FINRA fines Morgan Stanley $24,000 for mark-up failures
BY SourceMedia | MUNICIPAL | 08/14/24 12:11 PM EDTThe Financial Industry Regulatory Authority has fined Morgan Stanley
Morgan Stanley
The firm violated MSRB Rule G-15 on written confirmations and MSRB Rule G-27 on supervision. The firm agreed to a censure and a total fine of $400,000, $24,000 of which pertains to MSRB rule violations.
"From May 2018 through July 2022, Morgan Stanley
From May 2018 to June 2021, the banking giant also "did not include the time the trade was executed and references and hyperlinks to the EMMA and TRACE webpages containing the security specific trading data on non-institutional customer confirmations for approximately 500,000 fixed price corporate primary market or agency primary market and approximately 35,000 fixed price municipal securities primary market transactions," FINRA said. "Morgan Stanley
In addition to violating MSRB Rule G-15 on written confirmations on the muni transactions, the firm also violated FINRA rules 2232 and 2010 on the corporate and agency debt transactions, as well as MSRB Rule G-27 for failing to catch those markup disclosure violations.
"For example, with respect to the firm's not disclosing mark-up and mark-down information on confirmations, the firm did not have any reasonably designed process in place to test the accuracy of the information in its internal systems that triggered mark-up and mark-down disclosures on non-institutional customer confirmations," FINRA said.
Under MSRB Rule G-15, if the "offsetting" of the principal transaction is done by an affiliate of the dealer, the dealer is then required to "look through" to analyze the terms of the affiliate's transaction and decide whether a disclosure is required and if so, whether it should be marked-up or down.
"The firm did not reasonably evaluate whether its internal system accurately captured offsetting trading activity involving one of its affiliates and, as a result, it did not timely detect that it was not capturing trade data from an affiliate and, therefore, was not disclosing or was inaccurately disclosing mark-ups and mark-downs on confirmations involving transactions executed with that affiliate," FINRA said.
The firm's written supervisory procedures required the firm to only review confirmations for time of execution and security specific URL disclosures where a mark-up or mark-down was required and therefore failed to detect time-of-execution and security-specific URL disclosures.
"Morgan Stanley
FINRA has charged a few other firms for mark-up failures in the last month, including The Jeffrey Matthews Financial Group, which was fined $110,000 for charging unfair mark-ups on 86 municipal bond transactions, as well as the $15,000 fine leveled at Wichita-based Riedl First Securities Company of Kansas, which was fined by the regulator of charging unfair prices on 160 corporate bond transactions and violating MSRB Rule G-30 on fair pricing.
At the top of this year, Rockefeller Financial was fined $100,000 for failing to disclose mark-ups and mark-downs on 793 retail customer confirmations.
Morgan Stanley