Morgan Stanley Investment Management Inc., a registered investment advisor, has been ordered to pay $8 million in civil penalties for failing to supervise a former portfolio manager/trader, the Securities and Exchange Commission announced Tuesday.
Sheila Huang, the portfolio manager, also has been ordered to pay $125,000 for conducting illegal transactions, the SEC says. MSIM also has been ordered to pay $857,000 in compensation to harmed investors.
The penalties resulted from a series of unlawful prearranged trades conducted by Huang that resulted in the undisclosed favorable treatment of certain MSIM advisory clients over others. The actions violated MSIM’s fiduciary duties to those clients, the complaint says.
Instead of offering a series of bonds to the market, Huang "parked" them at SG Americas Securities, a registered broker-dealer in New York City, and then purchased them back at a prearranged price, the SEC says.
SG Americas Securities has been ordered to pay $800,000 and has been censured by the SEC and Yimin Ge, who cooperated in the investigation, has been ordered to pay $25,000.