Morgan Stanley Fined $5 Million for Swap Data Reporting Failures

Given the extent of the failures, the CFTC requested the appointment of an outside consultant to ensure compliance.

Morgan Stanley Capital Services LLC has been slapped with a $5 million fine by the US securities regulator to resolve federal court charges for alleged violations of various swap data reporting.

The Commodity Futures Trading Commission (CFTC) ordered the penalty after finding Morgan Stanley had inaccurately reported swap data for approximately 3 million swaps. The reporting failures took place from December 31, 2012 or possibly earlier.

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Authorities found the reporting errors included primary economic terms data fields, such as Legal Entity Identifier, Unique Swap Identifier, notional amount, execution venue LEI, and price notation.

Additionally, the flaw in its swap data reporting systems saw nearly half of its swaps for one asset class not reported in a timely manner as requested by the CFTC regulation and outside of the regulators’ time parameters.

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Given the extent of the failures, the CFTC requested, and Morgan Stanley consented to, the appointment of a qualified outside consultant to facilitate its compliance with its swap data reporting obligations.

Regarding the swaps action, CFTC director of enforcement, James McDonald says: “This case demonstrates once again the importance of complying with the CFTC’s swap data reporting requirements. The CFTC will continue to scrutinize closely entities that do not meet their reporting obligations and, as appropriate, will continue to bring cases in this area.”

In a separate enforcement action, earlier this year, the Financial Industry Regulatory Authority has fined Morgan Stanley $875,000 for failing to provide accurate trade data, also known as blue sheets, in an automated format.

FINRA found that from at least 2014 through 2017, Morgan experienced significant failures with its blue sheet systems used to compile and produce blue sheet data.

The Wall Street independent regulator alleged that the US bank made many deficient blue sheet submissions with missing or inaccurate data, largely because of undetected coding errors. These problems involved nearly 869 inaccurate blue sheets on at least 156,678 options transactions, which demonstrated that Morgan had inadequate processes in place to validate the accuracy of its submissions to SEC and FINRA.

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