Washington, DC, United States (4E) – Morgan Stanley’s retail brokerage is ordered to pay a fine of $5mn after a financial regulator decided that it lacked clear policies related to communications with customers regarding their commitment to purchase shares in IPOs or initial public stock offerings.
The Financial Industry Regulatory Authority (Finra) said the alleged violation as procedural, and did not elaborate if investors had been impacted.
Finra’s chief of enforcement Brad Bennett said that the review of the broker’s rules did not come as a result of customer complaints.
For more than a year, the bank’s retail brokerage Morgan Stanley Smith Barney LLC had failed in its training and rules to distinguish between nonbinding indications of interest and those of retail brokerage orders for IPO shares that were firm commitments to buy, Finra said.
Morgan Stanley said it accepted Finra’s findings, bit did not admit any wrongdoing. A spokeswoman for the bank said Morgan Stanley Wealth Management is committed to provide participation in IPOs for its clients in accordance with applicable rules by Finra and the company has since improved its practices.
The agency said among those companies whose shares the firm sold to retail buyers during the time when the policies were unclear included Facebook Inc. and Yelp Inc.