Morgan Stanley & Co. LLC has been fined US$2 million for alleged violations of short sales rules and reporting requirements, the Financial Industry Regulatory Authority (FINRA) said Wednesday.
The fine was for violations of short interest reporting requirements, and short sale rules, that spanned more than six years, and for Morgan Stanley failing to implement a supervisory system to detect and prevent these kinds of violations, FINRA says.
The firm settled the allegations without admitting, or denying the charges; and it consented to FINRA’s findings.
FINRA says that it found that Morgan Stanley failed to completely and accurately report its short interest positions in certain securities involving billions of shares. It also found that the firm included positions from the accounts of non-broker-dealer affiliates when calculating certain net positions. Additionally, it found that the firm’s supervisory system was not designed to detect and prevent violations.
“Short interest reporting continues to provide investors with important transparency into the level of short selling in a particular issue. Accordingly, it is imperative that this information be timely and accurately reported. Similarly, a fundamental requirement for compliance with the short sale rule is that firms properly track their short positions,” said Thomas Gira, executive vice president of FINRA Market Regulation.