Morgan Stanley fined $4 million over rule lapse

Wed Dec 10, 2014 12:55pm EST
 
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By John McCrank

(Reuters) - U.S. regulators on Wednesday fined Morgan Stanley (MS.N: Quote) $4 million for failing to enforce rules that would have prevented the unauthorized buying of Apple Inc (AAPL.O: Quote) shares by a trader at one of the bank's customer trading firms that led to the demise of that firm.

Morgan Stanley did not have the required risk management controls in place to prevent the trader from entering orders that exceeded pre-set trading thresholds, violating "market access" rules, the U.S. Securities and Exchange Commission said.

"Broker-dealers become important gatekeepers when they provide customers direct access to our securities markets, and in this case Morgan Stanley did not live up to that responsibility,” said Andrew Ceresney, director of the SEC's Enforcement Division.

Morgan Stanley did not admit or deny the SEC's findings. But a spokesman for the bank said Morgan Stanley has updated its written rules to address the problem identified by the SEC.

The trader was sentenced last month to 2-1/2 years in prison for the unauthorized purchase of Apple stock that led to a loss of $5.3 million for the firm, Rochdale Securities, which was then undercapitalized and forced to close.

(Reporting by John McCrank in New York; Editing by Jeffrey Benkoe)

 
The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013.
REUTERS/Mike Blake