Morgan Stanley Wealth Management has been charged $5 million by Finra for violating IPO rules. The financial regulator, found that Morgan Stanley lacked clear policies on how to communicate with customers about their intention to buy shares in initial public stock offerings. This procedural error comes from the company needing to distinguish for customers when they have a firm commitment to buy stock, or just a nonbinding indication of interest. This fine is the third-largest Finra has given out over the past two years. Finra stands as the industry self-regulator for investment brokers and securities firms. They stepped in, in this case to protect the clients, although this charge was not started because of a client’s complaint. Finra representative Mr. Bennett said the issue is whether investors were able to review information before making a decision for themselves. “The blocking and tackling [when selling IPOs] must be done correctly, so that if in the event you have IPOs with disappointed purchaser, that those purchasers made the decision with the benefit of timely and accurate information. The securities laws don’t guarantee you’ll make money, but that you’ll have the information in a timely fashion.” The fine for Morgan Stanley comes down to being transparent with their clients about whether they are buying into a stock, so that the client is aware of what the bias is of the company that they are getting their financial and investment advise from. Most of the confusing in the company’s policy comes from Morgan Stanley merging with Citigroup’s Smith Barney. When these company’s came together no one distinguished and combined the policies and training from each side to inform employees of the important difference between the language “indications of interest” that was used by brokers at Morgan Stanley and “conditional offers” spoken by brokers at Citigroup Smith Barney.
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