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Regulation and Compliance > Federal Regulation > FINRA

FINRA Fines Morgan Stanley $300K for Reporting Violations

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The Financial Industry Regulatory Authority fined Morgan Stanley $300,000 and censured the firm for failing to timely report more than 1,000 fixed income transactions to the real-time transaction reporting system, according to the regulator.

Without admitting or denying the findings, Allison Patton, a managing director at Morgan Stanley and head of retail litigation at the firm, on Feb. 28 signed a FINRA letter of acceptance, waiver and consent in which the company agreed to the sanctions imposed on it by FINRA. The letter was accepted by FINRA Wednesday.

“The settlement does not allege intentional misconduct by the firm and there has been no finding that any client or market participant was financially harmed,” a Morgan Stanley spokeswoman told ThinkAdvisor on Thursday. “Morgan Stanley is committed to the timely reporting of its trades.”

From July 1, 2015, to Dec. 31, 2018, Morgan Stanley failed to timely report a total of 1,068 fixed income transactions, 609 of which qualified as a large block transaction, to the Trade Reporting and Compliance Engine, according to the FINRA AWC letter.

“The untimely reports had several causes, including manual errors by firm employees and untimely amendments or corrections made to TRACE reports, and the improper set-up of relevant” Committee on Uniform Security Identification Procedures in the firm’s reporting system, FINRA said in the letter.

There was also a coding error in the firm’s TRACE reporting system that FINRA said “caused prices in certain agency debt transactions to be reported to five decimal points instead of the required six decimal points.” The trade reports “failed to match with counter-party trade reports and were rejected by TRACE,” according to the letter.

Although Morgan Stanley manually corrected the rejected trade reports, the firm “failed to do so within the specified timeframe,” according to FINRA.

Based upon its actions, the firm violated FINRA Rules 6730 (on transaction reporting) and 2010 (governing standards of commercial honor and principles of trade), as well as Municipal Securities Rulemaking Board Rule G-14 that requires brokers, dealers and municipal securities dealers to report to the MSRB their municipal securities transactions with customers each business day, according to FINRA.

This was not the first time that FINRA sanctioned Morgan Stanley over the same reporting violations.

On May 13, 2015, the firm was censured and fined $225,000, of which $190,000 was for late and inaccurate trade reporting violations to TRACE during the periods April 1, 2013, through March 31, 2014, and July 1, 2014 through Sept. 30, 2014; and $15,000 for inaccurate trade reporting of municipal securities transactions during the period of Jan. 1, 2013 through March 31, 2013, FINRA noted.

Also, on Oct. 17, 2016, the firm was censured and fined $102,500 for late reporting of TRACE-eligible securities transactions during the period of July 1, 2014, through March 31, 2015, according to FINRA.


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