Morgan Stanley Smith Barney will pay a $15 million penalty as part of a settlement with the financial instruments and trade percentage related to four financial advisers who stole millions of dollars of advisory clients’ and brokerage customers’ funds.

The settlement announced late Monday is also related to the firm’s setback to adopt policies and procedures designed to prevent and detect such theft.

The SEC order said that MSSB failed to adopt and implement policies and procedures reasonably designed to prevent its financial advisers from using two forms of unauthorized third-event disbursements, Automated Clearing House payments and sure patterns of funds wire transfers, to misappropriate funds from customer accounts. The order said the financial advisers, located in Texas and California, made hundreds of unauthorized transfers from customers’ or clients’ accounts to themselves or for their own advantage.

Morgan Stanley formed a enterprise with Citigroup’s Smith Barney in 2009 and purchased the business outright in 2013.

The SEC said that until at least December 2022, MSSB did not have a policy or procedure to screen externally initiated ACH remittance instructions to detect instances in which one of its financial advisers assigned to the account bore the same name as the beneficiary listed in the ACH remittance instructions. As a outcome the firm didn’t detect hundreds of unauthorized ACH transfers between May 2015 and July 2022 from its customers’ or clients’ accounts.

“Safeguarding investor assets is a fundamental responsibility of every financial services firm,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in a statement. “Today’s resolution also takes into account the firm’s several self-reports to, and substantial cooperation with, the percentage staff and its remedial efforts, including compensating the financial advisers’ victims and retaining a lawful operation consultant to conduct a comprehensive review of the relevant policies and procedures.”

Aside from the $15 million penalty, MSSB, which did not admit or deny the SEC’s findings, has consented to a cease-and-desist order, a censure and sure undertakings that include having a lawful operation consultant review all forms of third-event funds disbursements from customer and client accounts.

Morgan Stanley Smith Barney will pay a $15 million penalty as part of a settlement with the stocks and bonds and swap percentage related to four financial advisers who stole millions of dollars of advisory clients’ and brokerage customers’ funds.

The settlement announced late Monday is also related to the firm’s setback to adopt policies and procedures designed to prevent and detect such theft.

The SEC order said that MSSB failed to adopt and implement policies and procedures reasonably designed to prevent its financial advisers from using two forms of unauthorized third-event disbursements, Automated Clearing House payments and sure patterns of money wire transfers, to misappropriate funds from customer accounts. The order said the financial advisers, located in Texas and California, made hundreds of unauthorized transfers from customers’ or clients’ accounts to themselves or for their own advantage.

Morgan Stanley formed a enterprise with Citigroup’s Smith Barney in 2009 and purchased the business outright in 2013.

The SEC said that until at least December 2022, MSSB did not have a policy or procedure to screen externally initiated ACH remittance instructions to detect instances in which one of its financial advisers assigned to the account bore the same name as the beneficiary listed in the ACH remittance instructions. As a outcome the firm didn’t detect hundreds of unauthorized ACH transfers between May 2015 and July 2022 from its customers’ or clients’ accounts.

“Safeguarding investor assets is a fundamental responsibility of every financial services firm,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in a statement. “Today’s resolution also takes into account the firm’s several self-reports to, and substantial cooperation with, the percentage staff and its remedial efforts, including compensating the financial advisers’ victims and retaining a lawful operation consultant to conduct a comprehensive review of the relevant policies and procedures.”

Aside from the $15 million penalty, MSSB, which did not admit or deny the SEC’s findings, has consented to a cease-and-desist order, a censure and sure undertakings that include having a lawful operation consultant review all forms of third-event money disbursements from customer and client accounts.