Back to top

Analyst Blog

Morgan Stanley Smith Barney LLC (MSSB), a registered Futures Commission Merchant and a division of the investment brokerage firm Morgan Stanley (MS - Analyst Report) settled Commodity Futures Trading Commission (CFTC) charges for $490,000 million. CFTC fined Morgan Stanley as investigations revealed the company’s futures trading unit violated rules regarding the management of overseas futures and option customers’ secured funds.

The Probe

CFTC alleges that in Apr 2013 Morgan Stanley’s trading unit inappropriately moved $16 million from customer funds bank account, which led to a $9.27 million shortage in MSSB’s secured funds. Though the company took corrective measures the following day after it became aware of the matter, such an act is considered to be a breach of rules. Following this, MSSB adopted several changes in its policies and procedures owing to recommendations by an independent auditor.

Several other allegations by CFTC include MSSB commingling customer and firm funds, making incorrect calculations of segregated and secured funds, and documenting account statements with incorrect titles. CFTC also found similar wrongdoings by MSSB in 2012.

Notably on the brighter side, such violations did not cause customers any losses. MSSB neither accepted nor contradicted the allegation.

In Conclusion

The latest settlement of diluting customer and firm funds is nothing new and it rather adds to similar cases in the industry. MF Global Inc. a major brokerage firm, transferred around $1.6 billion from client accounts to the firm’s account. Later in Oct 2011, the company filed for Chapter 11 bankruptcy. Jolted by such cases, regulators have imposed stricter rules in order to curb the re-occurrence of these activities.

Therefore, such settlements safeguards the customers’ interests and reduces the banks’ legal hassles to some extent.

Morgan Stanley currently carries a Zacks Rank #3 (Hold). Some better ranked stocks in this space worth considering include GAIN Capital Holdings, Inc. (GCAP - Snapshot Report), Investment Technology Group Inc. (ITG - Snapshot Report) and Piper Jaffray Companies (PJC - Snapshot Report). All these stocks hold a Zacks Rank #1 (Strong Buy).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%