Morgan Stanley to Reimburse Clients Affected by Outage
(Story updated throughout, with details of the systems problem and remediation instructions given to brokers.)
Morgan Stanley Wealth Management will “appropriately reimburse” clients who had trouble putting in trading orders on Wednesday when the company’s primary order-routing and account-viewing functions failed.
She declined to name the software manufacturer or its functionality, but a person who received memos on the issue and a second firm official said it was an IBM product. An IBM spokesperson could not immediately be reached for comment.
Vince Lumia, the head of Morgan Stanley’s salesforce of more than 15,000 advisors, told managers Thursday that if brokers or their customers had trouble submitting orders they should send reports to their “risk and service partners” by 9:00 a.m. EST on Friday, according to a memo that was read to “AdvisorHub.” The firm will reconcile claims with system records, and make the “necessary adjustments,” he wrote.
Brokers were able to route trades through a back-up system on Wednesday, but the redundant system was “slow,” the spokeswoman said.
“In defense of Morgan Stanley, the clients will get the best price,” said one advisor in a southwestern state who spoke on condition of anonymity. “Management is busy cleaning up trades.”
The system collapse amid the chaos of the coronavirus crisis was disturbing, three other advisors said, particularly because stock indexes on Wednesday were broadly rebounding for the second consecutive day after weeks of volatility and declines. Although the order-routing problem was relatively harmless because they have been urging clients to refrain from bottom-fishing and from cashing out their accounts, the inability to review accounts was problematic for them and customers, they said.
Almost all of Morgan Stanley’s 15,500 brokers have been working from outside their branch offices as a result of the coronavirus pandemic.
The Morgan Stanley systems issue was the most prominent that has emerged since virus concerns emerged, but other firms also have had mishaps among the coronavirus-shattered markets.
Wealth management clients of JP Morgan Chase lost access to an electronic trading platform as markets plunged on March 12. Bank of America’s Merrill Edge suffered a 20-minute outage late in the day on March 25 that affected their ability to view their accounts. Bank of America is working with clients on a case-by-case to address concerns, a spokesman said.
Robinhood Markets, which offers no-commission stock trades, suffered outages earlier this month as trading volume overwhelmed capacity. It began offering remediation credits this week to customers who said they lost money by being locked out of the markets.
After dropping more than 30% from its February peak, the S&P 500 gained almost 11% over this week’s first three trading days.