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Morgan Stanley Agrees to Fine for Failure to Provide Fund Disclosures

Posted on January 2nd, 2024 at 1:16 PM
Morgan Stanley Agrees to Fine for Failure to Provide Fund Disclosures

From the desk of Jim Eccleston at Eccleston Law 

Morgan Stanley has agreed to a censure and a $400,000 fine following a Financial Industry Regulatory Authority (FINRA) investigation, which revealed the failure to deliver prospectuses to approximately 44,000 accounts invested in specific exchange-traded funds (ETFs).

According to the AWC (Acceptance, Waiver, and Consent), from August 2020 to October 2022, Morgan Stanley neglected to provide fund disclosure documents for 166,104 trades in 65 ETFs within a fund family to customers who opted for paper delivery. This failure resulted from a coding error that erroneously indicated to a third-party vendor that prospectuses were not required, according to FINRA.

Although the fund family and vendor were not identified, FINRA credited Morgan Stanley for its exceptional cooperation, including self-reporting, immediate remedial actions, and voluntarily providing substantial information before a document request. According to AdvisorHub, a spokesperson for Morgan Stanley acknowledged the coding error, stating that it was promptly rectified within a week of discovery with ongoing system enhancements.

 

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

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