The Financial Industry Regulatory Authority (FINRA) has fined Morgan Stanley Smith Barney (Morgan Stanley) $1 million and ordered restitution for excessive markups and markdowns charged to customers on bond transactions.
FINRA’s investigation revealed that customers were charged markups and markdowns on corporate and municipal bond transactions ranging from below 5% to 13.8%. FINRA found that this range was higher than reasonable based on several factors including market conditions, the cost of execution and the value of services rendered to the customers.
Thomas Gira, Executive Vice President, FINRA Market Regulation said, “Firms must ensure that customers who buy and sell securities, including corporate and municipal bonds, receive fair and reasonable prices regardless of whether a markup is above or below 5 percent. Morgan Stanley clearly violated fair pricing standards and FINRA will continue to require firms that violate such standards to make their customers whole.”
Morgan Stanley consented to the entry of FINRA’s findings without admitting or denying the charges.