FINRA Fines Morgan Stanley for Submitting Inaccurate Blue Sheets

The Financial Industry Regulatory Authority (FINRA) has fined Morgan Stanley $875,000 for submitting at least 869 inaccurate blue sheets to the SEC and FINRA.

09 July, 2020 | AtoZ Markets – Morgan Stanley is a brokerage firm and investment advisor. It has registered with FINRA as a broker-dealer since May 2009. Headquartered in Purchase, NY, Morgan Stanley employs more than 23,000 registrants in more than 720 branches.

Morgan Stanley Agrees to Pay $875,000 Fine to FINRA

Morgan Stanley has agreed to pay an $875,000 fine as part of a settlement with the US FINRA for failing to provide accurate trading data, also known as blue sheets. Moreover, Morgan Stanley has agreed to the imposition of a censure. The company accepts and agrees to this without admitting or denying the findings. The Regulatory Authority said:

"FINRA first discovered Morgan Stanley’s blue sheet errors in late 2016. Blue sheet information submitted by Morgan Stanley proved to be inconsistent with information reflected in customer account statements."

Between February 2014 and April 2017, Morgan Stanley erroneously submitted about 869 blue sheets and filed more than 156,678 option transactions with inaccurate data to the SEC and FINRA. Blue sheets provide regulators with important information about suspicious transactions, such as the name of the account holder, the nature of the transaction, and the price at which the transaction occurred. Therefore, Morgan Stanley is in violation of the Securities Exchange Act and FINRA rules.

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Morgan Stanley determined that there was a human error behind the inaccurate blue sheet submission. However, FINRA discovered that Morgan had a serious hurdle in the blue sheet system. The Regulatory Authority said:

"FINRA subsequently identified different inconsistencies between blue sheet submissions and other documents that led to the discovery of two separate computer coding issues. It caused the firm to incorrectly report whether options transactions opened or closed positions"

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