June 17--HARTFORD, Conn. -- A major brokerage with offices in Connecticut has reached a $5 million settlement with state banking regulators over employee supervision and following established procedures, the largest settlement ever for the department's securities division.
Morgan Stanley Smith Barney reached the agreement with state regulators following an 18-month investigation focused largely on client e-mails and allegations that the electronic correspondence wasn't being monitored by supervisors. In addition, state regulators alleged procedures weren't being followed in internal compliance reviews of e-mails, including what was outsourced to third-party contractors -- one of them located in India.
Eric Wilder, director of the banking department's securities division, said the brokerage giant also was slow in providing state regulators with documents sought during the investigation.
Morgan Stanley has settled the matter without admitting or denying the allegations, according to Christy Jockle, a brokerage spokeswoman.
"There were no allegations of specific harn to any client of our Connecticut offices," Jockle said.
She declined further comment.
Morgan Stanley has agreed to reassess its procedures involving supervisory review of e-mails and evaluate the effectiveness of its compliance reviews of e-mail correspondence. The brokerage also must ensure it makes a more timely response to requests for information from state regulators.
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