The National Association of Securities Dealers announced that it has imposed fines totaling US$2.9 million against Morgan Stanley & Co. Inc. and Morgan Stanley DW Inc. for violations dealing with reporting obligations, best execution, short sales, and a range of other rules.

In addition to the fines, both firms will provide reports to NASD detailing the corrective actions being taken to ensure that each firm has adequate policies, procedures, systems and training necessary to ensure regulatory compliance. In settling these matters, the firms neither admitted nor denied the charges, but consented to the entry of the NASD’s findings.

The NASD found that the firms each committed numerous violations of federal securities laws, NASD rules and MSRB rules during the seven-year period from 1999 to 2006. Among the most significant was a series of violations of the Order Audit Trail System reporting requirements, which resulted from MSCO’s pervasive inability to properly track and report OATS data.

Additionally, MSDW had numerous regulatory violations involving the firm’s failure to adequately price, sell and report corporate and municipal bond transactions, the regulator said. It will make nearly US$30,000 in restitution payments to affected customers.

The NASD also discovered that both firms failed to implement effective supervisory systems and written supervisory procedures necessary to ensure compliance with federal securities laws, NASD rules and MSRB rules. It found a variety of other regulatory violations at both firms.

“MSCO and MSDW had numerous types of reporting violations and the scope of those violations indicated a failure to adequately address compliance needs of the firms,” said NASD executive vp Tom Gira. “But MSCO and MSDW also undertook independent, internal reviews to determine the causes and extent of their trade reporting problems, provided their findings to NASD, and were otherwise highly cooperative with NASD’s investigation. The firms’ cooperation is reflected in the sanctions.”