Morgan Stanley Ordered To Pay $800,000 By FINRA for Allegedly Failing To Disclose Certain Information About the Relationships Morgan Stanley, or its Analysts, Had With Companies Covered in its Research Reports and The Availability of Independent Research in Customer Account Statements.
The Financial Industry Regulatory Authority (FINRA) has issued an order censuring and imposing fines on Morgan Stanley & Co., Inc. in the amount of $800,000 to settle charges relating to Morgan Stanley’s alleged failure to make public disclosures required by FINRA’s rules governing research analyst conflicts of interest and failure to comply with the 2003 Research Analyst Settlement requiring firms disclose the availability of independent research in broker customer account statements, according to an August 10, 2010 FINRA securities & investment regulatory press release.
FINRA reportedly found that from April 2006 to June 2010, Morgan Stanley issued equity research reports that failed to disclose accurate information about the relationships Morgan Stanley, or its analysts, had with companies covered in its research reports, representing approximately 6,836 deficient disclosures in about 6,632 equity research reports and 84 public appearances by research analysts, including the following alleged deficient disclosures:
- Securities holdings of an analyst, or a member of the analyst’s household, in a subject company;
- Morgan Stanley’s receipt of investment banking and non-investment banking revenue from subject companies;
- Morgan Stanley’s role as a manager, or co-manager, of a public offering of securities for subject companies;
- Morgan Stanley’s role as a market maker for certain subject companies’ securities; and
- Price charts for securities covered in equity research reports and the valuation method used to support published price targets.
According to FINRA, Morgan Stanley also did not disclose in approximately 127,600 monthly Morgan Stanley brokerage account statements sent to Morgan Stanley customers from August 2007 to February 2008 that it had available independent, third-party research.
In settling this matter, Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
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