The SEC ordered Morgan Stanley to pay $8.8 million dollars for unsupervised prearranged trading, or “parking”, by a portfolio manager and trader. Societe Generale Americas was ordered to pay $1 million for their part. The SEC investigation found that Morgan Stanley portfolio manager Sheila Huang arranged the sale of mortgage-backed securities to Yimin Ge, a trader at Societe Generale Americas. The securities were set at prices predetermined by Huang to allow her to buy back the securities at just a small markup and place them into other Morgan Stanley advised accounts.
The SEC press release also stated that Ms. Huang sold additional bonds at above market prices, circumventing losses in some accounts, and then purchasing the same bonds back for different accounts at an unfavorable price without disclosing the unfavorable purchase and the harm caused to the disadvantaged client. Huang was penalized with a $125,000 fine and is unable to work in the securities industry for at least five years. Morgan Stanley will pay a penalty of $8 million and reimburse certain harmed clients over $800,000 total. Societe Generale Americas were fined $800,000 and a little over $200,000 in disgorgement and prejudgment interest. Ge will pay a $25,000 penalty and is unable to work in the securities industry for three years. None of the parties admitted to or denied the SEC’s findings. Read the full SEC press release here.