The Financial Industry Regulatory Authority (FINRA) has fined two brokerage firms for failing to adequately supervise rogue brokers. Specifically, FINRA has fined Morgan Stanley Wealth Management and Scottrade Inc. in amounts of $650,000 and $300,000, respectively, for failing to supervise wire transfers from customer accounts to third-party accounts.
Morgan Stanley and Scottrade agreed to pay the fines, which resulted from alleged gaps in the firms’ compliance systems that allowed rogue brokers to improperly transfer funds into personal accounts without detection. Previously, FINRA had warned both brokerage firms about their compliance problems, but both brokerage firms failed to correct their supervisory problems.
The violations that occurred at Morgan Stanley took place from June 2009 through November 2014. According to FINRA, Morgan Stanley failed to have “reasonable supervisory systems and procedures” regarding certain wire transfers. Scottrade’s violations took place between 2011 and 2013 for failing to obtain customer confirmations for third-party transfers of less than $200,000.
As a result of the brokerage firms’ supervisory failures, three brokers in two offices in Fort Lauderdale, Florida and Paramus, New Jersey were able to steal nearly $500,000 through fraudulent wire transfers and forged signatures.
The stockbroker negligence attorneys at Dimond Kaplan & Rothstein, P.A. represent investors who have been defrauded by rogue brokers and the firms that allowed the brokers to engage in misconduct. If you have been a victim of stockbroker fraud or broker negligence please contact us for a free consultation to discuss your rights.