In Focus
December 13, 2004
t's the season for giving, and securities regulators are demanding that some brokerage firms give (back) to their customers.
Thank the New York Stock Exchange for arranging the largest "gift". Morgan Stanley may pay as much as $150 million to its customers because the brokerage firm failed to deliver prospectuses for the investments that it sold them. And more brokerage firms are invited to that party, including Lehman Brothers, Goldman Sachs, and Bear Stearns, as each recently had to disclose to the NYSE the investments for which they had failed to deliver prospectuses. Stay tuned for more holiday news.
Not to be outdone, the National Association of Securities Dealers has delivered its own December cheer to Morgan Stanley customers. The brokerage firm failed to disclose to investors that the municipal bonds that they were purchasing could be called prior to maturity, which could result in losses to investors. Several bonds did just that. Others may follow. But, meanwhile, the brokerage firm will buy back the bonds sold in up to 171 separate municipal bond transactions.
Joining the celebration is Citigroup Global Markets. The NASD has convinced the brokerage firm that it is better to give than to receive, at least regarding the Citigroup Diversified Futures Fund L.P. and the Salomon Smith Barney Diversified 2000 Futures Fund L.P. The regulators found that the brokerage firm sold these investments to 45 customers even though they did not meet the requisite minimum net worth and income requirements.
Investors should applaud the effort of the NASD and NYSE for making this holiday season even more joyous!
— James J. Eccleston
FinancialCounsel.com
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