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NASD fines Morgan Stanley $100,000
Dec 6, 2:07 PM EST
WASHINGTON (AP) -- The National Association of Securities Dealers censured Morgan Stanley and fined the securities firm $100,000 for failing to disclose to municipal bond buyers that the bonds could be called before their maturity dates, which could result in losses to the investors.
NASD also slapped a $25,000 fine on New York-based Morgan Stanley for not responding in a timely way to requests for information.
According to the NASD, Morgan Stanley between 1997 and 2002 failed to disclose the existence of the call feature in confirmations for 258 municipal bond purchase transactions.
Under the imposed sanctions, the NASD also required Morgan Stanley to offer to buy back bonds sold in up to 171 separate municipal bond transactions. To date, the company has paid about $211,510 in restitution to customers since the NASD probe began.
"Municipal bond investors are entitled to receive all critical information about the bonds they are purchasing, especially call features which can impact the total return the investor expects," said NASD Vice Chairman Mary L. Schapiro.
Several bonds matured as scheduled without being called, resulting in no loss to investors. Other bonds were called before their stated maturity, resulting in the firm's payment of restitution to customers for losses from the early redemptions.
For the bonds that have not yet matured and have not been called, NASD said Morgan Stanley will advise those investors of the call feature and offer them the opportunity to sell the bonds back to the firm.
In agreeing to these sanctions, NASD said Morgan Stanley neither admitted nor denied the allegations.
Morgan Stanley said it upgraded its software nearly two years ago and fixed the problem that led to the situation.
Shares of Morgan Stanley traded Monday afternoon at $53.34, up 27 cents, or 0.5 percent, on the New York Stock Exchange.
The most valuable commodity I know of is information
RE: NASD fines Morgan Stanley $100,000
"the bonds could be called before their maturity dates, which could result in losses to the investors."
Seems like it would be nice to know this, but isn't there some kind of responsibilty for investors to read
the terms of the Bonds prior to purchasing them? Read the fine print [img]i/expressions/face-icon-small-smile.gif[/img]