Morgan Stanley Fined $5 Million For Violation of IPO Sales Policies

Posted on May 19th, 2014 at 8:30 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

FINRA has fined Morgan Stanley $5 million for allegedly failing to keep watch over how its financial advisers solicited client interest in 83 initial public offerings, including some big-ticket offerings such as Yelp and Facebook.

From February 2012 to May 1, 2013, Morgan Stanleyhad a compliance policy that did not distinguish between client's “indication of interest” and a “conditional offer” to buy shares once they became registered with the SEC.

An indication of interest is nonbinding and will not result in a purchase of shares unless it is reconfirmed by the investor after the registration statement is effective. There is more certainty around the price of the offering.

By comparison, a conditional offer will result in a purchase after the registration statement becomes effective, unless the client revokes the offer.

The firm failed to train advisers on the distinction and failed to instruct advisers to reconfirm indications of interest with clients or instruct clients that their conditional offers could be revoked.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

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