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May 7, 2014

Morgan Stanley Fined $5 Million Over I.P.O. Work

“The Financial Industry Regulatory Authority has fined Morgan Stanley $5 million, saying that the firm did not follow proper procedures in the initial public offerings for 83 companies including Facebook and Yelp.

“The bank failed to distinguish between two separate types of nonbinding offers when it solicited investors for I.P.O.s., said the industry self-regulatory group, known as Finra. Instead, Morgan Stanley used “indications of interest” and “conditional offers” interchangeably, and did not have policies in place to ensure that brokers understood and relayed the different types of commitments to clients, the agency said.

“Both types of offers can be nonbinding, but customers must reconfirm their interest in buying shares of a company when they provide an indication of interest. A conditional offer to buy could result in a binding transaction if the investor does not actively withdraw the offer.

“Morgan Stanley, moreover, failed to supervise its brokers’ activities by not having policies that were ‘reasonably designed to achieve compliance with the securities laws or Finra rules,’ according to the disciplinary action.”


Read full New York Times article here

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