In the Matter of Morgan Stanley Smith Barney LLC, CFTC Docket No. 13-02. On October 22, 2012, the CFTC announced it issued an order filing and settling charges that Morgan Stanley failed to diligently supervise the handling of customer accounts. Morgan Stanley’s “Customer A” provided trust services for its clients. Customer A accepted orders to trade commodity futures contracts on behalf of its own third-party client, accepted the third-party client’s money to place those trades, and effected the trades via a contract market on the third-party client’s behalf. By engaging in these transactions, Customer A acted as a futures commission merchant without being registered with the CFTC. Because funds were moving from a proprietary trading account to a third-party bank account, Morgan Stanley’s employees who were executing the transactions should have questioned Customer A’s actions and looked in to how the account was being handled. Without admitting or denying the charges, Morgan Stanley consented to an order requiring it to cease and desist from violating Regulation 166.3, imposing a $200,000 civil monetary penalty, and undertaking a review and evaluation of its supervisory procedures for proprietary futures trading accounts.
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