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FINRA Fines Morgan Stanley $1.6 Million for Municipal Securities Rule Violations

Posted on April 9th, 2024 at 8:57 AM

From the desk of Jim Eccleston at Eccleston Law 

The Financial Industry Regulatory Authority (FINRA) has imposed a $1.6 million fine on Morgan Stanley for repeated violations of rules established by the Municipal Securities Rulemaking Board (MSRB) concerning the processing and settlement of municipal securities transactions.

AdvisorHub reports that, according to FINRA's announcement, from 2016 to August 2021, Morgan Stanley neglected to close out 239 failed inter-dealer municipal securities transactions and failed to promptly take physical possession or control of 247 municipal securities that were short for more than 30 calendar days. These actions exceeded the 30-day window allowed for closing out as per MSRB rules.

FINRA emphasizes that Morgan Stanley violated its obligation to maintain a reasonably designed supervisory system to adhere to MSRB rules. This incident marked FINRA's first imposition of a fine based on MSRB's close-out requirements violation. Still, it was the second time Morgan Stanley faced sanctions for supervisory failures related to short positions in municipal securities, with a similar incident occurring in 2015.

While Morgan Stanley consented to FINRA's findings without admitting or denying the charges, a spokesperson for the firm stated that it had enhanced its policies and procedures for closing out municipal short positions and expressed satisfaction in resolving the matter.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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