Morgan Stanley is facing a $400,000 fine from Finra over a reported years-long failure to properly disclose critical information on hundreds of thousands of trades to non-institutional clients.
The violations occurred between May 2018 and July 2022 and involved municipal securities, corporate debt transactions, and agency debt transactions, according to a letter of acceptance, waiver, and consent released by the industry regulator Wednesday.
The AWC from Finra outlined how Morgan Stanley did not accurately disclose or entirely omitted the firm’s mark-ups and mark-downs on approximately 19,000 municipal securities and corporate debt transactions.
Additionally, the firm failed to include the time of execution and did not provide a security-specific URL link on approximately 535,000 fixed price primary market transactions involving municipal, corporate, or agency debt securities.
Morgan Stanley discovered those issues in June 2021 and subsequently reported them to Finra.
“Trade confirmations protect investors … by, among other things, alerting them to potential conflicts of interest with their broker-dealers and providing them the means to verify the terms of their transactions and evaluate transaction costs,” Finra explained.
Morgan Stanley also didn’t have reasonable supervision processes, Finra said, noting that it “did not have any reasonably designed process in place to test the accuracy of the information in its internal systems that triggered mark-up and mark-down disclosures on non-institutional customer confirmations.”
Because of its reporting and compliance shortfalls, the regulator found Morgan Stanley in violation of MSRB Rule G-15 as well as Finra Rules 2232 and 2010, which require certain information to be reported to ensure transparency and protect investors.
"Morgan Stanley has enhanced its supervisory processes for trade confirmations and is pleased to resolve this matter,” the firm said in an emailed statement.
The firm also found itself on the wrong end of a landmark enforcement action in February this year. In that case involving muni debt trades, Finra saw “repeated failures to timely close out failed inter-dealer municipal securities transactions” between 2016 and 2021.
That action, the first disciplinary case in which Finra “charged a firm with violating the close-out requirements of Municipal Securities Rulemaking Board (MSRB) Rule G-12(h) and related supervisory failures,” resulted in a more substantial $1.6-million fine for Morgan Stanley.
In an era of AI euphoria and market FOMO, getting back to basics with fixed income may be the most contrarian and most important move advisors can make.
Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.
Shannon Reid, president of Osaic and the network’s number two executive, has plenty of challenges, industry executives said.
Auditors flagged the commingling. The COO allegedly knew. Investors kept getting the pitch
The advisors on the move include two brothers leading a family practice in Connecticut, and a husband-and-wife tandem working with business owners in the West Coast.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
