SEC charges Morgan Stanley with misleading clients, bank to pay $5M to settle
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(Reuters) – A unit of Morgan Stanley agreed to pay a $5 million fine to settle U.S. Securities and Exchange Commission charges it misled retail investing clients about the costs of a "wrap fee" program, the regulator said on Tuesday.
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Wrap fee programs offer accounts in which clients pay asset-based fees meant to cover investment advice and brokerage services, including the execution of trades.
The SEC said that while Morgan Stanley Smith Barney promised wrap fee clients a "transparent" fee structure, some managers sent most or all of their client trades to third party brokers, causing clients to pay extra fees they could not see.
"Investment advisers are obligated to fully inform their clients about the fees that clients will pay in exchange for services," Melissa Hodgman, associate director in the SEC's enforcement division, said in a statement.
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Morgan Stanley oversaw $2.4 trillion of client assets, including $1.13 trillion from fee-based clients, as of March 31, according to a regulatory filing.