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FINRA Fines Morgan Stanley $80,000 for Supervisory Failures, Deletion of 21k OTC Options Positions

Morgan Stanley & Co. LLC received a censure and $80,000 fine after a FINRA investigation determined the firm improperly deleted 21,374 over-the-counter (OTC) options positions required to be reported to the Options Clearing Corporation (OCC)'s LOPR system, thereby rendering the LOPR data inaccurate.

FINRA wrote that, "The accuracy of LOPR data is essential for the analysis of various potential violations, including insider trading, position limits, exercise limits, front-running, capping and pegging, mini-manipulation, and marking-the-close." The identification process assists regulators in identifying potential market manipulation by users who hold large options positions, such that deleting such information may adversely affect the industry's ability to detect such violations.

FINRA AWC #2014040951201

According to the findings, Morgan Stanley, due to a coding error, deleted approximately 21,374 OTC options positions on expiration, thus underreporting each of these OTC options positions to the LOPR system.

The investigation states that Morgan Stanley failed to maintain an adequate system of supervision reasonably designed to achieve compliance with options position reporting to the LOPR system, additionally finding that the firm lacked adequate written supervisory procedures to ensure the LOPR submissions were accurate, and that the firm "was unaware" of the coding error responsible for the deletion, resulting in a failure to detect and prevent the deletion of 21,374 options positions on expiration from the LOPR.

Accordingly, FINRA fined the firm a total of $80,000 and ordered revision of Morgan Stanley's written supervisory procedures.

If you have invested in over-the-counter options through a Morgan Stanley or other industry broker or financial adviser, and such reporting inaccuracies have impeded calculation of position limits in a product you hold or trades in your market, or prevented the detection of untoward manipulation, violations, or abuses that have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
Located at 12711 Ventura Boulevard, Suite #440 Studio City, CA 91604. View Map
Phone: (800) 699-1881 | Local Phone: (818) 760-9880.
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