Morgan Stanley Settles to Pay $280,000 to CFTC, Relating to Faults in KYC Procedures

The U.S. Commodity Futures Trading Commission (CFTC) issued an announcement outlining that it simultaneously filed an order and settled charges with Morgan Stanley Smith Barney, LLC (Morgan Stanley) for improper supervision and records violations.

The Order filed by the regulator required Morgan Stanley to pay a $280,000 civil monetary penalty and to spew out the commission fees it earned from various accounts held at the company under the name of a set of companies called SureInvestment.

The latter entity claimed to be operating a hedge fund in the British Virgin Islands, which according to the Morgan Stanley’s internal compliance procedure qualified as “high risk jurisdiction." According to the CFTC, the company failed to scrutinize the matter and did not implement its own Enhanced Due Diligence and Customer Identification Program procedures.

According to the CFTC announcement, Morgan Stanley should have raised “red flags” if it had applied internal “know your customer” norms. Audits of SureInvestment were filled with typos and various suspicious irregularities, allowing for the operation of a UK. Ponzi scheme.

The owner of SureInvestments, Benjamin Wilson, used the accounts to extend an ongoing $35 million Ponzi Scheme Ponzi Scheme A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and Read this Term operation based in the United Kingdom. Mr. Wilson has already been convicted to seven years of imprisonment after pleading guilty to criminal charges brought forth by the U.K. Financial Conduct Authority (FCA).

CFTC’s Enforcement Director, Aitan Goelman, commented in the announcement, “CFTC regulated firms, like Morgan Stanley, must adhere to rigorous internal controls, such as ‘know its customers’ controls, to protect customers and the markets from fraud and corruption.”

In addition, according to the order filed by the U.S. regulator, Morgan Stanley failed in the enforcement process of its own trading limits related to the accounts of SureInvestment. As a result, initial Margin Requirements Margin Requirements A margin requirement is defined as the minimum equity sum that investors must keep in their margin account preceding a trading transaction. Margin requirements may be referred to as maintenance margin, minimum maintenance, or maintenance requirement. This is a requirement for broker trading in any asset class.In terms of equities, the New York Stock Exchange (NYSE) and Financial Industry Regulatory Authority (FINRA) have a fixed margin requirement of 25% of the sum value of the securities presen A margin requirement is defined as the minimum equity sum that investors must keep in their margin account preceding a trading transaction. Margin requirements may be referred to as maintenance margin, minimum maintenance, or maintenance requirement. This is a requirement for broker trading in any asset class.In terms of equities, the New York Stock Exchange (NYSE) and Financial Industry Regulatory Authority (FINRA) have a fixed margin requirement of 25% of the sum value of the securities presen Read this Term far exceeded the applicable credit trading limit. The company failed to respond timely and accurately to the CFTC's request to produce the SureInvestments’ records and failed to maintain adequate records regarding the credit trading limit of SureInvestment accounts.