BOSTON, Oct. 3 (UPI) — As banking giant Wells Fargo continues to deal with the fallout of a widespread scandal involving thousands of employees, Massachusetts officials accused investment house Morgan Stanley on Monday of also engaging in unethical tactics to boost its figures.
Regulators claimed that Morgan Stanley Smith Barney LLC started a high-pressure sales contest nearly three years ago to increase lending and banking numbers.
“This complaint lays bare the culture at Morgan Stanley that bred the high-pressure effort to cross-sell banking products to its brokerage customers without regard for the fiduciary duty owed to the investor,” Galvin said, claiming that the behavior was “unethical” and “dishonest.”
“This contest was relatively local, but the aggressive push to cross-sell was company wide.”
The complaint was filed by the Massachusetts Office of the Secretary of the Commonwealth Securities Division.
“Morgan Stanley’s firm-wide culture emphasizes the aggressive cross-selling of banking and lending products to wealth management clients,” Enforcement Attorney Patrick M. Costello and Associate Director Patrick J. Ahern stated in the complaint, according to Masslive.com. “This culture inspired at least two sales contests in Massachusetts, which ran undeterred for sixteen months because of Morgan’s Stanley’s lack of adequate compliance and supervisory oversight.”
“The sales contest resulted in financial advisers acting in their own interest rather than in the best interest of their clients,” the filing added.
According to the complaint, 30 financial advisers in Massachusetts and Rhode Island engaged in a contest to persuade customers to take out securities-based loans against the value of their existing portfolios, Masslive.com’s report said.
Each financial adviser would receive $1,000 for every customer they talked into a new loan, the complaint claims.
Regulators said the contest ran from early 2014 to spring 2015.
Last month, Wells Fargo fired more than 5,000 employees and took steps to reform its policies after it was revealed that those employees created millions of unauthorized accounts and manipulated existing customer accounts to boost sales figures.
Massachusetts officials say the contest at Morgan Stanley generated about $24 million in new loan balances.
Morgan Stanley objected to the allegations Monday and said it will defend itself “vigorously,” Bloomberg reported.
“The securities-based loan accounts were opened only after discussing the product with each client and obtaining their affirmative consent,” spokesman John Wiggins said in an email. “These accounts are valuable to clients providing access to low-cost liquidity whenever they choose to access it.”