and its Managing Director of Retail Sales, Bruce F. Alonso were recently fined and censured by the NASD (National Associates of Securities Dealers) for prohibited sales contests for its brokers and managers to promote Morgan Stanley mutual funds between October 1999 and December 2002, and also for supervisory violations. Both parties have not admitted nor denied the accusations but have accepted a settlement of two million and 250 thousand dollars respectively. As you will see from this analysis, the Human resources department either has ignored (never applied) or was not aggressive enough in making sure all employees knew of the regulations. .
The investigation started when the NASD discovered that the company had implemented national sales contests and that national managers, supervised by Mr. Alonso, pressured regional managers, branch managers and financial advisors. These awards were of a variety in nature, ranging from travel and entertainment expenses: musical concerts, sporting events and business development awards to be used for office supplies, and business trips. All information retained from the NASD was from internal memos and electronic mail messages announcing the contests, and they specifically provided regional managers, branch managers, and financial advisors with daily updates with respect to each contest offered. .
Mary Shapiro, president of NASD, the regulatory unit, in a New York Times article, stated, "NASD regulators were surprised to find that Morgan Stanley ignored the rules to eliminate the contests from practically the moment the rules were written."" The NASD specifically prohibits sales contests to promote the sales of ones own mutual funds according to regulation 2820(L) which states:.
An occasional meal, a ticket to a sporting even or the theater, or comparable entertainment that is neither so frequent nor so extensive as to raise any question or propriety and is not preconditioned on the achievement of sales targets.