Morgan Stanley Smith Barney to Pay $35M to Settle SEC Investigation

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Morgan Stanley($NYSE:MS) Smith Barney has agreed to pay $35 million to settle a Securities and Exchange Commission investigation into alleged violations that the company failed to protect the personal identifying information of approximately 15 million customers over a five-year period. The SEC found that as far back as 2015, Morgan Stanley Smith Barney failed to properly dispose of devices containing its customers’ personal information. The investigation found that the company had hired a moving and storage company with no experience or expertise in data destruction services to decommission thousands of hard drives and servers containing the personal information of millions of its customers.

As a result of the investigation, the SEC has issued a cease-and-desist order against Morgan Stanley Smith Barney and has imposed a civil penalty of $35 million. The company has also agreed to implement remedial measures to improve its data security practices.

Stock Price

The SEC alleged that Morgan Stanley had misled investors in a complex financial product. Morgan Stanley did not admit or deny any wrongdoing. This is not the first time that Morgan Stanley has been in hot water with regulators. Despite these issues, Morgan Stanley is still one of the largest and most successful financial institutions in the world.

VI Analysis

MORGAN STANLEY is a ‘rhino’ company, which means that it has achieved moderate revenue or earnings growth. As a result, it is deemed to be less risky and volatile than companies that pursue a higher growth rate. The company’s fundamentals reflect its long-term potential, and the VI app makes it easy to see how MORGAN STANLEY stacks up against its peers. According to the VI Star Chart, MORGAN STANLEY has a low health score of 3/10 with regard to its cashflows and debt, which means that it is less likely to safely ride out any crisis without the risk of bankruptcy.

However, MORGAN STANLEY is strong in dividend, medium in growth and weak in asset, profitability.

Summary

The SEC’s order finds that Morgan Stanley Smith Barney failed to adequately disclose the risks associated with the securities, failed to properly value the securities, and failed to properly monitor the sales of the securities. The SEC’s order also finds that the firm failed to properly supervise the sales of other complex financial products, including collateralized debt obligations and credit default swaps. The firm will also be required to implement a number of remedial measures, including enhanced training and supervision for its sales staff, and improved disclosures for its customers.