Financial Industry Regulatory Authority (FINRA) fined Morgan Stanley $115,000 and ordered them to pay restitution to investors in the total amount of $55,284.28 plus interest over findings that the brokerage firm sold municipal securities, including Puerto Rico bonds, to its customers at an aggregate price, including any markups or markdowns, that was not fair or reasonable. Morgan Stanley was responsible for a total of $57,159 in restitution to its customers, but the firm has already paid some to address these violations, according to the CRD report.
According to the Acceptance, Waiver & Consent (AWC) on FINRA’s website, FINRA’s Fixed Income Investigations staff of the Department of Market Regulation reviewed the firm’s municipal bond transactions that took place between July 1, 2013 and March 31, 2014 to determine whether the firm transacted with customers at prices that were consistent with the firm’s obligations to its customers under applicable rules.
Between October 1 and December 31, 2013, in 14 pairs of transactions, the brokerage firm purchased municipal securities for its own account from a customer, or sold municipal securities for its own account to a customer, at an aggregate price that was not fair and reasonable, taking into consideration the following relevant factors:
- The best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction;
- The expense involved in effecting the transaction;
- The fact that the broker, dealer, or municipal securities dealer is entitled to a profit;
- And the total amount of the transaction.
The firm also purchased municipal securities for its own account from a customer at an aggregate price that was not fair and reasonable in six municipal bond transactions between July 1, 2013 and March 31, 2014, and in 13 transactions between January 1 and March 31, 2014. This conduct in each of the above instances violates Municipal Securities Rulemaking Board (MSRB) Rules G-17 and G-30(a), which pertain to fair dealing and prices and commissions, respectively. Without admitting or denying the findings, Morgan Stanley consented to the settlement.
In separate cases, Morgan Stanley was fined $1 million in October 2011 by FINRA for charging unfair markups and markdowns, violating MSRB Rule G-30, in connection with fixed income transactions between January 1, 2009 and December 31, 2010. In August 2013, Morgan Stanley was fined $1 million for charging unfair prices in connection with fixed income transactions that occurred between January 2008 and September 2011.
If you were a client of Morgan Stanley or another firm, and have experienced investment losses or financial irregularities as a result of investment in Puerto Rico bonds, please call us at 888-840-1571 or complete our contact form. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.