FINRA Slaps Morgan Stanley with $1 Million Fine

The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. LLC $1 million and ordered the firms to pay $188,000 in restitution. FINRA found that the firms failed to provide best execution in certain customer transactions involving corporate and agency bonds, and failed to provide a fair and reasonable price in certain customer transactions involving municipal bonds. Claims regarding reasonable bond pricing typically involve a brokerage firm charging excessive markups or markdowns on bond trades.

In this instance, FINRA found that on 165 different trades Morgan Stanley failed to purchase or sell municipal bonds at prices reasonably related to the fair market value of the subject security. This is the most recent in a long line of regulatory fines given to brokerage firms for unfair bond pricing. Unfortunately, the fines do not seem to stop brokerage firms from engaging in this form of securities fraud investment fraud. Rather, they appear to treat the fines as just another cost of doing business, all at the expense of the investors they are gouging.

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