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Friday, December 3, 2021

Morgan Stanley will pay large fine over ISTA lawsuit

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Indiana Securities Commissioner Chris Naylor has signed and approved an agreement in which Morgan Stanley & Co. LLC will submit to a fine of $100,000 and pay $110,000 in investigative costs to the securities division in order to settle the commissioner’s claims that Morgan Stanley charged excessive fees to the Indiana State Teachers Association (ISTA) Insurance Trust. By entering into a consent decree, Morgan Stanley neither admits nor denies the commissioner’s allegations.

This resolution with the securities commissioner follows a settlement ISTA reached directly with Morgan Stanley after ISTA had filed a lawsuit against Morgan Stanley in 2009, which resolved issues of excessive compensation by Morgan Stanley. Claims by ISTA against other entities are still pending.

The Securities Division is currently involved in litigation regarding suitability of investments with Morgan Stanley agent and investment adviser, David Karandos. The actions giving rise to the administrative litigation occurred while Karandos was associated with UBS. The Securities Division’s lawsuit against ISTA for selling an unregistered security is scheduled for trial, to begin on Oct. 1, 2012.

The ISTA Insurance Trust’s current trustees have adopted a resolution that any settlement funds earmarked for ISTA relief will be held pending the outcome of what they refer to as the Naylor litigation in the Marion Superior Court, as well as the actions taken by the securities division. ISTA and the securities commissioner have also agreed that ISTA relief funds shall be held by the ISTA Trust and not used for ISTA general purposes, while the parties work to properly designate the distribution of the relief funds.

In the event a more formal method of securing these funds for a longer term can not be reached by agreement, the division expects to seek the court’s assistance to secure the funds pending the outcome of the federal court matter.

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