The Financial Industry Regulatory Authority announced yesterday that Morgan Stanley will pay $1 million to settle claims related to Best Execution and Fair Pricing in customer bond transactions. The embattled banking giant has also been ordered to pay $188,000 in restitution. “Wall Street continues to take advantage of its clients with excessive mark-ups in bond transactions,” commented Peter Mougey an attorney with Levin, Papantonio and practices in the area of securities litigation. “Because of the lack of transparency in bond mark-ups, Wall Street continues to make ridiculously large and unwarranted profits on the backs of investors,” says Mougey.
The settlement concludes a lawsuit that alleged the group failed to perform reasonable diligence in trading and managing securities. The failure resulted in customers of the bank paying markedly higher prices for products than they would have had Morgan Stanley ensured that the purchase price was favorable.
FINRA’s release outlines that the practice potentially exposed 116 customer transactions involving corporate and agency bonds and another 165 transactions involving municipal bonds. Mougey believes this is the tip of the proverbial iceberg.
FINRA’s Vice President of Market Regulation, Thomas Gira, said, “Firms must ensure that customers who buy and sell securities – including corporate, agency, and municipal bonds – receive execution prices that are consistent with prices available in the marketplace. FINRA will continue to sanction firms that execute fixed income transactions for their customers at unfair prices, and will require firms that violate such standards to reimburse customers.”