Travelers purchased Salomon Brothers in 1997, and in 1998, Citicorp and Travelers Group merged to form Citigroup, Inc. The name of that company changed to Travelers Group in 1995. Later in 1993, Primerica bought Travelers Inc in 1993. In 1993, Primerica bought Shearson Lehman Brothers, and changed the name of the retail brokerage arm to Smith Barney Shearson. In 1988, Primerica was purchased by Sandy Weill's Commercial Credit Group. Smith Barney was purchased in June of 1987 by Primerica who, subsequent to the market crash of 1987, began losing money on the deal. In 1938, the two merged to become Smith Barney. Each ran successful businesses until the Great Depression, when Smith's firm ran short of money. Smith, another Philadelphian, began his own investment banking firm in 1892. The CFTC Division of Enforcement staff members responsible for this case are Daniel Jordan, Michael Loconte, and Rick Glaser.The company was founded in Philadelphia in 1873 As Charles D. The Order also finds that Morgan Stanley (1) failed to properly enforce its own trading limits assigned to the SureInvestment accounts, which resulted in initial margin requirements that far exceeded the applicable credit trading limit, (2) failed to respond timely and accurately to a CFTC request for production of account records, and (3) failed to maintain adequate records regarding the credit trading limit applicable to the SureInvestment accounts. “CFTC regulated firms, like Morgan Stanley, must adhere to rigorous internal controls, such as ‘know its customers’ controls, to protect customers and the markets from fraud and corruption,” said CFTC Enforcement Director Aitan Goelman. Earlier this year, Wilson was sentenced to seven years imprisonment after pleading guilty to criminal charges brought by the U.K. The Order finds that these accounts were ultimately used by the owner of SureInvestment, Benjamin Wilson, to continue an ongoing $35 million Ponzi scheme based in the United Kingdom.
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The Order finds that despite numerous red flags presented by SureInvestment’s account opening documents, including audits filled with typos and other suspicious irregularities for an entity that turned out not to exist, Morgan Stanley opened the accounts.
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These procedures required Morgan Stanley personnel to, among other things, “know its customer” and to be alert for any “red flags” regarding suspicious activity prior to opening an account.
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In light of this circumstance, the opening of these accounts was subject to special scrutiny pursuant to Morgan Stanley’s Enhanced Due Diligence and Customer Identification Program procedures.
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SureInvestment purported to operate a hedge fund based in part in the British Virgin Islands, deemed a “high risk jurisdiction” under Morgan Stanley’s compliance procedures. Specifically, the CFTC Order finds that Morgan Stanley failed to diligently supervise its officers’, employees’, and agents’ opening and handling of accounts held at Morgan Stanley in the name of a family of companies called SureInvestment. The CFTC Order requires Morgan Stanley to pay a $280,000 civil monetary penalty and to disgorge commissions it earned from the subject accounts in order to address its unlawful conduct. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Morgan Stanley Smith Barney, LLC (Morgan Stanley), a CFTC-registered Futures Commission Merchant, for improper supervision and records violations. SeptemCFTC Fines Morgan Stanley Smith Barney for Supervision and Records Failures Relating to Its “Know Its Customer” Procedures CFTC also finds other supervisory failures relating to enforcement of imposed trading limits, responding timely and accurately to a CFTC document request, and maintaining adequate customer records
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