(Adds Morgan Stanley reaction)
By Douwe Miedema
WASHINGTON, March 27 The Commodity Futures
Trading Commission on Thursday fined Morgan Stanley
$490,000 for violating rules that require futures brokers to
protect clients by keeping their money segregated from other
funds on the bank's books.
Morgan Stanley's futures trading unit transferred some $16
million from a segregated client account in 2013, and it also
mixed segregated funds and its own money during a six-month
period in 2012.
The unit, a so-called Futures Commission Merchant, a U.S.
regulatory category that is subject to the CFTC's strict
customer protection rules, simultaneously settled the violations
with the CFTC.
Client segregation issues were at the heart of two major
collapses of futures brokers overseen by the CFTC, MF Global and
Peregrine Financial, and the agency has since tightened its
rules for the long-regulated industry.
Peregrine founder Wasendorf begun serving a 50-year jail
sentence last year for bilking $215 million from customers, and
the CFTC has also charged former MF Global chief Jon Corzine - a
former New Jersey governor and U.S. senator - for being a key
actor in one of the country's 10 biggest bankruptcies.
In the case of MF Global, some $1.6 billion went missing
from client accounts, money the firm used to stop gaps in its
business as investors quickly lost confidence.
Morgan Stanley said no client money was lost as a result of
the issues and that it cooperated fully with the CFTC. It also
said it hired an outside auditor to review its procedures and
made improvements where required.
Last year, the CFTC approved rules to better protect
customers of futures brokers - the biggest of whom are units of
Wall Street banks - to tighten up procedures and set aside their
own cash to cover client shortfalls.
(Reporting by Douwe Miedema; Editing by Cynthia Osterman)