Morgan Stanley agreed to pay $1M fine in settlement with FINRA

The Financial Industry Regulatory Authority (FINRA) has fined Morgan Stanley & Co. LLC for violating its rules. Morgan Stanley has agreed to pay $1 million as part of the deal with the authority.

From August 2019 to June 2023, Morgan Stanley violated Section 15(c)(3) of the Exchange Act, Exchange Act Rules 15c3-5(b) and 15c3-5(c)(1)(ii), and FINRA Rules 3110(a) and (b) and 2010 by failing to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial risks of its market access business activity, including controls designed to prevent the entry of erroneous orders.

When onboarding new customers who placed low-touch orders, the firm divided them into groups based on the order rules that would apply to each consumer. However, the firm's processes did not specify the process of assigning new clients to client groups or how the firm chose which group to assign consumers to. Furthermore, the firm failed to document on a customer-by-customer basis why those limits were fair for each consumer.

About Morgan Stanley

Morgan Stanley, headquartered in the United States and regulated by IIROC, offers a diverse range of financial services spanning wealth management, investment banking, sales and trading, research, investment management, and more. With a commitment to client success, Morgan Stanley provides dedicated customer support through its Fund Services division, ensuring accessibility via phone, email, and online portals. Their expertise in fund administration and tailored solutions underscores their focus on meeting clients' individual needs and delivering exceptional service.

About FINRA

FINRA, FINANCIAL INDUSTRY REGULATORY AUTHORITY is authorized by Congress to protect America‘s investors by making sure the broker-dealer industry operates fairly and honestly. To protect investors and ensure the market’s integrity, FINRA Is a not-for-profit self-regulatory organization that oversees U.S. broker-dealers.

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