In yet another in the never-ending series of malfeasances on the part of large financial institutions, Morgan Stanley has agreed on Wednesday to pay a two million dollar fine for willfully violating short-selling rules for a number of years, or roughly a few minutes of revenue.
The Financial Industry Regulatory Authority announced on Wednesday that it had levied a $2 million fine on Morgan Stanley & Co.for short interest reporting and short sale rule violations over a span of more than six years, as well as for inadequate implementation of supervisory system to detect and prevent these violations.
At this year's SALT New York conference, Jean Hynes, the CEO of Wellington Management, took to the stage to discuss the role of active management in today's investment environment. Hynes succeeded Brendan Swords as the CEO of Wellington at the end of June after nearly 30 years at the firm. Wellington is one of the Read More
Details on the May 13th Morgan Stanley short-selling settlement with FINRA
Banks and brokerages are required to report their total “short” positions in all customer and proprietary firm accounts in all securities to FINRA.
A FINRA investigation determined hat Morgan Stanley failed to completely and accurately report its short interest positions in certain securities involving billions of shares for several years. The agency also determined that MS’s oversight system was inadequate as it did not detect or prevent these violations that went on for more than six years.
The SEC’s rules for short sales mandates that financial firms aggregate their positions in a stock for determination if they are net long or short. Banks can track their positions in a stock from some trading operations or trading desks separately from other positions maintained at the firm through the use of an “aggregation unit.” Aggregation units, however, cannot include security positions of customers or non-broker-dealer affiliates. The investigation concluded that for nearly seven years, Morgan Stanley included positions from the accounts of non-broker-dealer affiliates in several aggregation units when determining the unit’s net position.
Of note, Morgan Stanley neither admitted nor denied the charges, but agreed to pay the fine and to the entry of FINRA’s findings.
Statement from FINRA exec VP
Thomas Gira, the Executive Vice President of FINRA Market Regulation noted, “Short interest reporting continues to provide investors with important transparency into the level of short selling in a particular issue. Accordingly, it is imperative that this information be timely and accurately reported. Similarly, a fundamental requirement for compliance with the short sale rule is that firms properly track their short positions.”