New US Regulator Fines Morgan Stanley

Chris Owen

3 August 2007

The newly-created US Financial Industry Regulatory Authority (FINRA) slapped a $6.15 million penalty on Morgan Stanley to settle allegations that it overcharged retail brokerage customers on $59 million in corporate bond sales. FINRA assessed a $1.5 million fine and ordered Morgan Stanley to reimburse $4.65 million to customers. It said Morgan Stanley's retail brokerage unit in 2001 overcharged customers on 2,807 transactions involving notes issued by Kemper Lumbermens Mutual Casualty Co, including mark-ups ranging from 5.88 per cent to 17.86 per cent. The regulator also fined trader Kenneth Carberry $40,000 and suspended him for 15 business days. It said he set the excessive mark-ups. Morgan Stanley and Carberry did not admit wrongdoing. The enforcement case is the first since FINRA was created this week from the merger of the National Association of Securities Dealers and the New York Stock Exchange's member regulation, enforcement and arbitration operations.