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Morgan Stanley Fined $2 Million Over Multiple Violations

Regulators say that brokerage firm violated industry rules relating to short interest reporting and short sales.

Morgan Stanley, one of the largest full-service brokerage firms in the U.S., has been fined $2 million by the Financial Industry Regulatory Authority (FINRA) over multiple reporting and rule violations relating to short interest reporting and short sales. The alleged misconduct spanned a period of more than six years. In addition, FINRA also found that Morgan Stanley had failed to implement an adequate supervisory system to prevent and detect these types of violations.

Regulation SHO is the industry rule that governs “short” sales, which occur when investors try to profit on an expected decline in the price of a stock. The rule sets forth strict requirements regarding how short sales and interest related to those transactions are reported to investors. The purpose of the rule is to promote transparency in the marketplace and promote market stability with regard to short sales.

FINRA found that Morgan Stanley, over several years, failed to completely and accurately report its short interest positions in certain securities involving billions of shares. FINRA also found that the firm's supervisory system was deficient because it failed to detect and prevent these violations over an extended period of time.

While Morgan Stanley did not admit or deny FINRA’s findings, it agreed to pay the $2 million fine.

Before investing, it is always important to do your research. FINRA has provided some helpful tools for doing so, such as their Broker Check and Disciplinary Actions database. If you believe fraud or misconduct is responsible for your investment losses, we invite you to contact an experienced securities fraud lawyer at Meyer Wilson today. We will provide you with a free evaluation of your case.

Categories: Brokerage Firms, FINRA

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