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.