Morgan Stanley agrees to pay $300,000 fine as a part of FINRA settlement
From July 1, 2015 to December 31, 2018, Morgan Stanley failed to timely report a total 1,068 fixed income transactions to TRACE or RTRS.
Morgan Stanley Smith Barney has agreed to pay a $300,000 fine as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From July 1, 2015 to December 31, 2018, Morgan Stanley failed to timely report a total 1,068 fixed income transactions, 609 of which qualify as a large block transaction, to TRACE or the Real-time Transaction Reporting System (RTRS). The untimely reports had several causes, including manual errors by firm employees and untimely amendments or corrections made to TRACE reports, and the improper set-up of relevant CUSIPs in the firm’s reporting system.
Furthermore, a coding error in the firm’s TRACE reporting system caused prices in certain agency debt transactions to be reported to five decimal points instead of the required six decimal points. These trade reports failed to match with counter-party trade reports and were rejected by TRACE. The firm manually corrected the rejected trade reports but failed to do so within the specified timeframe.
During the periods of July 1, 2016 to June 30, 2017, January 1, 2018 to June 30, 2018, and October 1, 2018 to December 31, 2018, the firm failed to report to TRACE 191 large block transactions (that is, a transaction of $5 million or greater) in TRACE-eligible agency debt securities within the time required by Rule 6730. These transactions represented 10% of the total number of large block transactions in TRACE-eligible agency debt securities that the firm reported during the period, and constituted a pattern or practice of late reporting without exceptional circumstances.
In addition, during the period of July 1, 2016 through June 30, 2017, the firm failed to report to TRACE 292 large block transactions in TRACE-eligible corporate debt securities within the time required by FINRA Rule 6730. These transactions represented 8.8% of the total number of large block transactions in TRACE-eligible corporate debt securities that the firm reported during the period and constituted a pattern or practice of late reporting without exceptional circumstances.
Through the above-described conduct, the firm violated FINRA Rules 6730(a) and 2010.
Also, during the periods of January 1, 2016 through March 31, 2016, and July 1, 2016 through December 31, 2016, the firm failed to report to the RTRS 126 large block transactions in municipal debt securities within the time prescribed by Rule G-14 RTRS Procedures and the RTRS Users Manual. These transactions represented 17.1% of the total number of large block transactions in municipal debt securities that the firm reported during the periods. As a result of this conduct, the firm violated MSRB Rule G-14(b).
Finally, during the period of July 1, 2015 through March 31, 2016, the firm failed to report to TRACE 459 transactions in TRACE-eligible agency debt securities within the time required by FINRA Rule 6730. These late transactions constituted a pattern or practice of late reporting without exceptional circumstances. Thereby, the firm violated FINRA Rules 6730(a) and 2010.
In addition to the fine, Morgan Stanley consents to the imposition of censure.
