Recovering Losses caused by Investment Misconduct

Financial Industry Regulatory Authority Fines Morgan Stanley $800K

The USA Today recently reported that the Financial Industry Regulatory Authority (FINRA) has fined Morgan Stanley $800,000 for violating regulations.  The bank supposedly failed to properly disclose potential conflicts of interest in its analysts’ research notes.

FINRA regulations require investment banks that publish analyst reports to disclose any relationship that exists with the company they are analyzing.  For example, analysts are not permitted to write positive reports about companies in which they own stock.

According to FINRA, Morgan Stanley did not adequately inform clients regarding the relationships it might have had with the companies included in the reports.   Specifically, it was mentioned that Morgan Stanley did not provide proper disclosures in 6,632 research reports and 84 public appearances by its research analysts.  These reports date all the way back to 2006.

FINRA stated that Morgan Stanley failed to inform customers about stock holdings by analysts or their households, as well as any revenue that the bank might have obtained from the companies in the research notes.  Also, FINRA said that the bank did not tell clients about any role it might have had in managing a public offering or developing a market for the company stock or debt.

Morgan Stanley was the one that initially brought the violations to FINRA’s attention.  The bank stated that it was “pleased to settle this issue of disclosures in certain of its equity research reports with FINRA.”