Massachusetts’ Secretary of State this week accused Morgan Stanley of using sales contests and inflated commissions to foist mutual funds onto consumers.
The secretary filed an administrative complaint against the brokerage firm in an effort to return approximately $5 million to $8 million in commissions to consumers pressured into buying funds.
Investigators found that brokers in Morgan Stanley’s Back Bay office were paid higher commissions on Morgan Stanley’s own funds, but customers weren’t told that. The office also used sales contests, travel prizes, business development funds and asset retention funds. The state began investigating in March after a broker in that office complained anonymously to the state that supervisors pressured him to sell the firm’s own funds. Morgan Stanley staffers were told not to discuss sales contests in writing, per the state’s complaint.
The state’s complaint says New York City-based Morgan Stanley denied to state regulators that it ran sales contests, prompting the Secretary of State to file a complaint on July 14. Morgan Stanley did not comment on the state’s action.
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