Key Insights
- Morgan Stanley fined $400,000 by FINRA for trade confirmation disclosure violations from 2018 to 2022.
- The firm failed to disclose mark-ups, mark-downs, execution times, and security-specific URLs for numerous transactions.
- Morgan Stanley also cited for inadequate supervisory systems and procedures to ensure compliance.
NEW YORK (MarketsXplora) – Morgan Stanley Smith Barney LLC has agreed to pay a $400,000 fine to settle charges brought by the Financial Industry Regulatory Authority (FINRA) over trade confirmation disclosures and supervisory failures, the regulator announced on Wednesday.
The settlement addresses violations that occurred between May 2018 and July 2022, during which Morgan Stanley failed to accurately disclose or entirely omitted mark-ups and mark-downs for approximately 19,000 municipal securities and corporate debt transactions involving non-institutional customers.
FINRA also found that the firm neglected to disclose execution times and security-specific URLs for about 35,000 fixed price, primary market municipal securities transactions and roughly 500,000 similar transactions involving corporate or agency debt securities. These URLs would have provided customers with links to FINRA or Municipal Securities Rulemaking Board (MSRB) web pages containing publicly available trading data for the securities in question.
The regulatory body stated that these omissions violated MSRB Rule G-15 for municipal securities transactions and FINRA Rules 2232 and 2010 for corporate or agency debt transactions.
Furthermore, FINRA cited Morgan Stanley for failing to establish, maintain, and enforce a reasonable supervisory system, including written supervisory procedures (WSPs), to ensure compliance with MSRB Rule G-15 and FINRA Rule 2232. This failure resulted in additional violations of MSRB Rule G-27 and FINRA Rules 3110(a) and 2010.
As part of the settlement, Morgan Stanley has agreed to a censure in addition to the monetary penalty. The firm neither admitted nor denied the charges but consented to the entry of FINRA’s findings.