Legal

SEC Charges Former Morgan Stanley Exec Over Secret Links To Chinese Official

Harriet Davies Editor - Family Wealth Report 30 April 2012

SEC Charges Former Morgan Stanley Exec Over Secret Links To Chinese Official

The Securities and Exchange Commission has charged a former Morgan Stanley executive with violating the Foreign Corrupt Practices Act, as well as flouting securities laws for investment advisors, over the secret acquisition of millions of dollars worth of real estate investments for himself and an influential Chinese official.

The SEC alleges that Garth Peterson, a former managing director in Morgan Stanley’s real estate investment and fund advisory business, had a secret business relationship with the former chairman of Yongye Enterprise, a Chinese state-owned entity. This official allegedly held sway over decisions that affected the success of Morgan Stanley’s real estate business in Shanghai, the regulator says, and steered business to the Wall Street bank’s funds.

Peterson covertly arranged for $1.8 million to be paid to himself and the Chinese official, which he disguised as finder’s fees owed by the Morgan Stanley funds, the SEC alleges. He also arranged for the official and an attorney to acquire “valuable Shanghai real estate interest from a Morgan Stanley fund,” according to a statement from the regulator.

“In exchange for offers and payments from Peterson, the Chinese official helped Peterson and Morgan Stanley obtain business while personally benefitting from some of these same investments. Peterson’s deception, self-dealing, and misappropriation breached the fiduciary duties he owed to Morgan Stanley’s funds as their representative,” the statement continues.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes