Sub-advisors come under SEC scrutiny

By Staff | November 16, 2011 | Last updated on November 16, 2011
1 min read

The U.S. Securities and Exchange Commission is shining a light on sub-advisory agreements among asset managers.

“We want to take the advisory fee setting process out of the shadows by scrutinizing the role of investment advisers and fund board members in vetting fee arrangements with registered funds,” said Robert Khuzami, director of the SEC’s Division of Enforcement.

Better late than never, it seems. The SEC has charged Morgan Stanley Investment Management with violating securities law by paying a Malaysian sub-advisor for services that were never rendered.

The contract was repeatedly renewed over the course of a decade, costing The Malaysia Fund’s investors, $1.845 million. MSIM has agreed to settle with the SEC and will pay more than $3.3 million.

“Not only did MSIM’s internal controls fail in allowing this purported services arrangement to go on, but the firm repeatedly issued reports to investors that inaccurately represented those services,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “MSIM clearly lost sight of this sub-adviser.”

Read the SEC notice here. staff


The staff of have been covering news for financial advisors since 1998.