James Gorman is about to feel some pain in Massachusetts. William Galvin, the Bay State’s top securities regulator, has launched an investigation of Gorman’s Morgan Stanley and its alleged loan sales contests, which posed apparent conflicts of interest with clients, The Post has learned. Gorman’s bank created a pilot program that divided financial advisers into “teams” and offered them financial incentives for selling securities-based loans — an apparent regulatory no-no because it could benefit the broker more than the client, The Post first reported in March. “We’re interested because we were the test zone for this,” Galvin, Secretary of Massachusetts, told The Post in a phone interview. While Galvin declined to say if investigators had talked to victims, he confirmed that his initial inquiry has progressed into a more serious investigation. Finra, the brokers self-regulatory body, is also probing the matter. While begun in the Northeast, the contests to sell the most securities-based loans appear to have been held throughout the country. One former Morgan Stanley broker in Florida said that the bank encouraged a “Glengarry Glen Ross”-type environment, and even offered NBA tickets to the highest sellers. Securities-based loans, or SBLs, allow wealthy clients to quickly and cheaply borrow against their investments. Brokers have told The Post that they’re a quick way to make a high commission, and brokers were pushed to sell them even if clients didn’t need them. Christine Jockle, a spokeswoman for Morgan Stanley, declined to comment. The bank has previously denied that the pilot program was a sales contest.
Securities regulator William Galvin and associates are investigating Morgan Stanley over allegations of " loan sales contests " . It is claimed teams were created which were then offered " financial incentives for selling securities - based securities " , a practice described as a " no - no " . The competition is alleged to have taken place across the country . Morgan Stanley declined to participate .