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Business

Morgan Stanley mismanaged employee retirement funds: suit

By
Kevin Dugan
Published Aug. 20, 2016, 12:17 a.m. ET

Morgan Stanley was hit with a lawsuit on Friday accusing it of mismanaging its employees’ retirement money to maximize its own profits.

The suit, filed in Manhattan federal court, claims the Wall Street firm steered more than 60,000 employees into its own poorly performing funds with excessive fees.

For example, the bank’s small-cap fund performed worse than 99 percent of similar funds in 2014 and showed little improvement the next year, when it did worse than 95 percent, according to the complaint.

The fees on Morgan Stanley’s funds were also higher than those of peers, the suit claims. An investor with $1 million in one of Morgan Stanley’s small-cap funds would have made $335,485 more over five years if he had invested in a similar, cheaper fund run by Wellington.

“Morgan Stanley charges plan participants fees that are higher than those it charges outside investors with similar assets and investment strategy,” Charles Field, a lawyer for the lead plaintiff, said in a statement.

The suit is seeking $1.5 billion in damages on behalf of all plan participants from March 2010 through February 2016.

The bank declined to comment.