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State probe of securities case leads to $4.24 million settlement fund


Morgan Stanley Smith Barney LLC of Ridgeland has reached a settlement agreement with the Mississippi Secretary of State’s Office by which the securities brokerage agreed to establish a $4.24 million fund for investors.

The brokerage also agreed to pay a $100,000 fine to the state of Mississippi and reimburse investigative costs of $400,000.

Without admitting or denying the secretary of state’s investigative division’s allegations that arose from actions taken by one of its advisers, Morgan Stanley agreed to to resolve the investigation, according to a release from the Secretary of State.

Of a total of 259 accounts held by 213 investors in 15 states, 194 Mississippi accounts were adversely affected, the release said.

Clients are not required to participate and may seek their own legal remedy, the agency said.

Secretary of State Delbert Hosemann termed the handling of accounts “reckless activity.”

“This is a significant settlement which is a culmination of hard work by the Division on behalf of investors,” Hosemann said.

One of two agents who had been employed by Morgan Stanley, before it merged with Smith Barney, made “outside investments” between December 2007 and June 2012 “at times using his personal email (in violation of Firm policy and industry rules) to communicate un-monitored by the Firm with customers to purchase unauthorized and unregistered securities through private placement,” according to the consent order.

Morgan Stanley fired the agent on June 22, 2012 after the firm discovered the adviser’s actions, according to the order. Also, the firm “has updated its policies and procedures governing [certain accounts] and has enhanced its technology,” the order states.


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