FINRA fines Morgan Stanley for reporting deficiencies
Morgan Stanley & Co. LLC has agreed to pay a fine of $225,000 fine as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
In April 2018, the firm implemented a new Large Options Positions Reporting system (LOPR), but the system improperly deleted expiring OTC option positions on their expiration dates. Between April 2018 and January 2021, Morgan Stanley deleted approximately 28,109 expiring OTC option positions on expiration from its reports to the LOPR. Therefore, Morgan Stanley violated FINRA Rules 2360(b)(5) and 2010.
From April 2018 to January 2021, Morgan Stanley failed to establish and maintain a supervisory system, including WSPs, reasonably designed to achieve compliance with rules governing LOPR reporting. The firm implemented a new LOPR reporting system in April 2018, which improperly deleted OTC option positions on their expiration dates.
The firm did not test the new system for the deletion of expiring OTC positions from its reports to the LOPR, despite being previously disciplined for that exact issue. The firm updated its written supervisory procedures (WSPs) to include an OTC expiry review on January 19, 2021.
As a result, from April 2018 to January 2021, Morgan Stanley failed to establish and maintain a supervisory system, including WSPs, that was reasonably designed to comply with FINRA Rule 2360(b)(5). Therefore, Morgan Stanley violated FINRA Rules 3110 and 2010.
On top of the fine, Morgan Stanley also consents to the imposition of a censure.