The $56-billion pension fund made the announcement Friday that the firm was being placed on a watch list due to regulatory issues involving a US Securities and Exchange Commission (SEC) enforcement action. Currently, Morgan Stanley Investment Management manages $637 million in a Global Bond core plus mandate and $3.2 million in the defined contribution plan.
Last month, Morgan Stanley – parent of the institutional management division – agreed to pay $50 million to settle federal charges that it failed to tell investors about compensation received for selling certain mutual funds. The company did not admit or deny the charges, but agreed to provide more disclosure about its relationships with mutual fund groups (See Morgan Stanley Confirms Spitzer, SEC Fund Probe Ties ). While on OPERS’ watch list, Morgan Stanley Investment Management will be subject to heightened due diligence and will not be permitted to receive additional funds for the bond portfolio during the initial one-year watch list period.
Morgan Stanley Investment Management will be eligible to be removed from the watch list after all regulatory issues have been resolved and OPERS is satisfied that the firm has remedied the supervisory and compliance issues connected to its mutual fund trading practices, OPERS said in a news release.