The New Hampshire Bureau of Securities Regulation is filed civil charges against Morgan Stanley on Friday. The Wall Street Journal reported on Friday morning that regulators were preparing the charges in connection with alleged improper sales incentives that the firm allegedly offered its brokers in exchange for selling proprietary funds and variable annuities.
"We felt our dialogue with the company was not as constructive as we would like it to be and to protect the investors in this state, we decided to take this administrative action," Mark Connolly
, director of New Hampshire's Securities Regulation division told Reuters on Friday.
The state reportedly suspects Morgan Stanley of using sales contests, including "the Steak-a-thon," to reward brokers. Those reps selling at least $10,000 of proprietary mutual funds were rewarded with one steak; $30,000 in sales got two steaks; and the reward for $100,000, in sales was three steaks, the paper reports. It adds that regulators no fewer then 35 steak awards in New Hampshire.
The brokerage also allegedly held sales contests called "Find the Right Fit" and "Mid-Year Marathon" that provided cash and noncash compensation awards. Morgan Stanley also allegedly gave its Manchester and Portsmouth offices $10,000 in "business development awards" as part of the contests.
The regulators are planning to seek a $500,000 fine against Morgan Stanley claiming it violated state antifraud laws by not telling customers of the incentives offered to brokers. The paper reported that it had viewed a draft of a petition that would be filed in an administrative proceeding by state regulators.
A Morgan Stanley spokesperson told the paper that the broker-dealer had already dealt with regulators over its alleged use of sales contests. "Sales contests were something we addressed and resolved with the NASD last year," the paper quotes Andrea Slattery as telling it. In that case Morgan Stanley paid $2 million in September to settle NASD charges alleging that it had given concert and sporting event tickets to brokers selling proprietary funds.
Sean Hanna, Editor in Chief
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