Morgan Stanley Smith Barney and Morgan Stanley & Co. have been fined $1 million by the Financial Industry Regulatory Authority (FINRA) it was announced today.

The firm must also pay $188,000 in restitution plus interest for failing to provide best execution in certain customer transactions involving corporate and agency bonds. The firm also failed to provide a fair and reasonable price in certain customer transactions involving municipal bonds. The restitution is in addition to compensation paid by Morgan Stanley previously to customers for transactions under this settlement.

FINRA found that Morgan Stanley failed to use reasonable diligence to ensure that the customer’s purchase or sale price was the most favorable under current market conditions in 116 customer transactions involving corporate and agency bonds. In addition, Morgan Stanley failed to purchase or sell bonds at prices reasonably related to the fair market value of the subject security in 165 transactions involving municipal bonds.

“Firms must ensure that customers who buy and sell securities—including corporate, agency, and municipal bonds—receive execution prices that are consistent with prices available in the marketplace,” Thomas Gira, Executive Vice President, FINRA Market Regulation, said in a statement. “FINRA will continue to sanction firms that execute fixed income transactions for their customers at unfair prices, and will require firms that violate such standards to reimburse customers.”

In concluding this settlement, Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Earlier in the month, Morgan Stanley and Co. agreed to pay $100,000 to the New Jersey Bureau of Securities. This came after Bureau investigators found the company was in violation of state securities laws and regulations in its sale of non-traditional exchange-traded funds to investors.

Read more:


Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access