FINRA Fines Morgan Stanley $300,000 for Reporting Failures

Morgan Stanley has agreed to pay a $300,000 fine to settle charges from the Financial Industry Regulatory Authority (FINRA), in which the regulator accuses the firm of failing to properly report fixed income transactions.

According to a document seen by Finance Magnates, the regulator claims that between July 1, 2015, and December 31, 2018, Morgan Stanley failed to timely report a total 1,068 fixed income transactions.

From this, 609 qualify as a large block transaction, to TRACE or the Real-time Transaction Reporting System (RTRS). According to the regulator, this was a result of manual errors made by staff employees and the untimely amendments or corrections made to TRACE reports. Furthermore, relevant CUSIPs in the firm's reporting system were set up improperly.

“In addition, a coding error in the firm's TRACE reporting system caused prices in certain agency debt transactions to be reported to five decimal points instead of the required six decimal points. These trade reports failed to match with counter-party trade reports and were rejected by TRACE. The firm manually corrected the rejected trade reports but failed to do so within the specified timeframe,” the document said.

The $300,000 fine that Morgan Stanley has consented to includes $270,000 for the TRACE reporting violations and $30,000 for the MSRB reporting violations. However, the bank has consented to the fine without admitting or denying the findings.

Morgan Stanley to acquire E*Trade

The fine announced today comes slightly more than a month since the American multinational investment bank announced that it would be acquiring discount brokerage E*Trade in a deal worth around $13 billion.

As Finance Magnates reported, the all-stock deal is the biggest transaction made by a Wall Street bank since the financial crisis and follows last year’s $26 billion all-stock purchase of TD Ameritrade by Charles Schwab.

Morgan Stanley will pay $58.74 a share in stock for E*Trade, at a premium of 30.7 percent to the last closing price of E*Trade shares. Under the agreement, shareholders of the discount brokerage will receive 1.0432 Morgan Stanley shares for each share.