The NASD said Thursday it has censured and fined Morgan Stanley DW Inc. US$2.2 million and blocked it from registering new brokers for a week as punishment for more than 1,800 incidents of slow disclosure of customer complaints, disciplinary actions, and other issues involving its brokers.

NASD also required Morgan Stanley to hire an independent consultant to assess the firm’s supervisory systems and procedures in the reporting area, and imposed specific ongoing reporting obligations. The NASD also charged the firm for supervisory failures relating to the late filings. Morgan Stanley agreed to the sanctions while neither admitting nor denying the allegations.

The regulator said the late filings by Morgan Stanley had delayed several investigations. The late filings also may have hampered the investing public’s ability to accurately assess the background of certain brokers through NASD’s public disclosure program, BrokerCheck, and compromised the ability of state securities regulators to review applications from brokers changing firms.

Under NASD rules, after a securities firm hires a broker, it must ensure that information disclosed on the broker’s application for registration is kept current in the Central Registration Depository. The firm must update the information when significant events occur — including regulatory actions against the broker, customer complaints and settlements involving the broker, and criminal charges and convictions. Normally, the amendments must be filed within 30 days. If the reportable event involves a statutory disqualification, the event must be disclosed within 10 days.

In this case, the NASD found that, from January 2002 to March 2004, Morgan Stanley failed to file in a timely manner about 67% of the required updates that were the subject of NASD’s review. Those updates were filed from one to several hundred days late, and about 52% of all late filings were more than 90 days late. NASD also found that Morgan Stanley failed to maintain and enforce effective supervisory systems and procedures to achieve compliance with its reporting obligations. The firm, among other things, failed to assign clear responsibilities and tasks to its management and employees; to ensure that employees were accountable for the performance of their assigned tasks within clearly defined time periods, and to allocate sufficient resources, including personnel and other resources, to ensure timely filings.

Morgan Stanley has previously been the subject of four New York Stock Exchange disciplinary actions for similar reporting violations. State securities regulators in Maryland, Florida and Vermont have also previously filed charges against the firm for failing to update reportable information pertaining to its representatives.

“Every firm has a fundamental obligation to accurately and promptly file information about its brokers that NASD, other regulators and – most importantly – the investing public rely on to learn of potential misconduct,” said NASD vice chairman Mary Schapiro. “Those obligations cannot be ignored, and negligence on the scale demonstrated in this case merits particularly strong sanctions.”

NASD currently is engaged in a number of ongoing investigations involving similar types of reporting violations at other firms, including both late filings and failures to report information about brokers.