests are not permitted by regulators because they promote conflicts of interest between the bank employees and clients.

Morgan Stanley will pay US$1m to the state of Massachusetts to settle the case.