Morgan Stanley Slapped with $500K Fine
Morgan Stanley is on the hook for more than $600,000 in fines and restitution for improper execution of trades for its retail brokerage clients, according to a Finra letter of acceptance, waiver and consent.
The industry’s self-regulator alleges the wirehouse regularly recorded incorrect times for receiving and executing trades in exchange-traded preferred securities placed through a Morgan Stanley financial advisor, according to the letter.
Advisors typically took the orders by phone and then aggregated them for execution. But Morgan Stanley’s order management system allegedly recorded the time an order was placed rather executed, according to Finra. Those incorrect times were then reported to the regulator’s trade reporting system, and the reporting itself allegedly wasn’t performed in the time required, the regulator says.
From January 2012 through September 2013, Morgan Stanley’s brokers allegedly made 483 such “verbal trades,” according to the letter.
Morgan Stanley also allegedly allowed proprietary trades to occur prior to customer trades in over-the-counter preferred securities, violating a rule that requires brokerages to prioritize customers’ orders in such instances, Finra says. The regulator found 1,851 such instances from January 2012 through September 2013.
Finra also alleges Morgan Stanley failed to obtain the best possible price for its customers trading preferred securities in 74 instances from April to November 2014. And in 100 instances in the second and third quarter of 2015, the brokerage allegedly failed to fully and promptly execute orders in preferred securities, according to the regulator.
Morgan Stanley consented to the order without admitting or denying fault, and agreed to pay a $500,000 fine and pay back customers $103,219 in connection with the trades in question, Finra says.