Morgan Stanley fined as probe widens

  • Business
  • Wednesday, 19 Nov 2003

NEW YORK: Morgan Stanley has agreed to pay US$50mil to settle federal charges of mutual fund abuses as the investigation of the US$7 trillion industry widened amid further withdrawals of funds by investors in Putnam Investments. 

The Wall Street firm had settled charges that it failed to tell investors about compensation received for selling certain mutual funds, the US Securities and Exchange Commission (SEC) said. 

The deal followed an SEC settlement with Putnam last week that it had allowed some portfolio managers and certain clients to break company rules by buying and selling mutual fund shares very quickly to profit from stale prices. 

Without admitting or denying the charges, as is customary on Wall Street, Morgan Stanley had agreed to provide more disclosure about its relationships with mutual fund groups, the SEC said, adding that it was looking at 15 brokers in relation to the charges against the company. 

Morgan Stanley said on Monday it would no longer accept “soft dollar” payments – the paying of brokerage services through commission revenues rather than direct fees, or hard dollar payments – on retail sales of mutual funds. – Reuters  

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