Morgan Stanley Settles Best Execution Case in US

Stephen Harris

10 May 2007

Morgan Stanley has agreed to pay almost $8 million in the US to settle claims that it defrauded customers and failed to provide the best execution of some trades because its automated trading system was programmed so that it captured gains that should have been credited to clients, according to the Securities and Exchange Commission. Transaction orders by private clients in over-the-counter securities processed through Morgan Stanley's automated system had markups and markdowns of prices that customers were not made aware of and who received no benefit from them, the SEC said. And some retail customers' orders were executed too slowly, a problem that was rectified in 2003, according to the regulator. Over a million orders were affected between 2001 and 2004. Although it neither admits nor denies the claims, Morgan has agreed to pay $7.9 million to injured investors. This is made up of $5.9 million of allegedly illegal profits and a $1.5 million penalty, plus interest.