FINRA Settles with Morgan Stanley

Morgan Stanley & Co. will pay the Financial Industry Regulatory authority (FINRA) a total of $12.5 million on behalf of its “former affiliate” Morgan Stanley Dean Witter, (MSDW) according to a FINRA statement issued September 27, for failing “on numerous occasions to provide emails to claimants in arbitration proceedings as well as to regulators–while representing that the destruction of the firm’s e-mail servers in the September 11, 2001 terrorist attacks,” which destroyed MSDW’s World Trade Center offices, “resulted in the loss of all pre-9/11 email.”

The FINRA statement says that “millions of pre-9/11 emails” that had been stored off-site before the attacks, and “had been restored to the firm’s active e-mail system,” but were not provided anyway.

In a “first of its kind” settlement, according to FINRA, $9.5 million will be distributed to “two groups of customers,” which FINRA estimates to be “several thousand customers,” to settle arbitration cases brought against MSDW. A separate fine of $3 million was imposed for the firm’s “failure to provide pre-9/11 e-mails and updates to a supervisory manual.”