Morgan Stanley Reaches $4.2M Settlement, Witnesses $4.5M Fine - Analyst Blog

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Morgan Stanley ( MS ) has been hit with a double whammy. While the bank has agreed to enter into a $4.2 million settlement with the client services associates, it has also been ordered by a Financial Industry Regulatory Authority (FINRA) arbitration panel to pay $4.5 million to Citigroup Inc's ( C ) Banamex unit.

In the first case, the leading investment broker was accused of wrongly denying overtime payment to the client services associates. The second case by Banamex, pertains to the firm using a family trust account fund to repay third-party loans without its authorization.

Three client services associates Philips Amador, Sylvester Cetina and Joann Sunkett in the retail brokerage branches indicted Morgan Stanley of violating federal and state labor laws in 2011 when it did not pay them for the extra time worked after 40 hours a week.  This $4.2 million settlement finally ends the three-year old litigation.


Again, in the other case filed by Banamex in 2012, a FINRA arbitration panel found Morgan Stanley guilty. A banking unit of Morgan Stanley held and managed the trust account of a family, of which Banamex was a trustee. However, Morgan Stanley improperly used the trust's money for paying off third-party loans.

Notably, another big bank, JPMorgan Chase & Co. ( JPM ) has been sued by an Indianapolis church over fraud and mismanaging of church trust accounts (Read more: JPMorgan (JPM) Sued over Mismanaging Church Trust Assets ).

For a reputed financial institution like Morgan Stanley, this ongoing spate of settlements and accusations could adversely impact credibility.

Morgan Stanley currently carries a Zacks Rank #3 (Hold). A better-ranked investment brokerage firm is Piper Jaffray Companies ( PJC ). It sports a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: JPM , MS , C , PJC

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