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SEC Looking to Fine Morgan Stanley Some $10 Million for Alleged Document Violations

Regulators are looking to fine Morgan Stanley about $10 million for allegedly violating record-keeping rules by failing to preserve e-mail messages, a person with direct knowledge of the investigation said Tuesday. That person confirmed a published report saying the e-mail in question may have been relevant to several big cases that the SEC has brought against Morgan Stanley. That civil penalty would be among the biggest fines ever levied on a brokerage firm for failing to retain documents.

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Federal regulators are looking to fine Wall Street powerhouse Morgan Stanley around $10 million for allegedly violating record-keeping rules by failing to preserve e-mail messages, a person with direct knowledge of the government investigation said Tuesday. The person, who spoke on condition of anonymity because negotiations on a settlement are continuing, confirmed a report Tuesday in The Wall Street Journal that said the e-mail in question may have been relevant to several big cases that the Securities and Exchange Commission has brought against Morgan Stanley. A $10 million civil penalty would be among the biggest fines ever levied on a brokerage firm for failing to retain documents. In March 2004, Bank of America Corp.’s securities division agreed to pay a $10 million fine — a record — to settle the SEC’s allegations that it failed promptly to produce an e-mail exchange relating to issues that the firm’s employees knew were under investigation. The agency has been building its case against Morgan Stanley for some time, though a final decision on a fine could take months as representatives of the SEC and the firm continue to negotiate, The Journal reported. According to the newspaper, the SEC also is accusing Morgan Stanley of falsely certifying a document that said it had turned over all promised documents related to an investigation into whether Morgan Stanley and several other brokerage firms improperly doled out shares of hot new stocks to certain customers to get them to buy more at inflated prices once trading began. In January, Morgan Stanley and Goldman Sachs agreed to pay $40 million each to settle the SEC’s allegations in the matter brought in two civil lawsuits. The firms neither admitted nor denied wrongdoing but agreed to refrain from future violations. Morgan Stanley said it had no comment on the ongoing negotiations with the SEC. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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