May 16 (Bloomberg) -- Morgan Stanley was sued by a Birmingham, Alabama, medical firm over claims the bank received improper payments from ING Life Insurance and Annuity Co. in exchange for referral of retirement-investment business.
The New York-based bank placed retirement plans with so-called alliance partners, including ING, and received additional compensation from the partners based on the amount of assets invested, according to the suit filed today in Manhattan federal court.
The compensation amounted to a “pay-to-play” fee, prohibited by U.S. law governing the oversight of retirement funds, according to the suit brought by Skin Pathology Associates Inc. The payment was in addition to commissions and Morgan Stanley provided no additional work for it, according to the suit.
“The alliance partner program is structured to take advantage of a conflict of interest Morgan Stanley has created,” the skin-testing center said in the complaint. “Indeed, if Morgan Stanley is not successful in exploiting the conflict, it receives no additional compensation.”
Skin Pathology alleged it hired New York-based Morgan Stanley, the sixth-largest institutional broker in the U.S., as a broker for retirement funds that were placed with ING.
The center is seeking damages for alleged breaches of fiduciary duty in handling the funds and disgorgement of ING’s payments to Morgan Stanley on behalf of all investors that participated in the bank’s alliance partner program.
Morgan Stanley spokesman Akhilesh Raina declined to comment on the lawsuit. ING spokesman Joe Loparco declined to comment, adding that the company hasn’t yet been served with the suit.
The case is Skin Pathology Associates Inc. v. Morgan Stanley & Co., 13-cv-3299, U.S. District Court, Southern District of New York (Manhattan).
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