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Morgan Stanley (MS) Agrees to Pay $200M to Resolve SEC's Probe

Morgan Stanley MS has agreed to pay a $200-million fine (an amount which it had already set aside during its second-quarter results) to the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to resolve inquiries into its record-keeping practices.

In a filing, MS said that it would pay $125 million to the SEC and the remaining $75 million would be paid to the CFTC to resolve investigations into employee communications on messaging platforms not approved by the company.

For a long time, the SEC has been investigating whether Wall Street banks adequately record employees’ work-related communications like text messages and emails. The issue has gained more importance now, as bankers have moved to work remotely during the pandemic.

Regulators require banks to keep records of all business-related communications. Thus, firms typically ban the use of personal email, texts and other social media channels for work purposes in an effort to discourage and disclose violations such as insider trading.

According to people with knowledge of the matter, in July 2022, Bank of America BAC had advanced discussions with the regulators to pay a similar fine. BAC also set aside around $200 million to resolve matters related to the use of unauthorized electronic messaging by its employees.

Moreover, in December 2021, the SEC and the CFTC settled enforcement actions with JPMorgan JPM for failing to adequately monitor employee communications and dodging record-keeping requirements. JPMorgan was also fined $200 million. The investigation revolved around JPM’s failure to monitor business-related communications on platforms like WhatsApp.

Thus, in order to monitor compliance, financial firms must not only implement policies that forbid the use of any unauthorized apps or messaging services for business communications but also take affirmative steps to enforce the policies.

Over the past year, shares of MS have lost 14.5% compared with the industry's 16.7% decline.


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Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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