Morgan Stanley Settles ETF Investment Case
February 14 2017 - 2:02PM
Dow Jones News
By Anne Steele
Morgan Stanley's wealth-management division agreed to pay $8
million and admit wrongdoing to settle allegations related to
single-inverse ETF investments it recommended to clients, according
to the Securities and Exchange Commission.
The SEC said Morgan Stanley didn't make clear to clients the
risks involved with purchasing inverse exchange-traded funds. The
brokerage failed to obtain a signed disclosure notice -- stating
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 -- from several hundred
clients from mid-2010 to mid-2015.
Morgan Stanley allegedly solicited clients to purchase
single-inverse ETFs in retirement and other accounts and many of
the clients experienced losses after holding the securities
long-term.
The SEC's order also found Morgan Stanley failed to have a
supervisor conduct risk reviews to evaluate the suitability of
inverse ETFs for each advisory client. The SEC said the brokerage
didn't monitor the positions on an ongoing basis and didn't ensure
that certain financial advisers completed single-inverse ETF
training.
A Morgan Stanley spokeswoman said the bank is "pleased to have
resolved this matter."
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
February 14, 2017 13:47 ET (18:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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