Secretary of State Reaches $4.7 Million Settlement with Morgan Stanley Arising from Investigation of Advisers in Ridgeland Office
Jackson, MS—Secretary of State Delbert Hosemann has reached a settlement agreement with the investment firm Morgan Stanley Smith Barney, LLC (“Morgan Stanley”) which maintains a local branch office in Ridgeland, Mississippi. Morgan Stanley will return up to $4,243,815.28 to investors.
In addition, Morgan Stanley will pay an administrative penalty of $100,000 to the State and will reimburse the Division’s investigative costs of $400,000, for a total settlement amount of $4.7 Million Dollars.
The settlement concludes a comprehensive, multi-year investigation conducted by the Securities Division of the Office of the Secretary of State into complaints from customers who had investment accounts with financial representatives at the Ridgeland branch office and who suffered inordinate losses.
“This is a significant settlement which is a culmination of hard work by the Division on behalf of investors,” says Secretary Hosemann. “It exemplifies the important investor protection role the Agency serves to safeguard our citizens through fair regulation and enforcement and hopefully deterrence.”
The Consent Order cites violations of Mississippi’s Securities regulations committed by Morgan Stanley and its financial advisors in the Ridgeland branch office over a four year period.
Without admitting or denying the Division’s allegations, Morgan Stanley has agreed to resolve the investigation by establishing a customer fund of $4.2 Million Dollars, which will return a portion of the account losses to eligible customers who elect to participate.
This fund will be funded by Friday, September 9, 2016. No customer is required to participate in this settlement. Participation is entirely voluntary and any customer affected may choose not to participate and pursue any legal remedy they deem appropriate.
The customer fund has been set up for the benefit of two hundred fifty-nine (259) accounts held by two hundred thirteen (213) investors from fifteen (15) states. In Mississippi, one hundred ninety-four (194) accounts were affected. Other states include Alabama (4), Arkansas (5), Arizona (2), California (2), Florida (5), Kentucky (2), Louisiana (25), Minnesota (1), North Carolina (4), Oklahoma (1), Pennsylvania (2), Tennessee (7), Texas (4) and Washington (1).
The Secretary of State’s Office will send letters to the eligible customers to notify them about the fund and give them an opportunity to participate. The customers who elect to participate must return a signed notarized settlement agreement to Trustmark Bank in order to receive a payment. Trustmark Bank will process the agreements and issue the checks.
“Our office follows up on complaints as to violations of Mississippi security laws and takes regulatory action when we discover this type of activity,” states Secretary Hosemann. “Mississippians work too hard for their savings to be lost from these types of reckless activities.”
A copy of the Consent Order containing the details of the settlement will be available on the Secretary of State’s website at www.sos.ms.gov. Investors with questions about the Consent Order may contact the Securities Division at (601)-359-1334.