If you have suffered losses with an ETF purchased through Morgan Stanley please call 1-866-817-0201 for a free and confidential consultation with a private attorney concerning your rights. We have reason to believe that Morgan Stanley engaged in systematic wrongdoing in the sale of certain ETFs based upon recent findings of the The Securities and Exchange Commission.
The SEC announced on February 14, 2017 that it has settled with Morgan Stanley for $8 million for inappropriate sales of complex exchange traded funds to advice clients. More importantly, Morgan Stanley admitted to wrongdoing.
Morgan Stanley failed to obtain a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy. This is important because the number of clients this impacted number in the hundreds.
The investment recommendations were also unsuitable, in violation of the regulatory duties that Morgan Stanley owes its investors. Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses.
The SEC’s order further finds that Morgan Stanley failed to follow through on another key policy and procedure requiring a supervisor to conduct risk reviews to evaluate the suitability of inverse ETFs for each advisory client. Among other compliance failures, Morgan Stanley did not monitor the single-inverse ETF positions on an ongoing basis and did not ensure that certain financial advisers completed single inverse ETF training.
Morgan Stanley also owes a duty to the investors to follow its own internal regulations. The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.
“Morgan Stanley recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients,” said Antonia Chion, Associate Director of the SEC Enforcement Division.