Under the settlement, William Keith Phillips, 50, agreed to pay an $80,000 penalty and to serve a four-month suspension from working with an investment adviser or broker/dealer.
An SEC document outlining the settlement accused Phillips of recommending to pension fund clients that they hire three money managers (unnamed in the SEC settlement document) even though they were not on Morgan Stanley’s approved manager list. From 2000 to April 2006, the SEC alleged, Phillips also did not disclose to the institutional clients that he and Morgan Stanley received at least $3.3 million in brokerage commissions for trading for the managers’ institutional clients who were not Morgan Stanley clients and custodied their assets outside of Morgan Stanley (see Eyes Wide Shut).
Further, according to the agency, two of the three managers generated at least $200,000 in advisory fees. Phillips received a portion of the commission and advisory fees.
“(Phillips) knowingly or recklessly made misrepresentations about the manager recommendation process to his advisory clients and failed to ensure that the actual or potential conflicts of interest inherent in his recommendation of the Managers were disclosed to those clients,” the SEC document stated.
Phillips worked in Morgan Stanley’s Nashville branch from 2000 until 2006 when the company allowed him to resign. At the time of his departure, according to the SEC, Phillips had about 90 advisory clients and about 2,000 brokerage accounts. He worked for Morgan Stanley’s Investment Consulting Services unit, which helped clients create an investment policy statement and select money managers.
Phillips did not admit any wrongdoing as part of the settlement.
The document is available here.