Wrap-fee programmes offer accounts in which a client pays an asset-based “wrap fee” that covers investment advice and brokerage services, including trade execution. According to the SEC’s order, Morgan Stanley's marketing material said that its wrap-fee accounts offered clients professional investment advice, trade execution and other services in a 'transparent' fee structure.

Between October 2012 and June 2017, some of Morgan Stanley’s marketing bumf and communications with customers gave wrap-fee clients the impression that they were not likely to incur additional trade execution costs. During that period, however, they did. The fees, moreover, were often not visible to them. To be more specific, some communications gave clients the impression that Morgan Stanley executed most of their trades and that, although extra costs were possible, they were not actually going to incur them. Investment advisors, according to the SEC, are always obliged to inform their clients about the fees that they have to pay.

The SEC’s order contains a censure and a cease-and-desist order. Moreover, it states that Morgan Stanley wilfully flouted section 206(2) Advisors Act, which prohibits an investment advisor from engaging in any transaction, practice or course of business that operates as a fraud or deceit upon a client or prospective client. Scienter (intent or knowledge of wrongdoing) is not required to establish a contravention of s206(2) because it may rest instead on a finding of negligence, as can be seen in SEC v Steadman (1992).