Although cryptocurrency ("crypto") assets are risky and volatile, according to a FINRA investor alert, that hasn't stopped Morgan Stanley from its plans to expand crypto investment access to retail clients in any account type. Morgan Stanley previously restricted crypto funds by limiting investments to clients with aggressive risk tolerance and at least $1.5 million in assets.
By removing that restriction, Morgan Stanley opens the door for any of its retail customers to purchase these risky assets. According to FINRA, crypto assets aren't securities under the Securities Investor Protection Act (SIPA) and thus aren't protected under this regulation. In other words, crypto as an unregistered or under-regulated asset class remains risky and subject to dramatic and unpredictable price swings.
Investors risk losing all of their investments in crypto, a risk elevated by the unregulated nature of the crypto asset marketplace.
Further compounding its decision to remove the risk tolerance and portfolio value safeguards, Morgan Stanley advised it will use "automated monitoring" to ensure clients do not become over-concentrated in crypto.
In bypassing human safety checks through registered brokers or investment advisers, the risk for unsuitable investments and, yes, even overconcentration, increases, which could make Morgan Stanley itself liable should a customer suffer financial damages due to unsuitable or excessive crypto investment losses.
If you invested with Morgan Stanley or with any broker-dealer that unsuitably recommended, suggested, or offered excessively risky products such as cryptocurrency assets, and these volatile products have proven harmful to your investments or interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.