FINRA Fines Morgan Stanley Smith Barney LLC

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FINRA Fines Morgan Stanley Smith Barney LLC

FINRA announced recently that it fined Morgan Stanley Smith Barney LLC $5 million for supervisory failures pertaining to the solicitation of retail customers to invest in IPOs, such as Facebook and Yelp, without satisfactory procedures and training to ensure that its sales staff distinguished between indications of interest and conditional offers in their solicitations. Indications of interest result in the purchase of shares only if they are reconfirmed by the investors after the registration date is effective. Conditional offers, on the other hand, may become binding after effectiveness of the registration if the investor does not act to revoke the conditional offer before the firm accepts it.

In February 2012, Morgan Stanley Smith Barney adopted policies and procedures that used the two terms, indications of interest and conditional offers, interchangeably regardless of whether reconfirmation was required prior to execution. Further, it did not offer training to its financial advisers to clarify the policy. Therefore, the staff as well as customers may not have understood the kind of commitment they were entering. The firm additionally failed to supervise compliance and ensure that conditional offers were being properly solicited in accordance with FINRA rules and federal securities laws.

Morgan Stanley Smith Barney neither admitted nor denied the charges.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.

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