The U.S. Securities and Exchange Commission has settled a civil injunctive action filed today against Morgan Stanley & Co. Inc. over allegations that it failed to produce tens of thousands of e-mails during the SEC’s IPO and research analyst investigations from Dec. 11, 2000, through at least July 2005.

The commission alleges in its complaint that Morgan Stanley did not diligently search for back-up tapes containing responsive e-mails until 2005. Morgan Stanley also failed to produce responsive e-mails because it over-wrote back-up tapes, it claims.

The complaint further alleges that Morgan Stanley made numerous misstatements regarding the status and completeness of its productions; the unavailability of certain documents; and its efforts to preserve requested e-mail. The commission also charged Morgan Stanley with violating the provisions of the federal securities laws requiring the firm to timely produce its records and documents to the commission.

Morgan Stanley agreed to settle the matter without admitting or denying the allegations of the complaint. It consented to a permanent injunction and payment of a US$15 million civil penalty, US$5 million of which will be paid to the NASD and the New York Stock Exchange Inc. in separate related proceedings. Morgan Stanley has also agreed to adopt and implement policies, procedures and training focused on the preservation and production of e-mail communications. It also will hire an independent consultant to review these reforms. The settlement terms are subject to court approval.

“The laws requiring broker-dealers to provide documents to the commission are essential to the commission’s ability to enforce the federal securities laws and protect investors. Today’s action underscores the commission’s resolve to ensure the integrity of its investigative processes,” said Linda Chatman Thomsen, Enforcement Division Director.