BackMorgan Stanley fined $5 million over sales of 83 IPOs
US regulator fines Morgan Stanley for supervisory failures related to the sale of shares in 83 IPOs, including Facebook and Yelp, to retail customers
Premium
New York: A US regulator fined a Morgan Stanley wealth management unit $5 million on Tuesday for supervisory failures related to the sale of shares in 83 initial public offerings (IPOs), including Facebook Inc. and Yelp Inc., to retail customers.
The Financial Industry Regulatory Authority (FINRA) said Morgan Stanley Smith Barney LLC lacked adequate procedures and training from 16 February 2012 to 1 May 2013 to ensure sales staff distinguished between “indications of interest" and “conditional offers" when soliciting investors for IPOs whose registration statements had not yet gone effective.
FINRA said the unit treated the phrases interchangeably, even though indications of interest lead to share purchases only if investors reconfirm them, while conditional offers to buy can result in binding share purchases unless investors revoke them.
The regulator said the confusion was the result of Morgan Stanley’s effort to reconcile different policies at Morgan Stanley and Citigroup Inc., which had created Morgan Stanley Smith Barney in a 2009 joint venture. Morgan Stanley took full ownership of the business last June.
“Customers must understand when they are entering a contract to buy shares in an IPO," FINRA enforcement chief Brad Bennett said in a statement. “There must not be ambiguity regarding the customer’s obligations given the significant legal differences between an indication of interest and a conditional offer to buy."
Morgan Stanley neither admitted nor denied the charges. It also agreed to a censure by FINRA. Spokespeople for the bank did not immediately respond to requests for comment.
In September 2012, Morgan Stanley Smith Barney was renamed Morgan Stanley Wealth Management, but its broker-dealer designation remained Morgan Stanley Smith Barney LLC. Reuters
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
