FINRA Fines Morgan Stanley $1 Million
The Financial Industry Regulatory Authority (FINRA) has finedMorgan Stanley $1 million for an alleged failure to ensure the best prices and execution of transactions involving certain customers in a total of 281 different transactions involving agency, corporate, and municipal bonds, FINRA announced Thursday.
FINRA cited 116 instances involving corporate and agency bonds where it said "Morgan Stanley failed to use reasonable diligence to ensure that the purchase or sale price to the customer was as favorable as possible under current market conditions." There were also 165 municipal bond transactions where Morgan Stanley allegedly did not buy or sell the products at prices "reasonably related" to the fair market value of the security in question.
Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
In addition to the $1 million fine, Morgan Stanley will pay $188,000 in restitution and interest to clients.
Thomas Gira, executive vice president of FINRA market regulation, was quoted in FINRA's statement as saying that "Firms must ensure that customers who buy and sell securities ... receive execution prices that are consistent with prices available in the marketplace." He said that FINRA "will continue to sanction firms ... and will require firms that violate such standards to reimburse customers." FINRA is an independent regulator of securities firms doing business in the United States. Its core mission is to "pursue investor protection and market integrity."
This is at least the second time in the last two years that Morgan Stanley has been fined for its alleged failure to comply with "fair pricing standards." It received another $1 million fine from FINRA and was ordered to provide $371,000 in restitution in November 2011 for allegations related to "excessive markups and markdowns charged to customers on corporate and municipal bond transactions."
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