FINRA Fines Firm for Supervisory Failures in Connection with Sales of IPOs to Retail Investors

FINRA announced fines against Morgan Stanley Smith Barney LLC ("Morgan Stanley") for supervisory failures related to the solicitation of retail customers to invest in IPOs.

According to the FINRA Action, from February 16, 2012, to May 1, 2013, Morgan Stanley sold shares to retail customers in 83 IPOs without having adequate procedures and training to ensure that its sales staff distinguished between "indications of interest" (which must be confirmed after the registration statement becomes effective) and "conditional offers" in its solicitations of potential investors. FINRA found that Morgan Stanley's policy used the terms "indications of interest" and "conditional offers" interchangeably, "without proper regard for whether retail interest reconfirmation was required prior to execution."

Furthermore, FINRA stated, upon review, it found that the firm failed to monitor compliance with its policy adequately and did not have procedures in place to ensure compliance with the requirements for the acceptance of conditional offers.

See: FINRA Action.