Morgan Stanley recently informed advisors that they would have to close or freeze several accounts amid a due diligence backlog effective immediately, according to AdvisorHub.

Hundreds of advisors were instructed to close accounts not yet reviewed with a balance below $5 million, and to severely restrict accounts over $5 million by preventing deposits and withdrawals and limiting trading.

The new restrictions are reportedly linked to a six-month backlog in the enhanced due diligence department's review and approval process. Morgan Stanley has received an influx of new accounts fueled partly by its acquisition of E*Trade Financial in October 2020. Morgan Stanley is adding more automated supervision and increasing its hiring efforts to unfreeze accounts over $5 million and resume normal processing.

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