In 2012, Morgan Stanley had a great idea to pitch to clients: A wrap-fee program. Pay a simple asset-based fee and it covers everything: investment advice, brokerage services, trade execution, you name it. A nice, flat, “transparent” fee structure, “streamlining and simplifying the expense associated with such a portfolio,” it said. The only problem is, it may not have known the meaning of those words when it used them, and so now it has to pay a flat fee of its own.

A unit of Morgan Stanley agreed to pay a $5 million fine to settle U.S. Securities and Exchange Commission charges it misled retail investing clients about the costs of a “wrap fee” program, the regulator said on Tuesday….

The SEC said that while Morgan Stanley Smith Barney promised wrap fee clients a “transparent” fee structure, some managers sent most or all of their client trades to third party brokers, causing clients to pay extra fees they could not see.

Morgan Stanley pays $5 million fine to settle SEC charges it misled investing clients [Reuters]
Morgan Stanley Hid Fees From Some Customers, S.E.C. Says [NYT]