Morgan Stanley agreed to pay $5 million to settle charges by the Securities and Exchange Commission over alleged violations of Regulation SHO, the regulatory framework governing short sales, the SEC said Wednesday.
“We are pleased to have resolved this matter, which focused on the structuring of some internal units within our swaps business,” a Morgan Stanley spokesman told ThinkAdvisor. “The SEC did not allege, and we do not believe, that this issue had any impact on our customers,” he added.
According to an SEC order, Morgan Stanley agreed to the settlement without admitting or denying the findings of the regulator.
“Since the adoption and effective date of Reg SHO in 2004,” Morgan Stanley has “improperly operated its swaps business without netting certain ‘long’ and ‘short’ positions as required by Rule 200(c) of Reg SHO,” the SEC alleged. According to the order, Morgan Stanley was able to sell its hedges on the long swaps and mark them as “long” sales without concern for Reg SHO’s short sale requirements.