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Among other matters, the agreement covers systems deficiencies that resulted in inaccurate reporting of certain program trading information, short sale violations, failures to fingerprint new employees to ensure that they were not subject to a statutory disqualification; and failure to timely file Exchange Forms RE-3. With regard to several of the supervisory and operational failures, the firm has been the subject of previous disciplinary action by the Exchange. The agreement also includes the firm’s failure to supervise two former employees who misappropriated a total of approximately $60 million from the firm and its customers. These individuals are out of the industry and Morgan Stanley customers have been reimbursed.
The supervisory and operational failings at the firm impacted on several business areas and went undetected for substantial periods of time.
"Operational failures and supervisory lapses are a dangerous combination, as demonstrated by this case,” said NYSE Regulation Executive Vice President of Enforcement Susan Merrill. “We're issuing a wake-up call for member firms to take meticulous inventory of their systems and procedures to ensure they have strict controls designed to protect the investing public. We do want to credit Morgan Stanley for its quick disclosure to NYSE Regulation of the prospectus delivery matter and its forthright commitment to provide immediate rescission to its customers."
