A broker-dealer agreed to pay $1.1 million to settle charges brought by FINRA and eight securities exchanges for a variety of trading control failures, including failure to have procedures to prevent erroneous or duplicative orders and other risk management deficiencies.
FINRA's Department of Market Regulation conducted an investigation of Morgan Stanley & Co. LLC ("MSCO") on behalf of FINRA and other exchanges regarding the firm's compliance with the Market Access Rule. According to FINRA, MSCO neglected to institute automated pre-trade hard blocks that would prevent the submission of orders in excess of certain pre-set aggregate capital limits, as required by the Market Access Rule. Instead, MSCO relied on an alert system that made certain personnel aware that MSCO was in danger of breaching these limits. The responsible personnel then had the ability to implement a hard-block to prevent the entry of any further orders. In addition, FINRA determined that MSCO's pre-trade controls for high-touch clients were improperly based on MSCO's aggregate capital limits and were not customer-specific based on appropriate due diligence as to each customer's business and financial condition.
MSCO neither admitted nor denied the charges.
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