A regulator slapped Morgan Stanley with an $800,000 fine for thousands of disclosure violations over four years.
The Financial Industry Regulatory Authority, or Finra, said the giant firm failed in 6,836 cases between April 2006 and this past June to disclose research analyst conflicts of interest.
Morgan Stanley failed to disclose analysts’ securities holdings, its business relationships with covered companies and its roles making markets and leading securities offerings for those companies. All those conflicts are supposed to be disclosed, under Finra rules and the 2003 research analyst settlement.
“This case strikes at the heart of Finra’s research disclosure requirements, which were written in response to scandals involving research analyst conflicts of interest,” said Finra acting enforcement chief James S. Shorris.
Fortunately for Morgan Stanley, which neither admitted nor denied the findings, striking at the heart of Finra’s disclosure requirements isn’t a particularly costly offense. The settlement will set Morgan Stanley back just $117 for each infraction.
That’s not much, particularly when you consider Morgan Stanley made $2,663 every minute of every day last year. Nor when you note that the firm has something other than a clean track record on the disclosure front.
In 2006 Finra’s predecessor, the financial industry self-regulator known as NASD, found Morgan Stanley had failed provide appropriate disclosures in 22,000 research reports, and failed to correct its oversights even when they were pointed out.
“Throughout these time periods, Morgan Stanley received repeated notices from NASD Advertising that their research reports failed to comply with applicable disclosure rules, yet the firm failed to take reasonable or prudent steps to correct these deficiencies,” the regulator said at the time.
Showing the world once and for all that it wasn’t messing around, the NASD fined Morgan Stanley $200,000, an average of $9 an offense.
Finra noted in Tuesday’s statement that it considered that settlement in its decision to raise the price for this round of sanctions. Other factors it weighed: Morgan Stanley’s self-reporting of “some of its disclosure violations,” and undisclosed “remedial steps taken by the firm.” We’ll have to wait for the next go-round to see how well those worked out.
