Margin Alert: Morgan Stanley Gets Finra Disclosure Lesson
Morgan Stanley Smith Barney has signed an acceptance, waiver and consent letter with the Financial Industry Regulatory Authority agreeing to a $150,000 fine and censure for failing to disclose to customers in 2012, 2013 and 2014 the risks and trading procedures relating to margin account trading.
While the penalty is minuscule for the giant firm, the details behind it explain why those calls and emails from compliance appear to have accelerated in recent years. Firms are increasingly centralizing responsibilities for meeting disclosure and record-keeping requirements to avoid sanctions, meaning there are lots of specialized eyes on the alert for oversights.
“Prior to 2015, MSSB did not formally designate any one person or group to ensure that required yearly margin disclosure statements under Finra Rule 2264(b) were included in mailings to customers with margin accounts,” says the consent letter that Finra accepted on Friday. The wirehouse instead “relied on various individuals and groups” to provide the disclosures, a procedure that it said left some 4 million customers bereft of margin trading disclosure alerts.
Morgan Stanley, through its wealth management client litigation unit, accepted the penalties without admitting or denying the findings.
A spokeswoman did not immediately respond to a request for comment.