Blogs| Contact Us| Log In| Search Here

Skip Navigation LinksFSOkx Home > News > Detail

Search News

Keywords
Date From To

News Archive

Year 2017 (49)
Year 2016 (87)
Year 2013 (3)
Year 2012 (35)

News

Bookmark and Share

Morgan Stanley Agreed to pay US$7.5 Million to SEC to Settle Charges

The Securities and Exchange Commission (SEC) announced that Morgan Stanley & Co. LLC has agreed to pay US$7.5 million to settle charges it used trades involving customer cash to lower the firm’s borrowing costs in violation of the SEC’s Customer Protection Rule.

The Customer Protection Rule is intended to safeguard customers’ cash and securities so that they can be promptly returned should the broker-dealer fail.  The SEC order finds that from March 2013 to May 2015, Morgan Stanley’s U.S. broker-dealer used transactions with an affiliate to reduce the amount it was required to deposit in its customer reserve account.  According to the order, the transactions violated the Customer Protection Rule, which prohibits broker-dealers from using affiliates to reduce their customer reserve account deposit requirements. According to the SEC’s order, Morgan Stanley had its affiliate, Morgan Stanley Equity Financing Ltd., serve as a customer of its U.S. broker-dealer, a relationship that allowed the affiliate to use margin loans from the U.S. broker-dealer to finance the costs of hedging swap trades with customers.  The margin loans lowered the borrowing costs incurred to hedge these swap trades and reduced the U.S. broker-dealers’ customer reserve account deposit requirements by tens to hundreds of millions of dollars per day.

News Characteristics

Date : Dec 21, 2016
Region : North America
Industry : Capital Markets
Function : Regulation and Compliance
Sub-Function : Compliance