NASD Fines Morgan Stanley $2.9 Million

by Glen Shapiro, LawAndTax-News.com, New York

07 September 2006

The US National Association of Securities Dealers announced on Tuesday that it has imposed fines totaling $2.9 million against Morgan Stanley and Co., Inc. and Morgan Stanley DW Inc. for extensive violations dealing with reporting obligations, best execution, short sales, and a range of other NASD, Securities and Exchange Commission and Municipal Securities Rulemaking Board rules.

NASD found that MSCO and MSDW each committed numerous violations of federal securities laws, NASD rules and MSRB rules during the seven-year period from 1999 to 2006.

Among the most significant was a series of violations of the Order Audit Trail System (OATS) reporting requirements, which resulted from MSCO's pervasive inability to properly track and report OATS data. Additionally, MSDW had numerous regulatory violations involving the firm's failure to adequately price, sell and report corporate and municipal bond transactions, and will make nearly $30,000 in restitution payments to affected customers.

NASD also found that both MSCO and MSDW failed to implement effective supervisory systems and written supervisory procedures necessary to ensure compliance with federal securities laws, NASD rules and MSRB rules.

In addition to the fines, both firms will provide reports to NASD detailing the corrective actions completed and the ongoing corrective actions being taken to ensure that each firm has adequate policies, procedures, systems and training necessary to ensure regulatory compliance.

"MSCO and MSDW had numerous types of reporting violations and the scope of those violations indicated a failure to adequately address compliance needs of the firms," announced NASD Executive Vice President Tom Gira.

However, he went on to add that:

"MSCO and MSDW also undertook independent, internal reviews to determine the causes and extent of their trade reporting problems, provided their findings to NASD, and were otherwise highly cooperative with NASD's investigation. The firms' cooperation is reflected in the sanctions."

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