Morgan Stanley to pay $50 mn fine over mutual fund charges

Morgan Stanley on Monday agreed to pay $50 million to settle federal charges of mutual fund abuses as the industry scandal widened amid further withdrawals of funds by investors in Putnam Investments.

Morgan Stanley, MWD settled charges that if failed to tell investors about compensation received for selling certain mutual funds, the US Securities and Exchange Commission and National Association of Securities Dealers said.

The deal followed an SEC settlement with Putnam on Thursday that it had allowed some portfolio managers and certain clients to break company rules by buying and selling mutual fund shares very quickly to profit from stale prices.

Without admitting or denying the charges, as is customary on Wall Street, Morgan Stanley agreed to provide more disclosure about its relationships with mutual fund groups, the SEC said, adding it was looking at 15 brokers in relation to the Morgan Stanley charges.

Morgan Stanley said in a statement it would no longer accept “soft dollar” payments the paying of brokerages services through commission revenues rather than direct fees, or hard dollar payments on retail sales of mutual funds.

The probe of the $7 trillion mutual fund industry will expand to include the examination of soft dollar payments and mutual fund fees, New York Attorney General Eliot Spitzer, who has spearheaded the investigations, said last week.