Morgan Stanley’s Investment Unit Agrees $2.2m Settlement with FINRA

The investment unit of the bank has agreed to a fine for submitting inaccurate reports in violation of FINRA’s rules.

Morgan Stanley Smith Barney has agreed to pay a fine of $2.2 million to the US Financial Industry Regulatory Authority (FINRA), after the watchdog alleged that the firm submitted millions of inaccurate reports to the Options Clearing Corp, violating FINRA rules, according to a Reuters report today.

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FINRA claimed that in over 13 million situations, the wealth management firm sent reports on its large options positions, which missed details such as tax identification numbers, had wrong account type details and incomplete address fields.

FINRA typically tracks reports like those that Morgan Stanley submitted in order to identify holders of large option positions who could be, in addition to other things, attempting to manipulate the market.

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Previously Fined

This is not the first time that FINRA has pulled up Morgan Stanley Smith Barney for inaccuracies.

The US regulatory authority fined the bank’s investment unit $650,000 last year following a series of warnings dating back to 2011 when FINRA alerted the company to “significant gaps in its systems”, noting that its monitoring of the transmittal of customer funds to third parties was sub-standard.

According to a statement at the time, Morgan Stanley Smith Barney “failed to implement reasonable supervisory systems and procedures” to monitor for wires from multiple customer accounts to in some cases the same, third-party accounts.

FINRA found that three registered representatives were able to fraudulently transfer customer funds to their own personal bank accounts or other self-interested receivers which resulted in the imposition of the aforementioned fine.


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