FINRA recently fined Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. $1 million, and ordered $188,000 in restitution plus interest for failing to provide best execution in certain customer transactions involving corporate and agency bonds, and failing to provide a fair and reasonable price in certain customer transactions involving municipal bonds. The $188,000 restitution is in addition to amount previously paid by Morgan Stanley to customers covered by FINRA’s investigation, which focused on transactions between January 2008 and September 2011.
FINRA found that Morgan Stanley failed to use reasonable diligence to ensure that the purchase or sale price to the customer was as favorable as possible under current market conditions in 116 customer transactions involving corporate and agency bonds. Further, Morgan Stanley failed to purchase or sell bonds at prices reasonably related to the fair market value of the subject security in 165 transactions involving municipal bonds.
“Firms must ensure that customers who buy and sell securities – including corporate, agency, and municipal bonds – receive execution prices that are consistent with prices available in the marketplace. FINRA will continue to sanction firms that execute fixed income transactions for their customers at unfair prices, and will require firms that violate such standards to reimburse customers,” said Thomas Gira, Executive Vice President, FINRA Market Regulation.
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