WFC now...the dominos are falling...Morgan Stanley Faces Charges Over Sales Contest
DOW JONES & COMPANY, INC. 12:05 PM ET 10/3/2016
Symbol Last Price Change
MS 31.77up -0.29 (-0.9%)
WFC 43.815 -0.465 (-1.05%)
QUOTES AS OF 12:05:09 PM ET 10/03/2016
Massachusetts Secretary of the Commonwealth William Galvin charged Morgan Stanley(MS) with dishonest and unethical conduct for running "high-pressure sales contests" for 30 financial advisers across five offices.
Mr. Galvin said the contest, which allegedly gave cash bonuses for advisers who sold more securities-based loans, created a conflict of interest and violated the company's fiduciary duty to clients in pursuit of brokerage customers opening banking and lending accounts.
"This contest was relatively local, but the aggressive push to cross sell was company-wide," Mr. Galvin said.
Morgan Stanley (MS) said the accounts were only opened after discussing it with the clients and that they provide customers access to low cost liquidity when they need it.
"We object strongly to these allegations," Morgan Stanley(MS) said in a statement. "The complaint is without merit, and Morgan Stanley(MS) intends to defend itself vigorously."
The complaint wants to potentially censure Morgan Stanley(MS), give relief for customers who entered into the loans during the contest and levy an administrative fine.
Securities-based loans allow customers to borrow against the value of the securities in their investment accounts using securities as collateral for loans. One alleged contest happened in 2014 and another happened through April 2015. Mr. Galvin said the contest worked, nearly tripling the number of accounts opened from the year before and generated nearly $24 million in loan balances.
The responsibility advisers and bankers have to their clients has come under scrutiny recently as Wells Fargo & Co.(WFC) was fined $185 million last month for allegedly "widespread illegal" sales tactics. Wells Fargo(WFC) opened as many as 2 million customer accounts with fictitious or unauthorized information, according to federal authorities.
Earlier this year the Labor Department unveiled new rules, which require retirement advisers to act as "fiduciaries," legally bound to act in their clients' "best interest," a stricter standard than one for brokers only requiring " suitable" guidance.
Write to Austen Hufford at austen.hufford@wsj.com
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10-03-161205ET
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