The Financial Industry Regulatory Authority on Tuesday said it ordered Morgan Stanley to pay $800,000 for failing to disclose conflicts of interests in thousands of equity-research reports and public appearances of its research analysts since 2006.
Previously, in 2005, FINRA had found that the company violated research analyst disclosure rules.
FINRA said on Tuesday that Morgan Stanley & Co. Inc., a subsidiary of the investment bank and part of its global wealth-management group, failed to disclose accurate information about the firm’s relationships with companies it covered in more than 6,500 equity research reports. In addition, relevant disclosures also weren’t made for 84 public appearances of its research analysts.
The deficient disclosures include failing to reveal securities holdings of an analyst or a member of the analyst’s household in a company. Morgan Stanley also didn’t disclose when it received banking revenue from these companies or if the company was acting as a manager of stock offerings of these companies.
FINRA’s acting enforcement chief James S. Shorris said such infringement “strikes at the heart of FINRA’s research disclosure requirements,” while “depriving investors of important information.”
As part of the settlement, Morgan Stanley has to review a sample of its research reports and certify to FINRA that they comply with research analyst conflict-of interest rules. Such reviews must take place every six months for the next two years.
Morgan Stanley said in a statement it was “pleased to settle this issue” and noted it initially reported the matter to FINRA. The company added that it has implemented systems for the publication of the required disclosures in response to this matter.
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