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News August 2, 2004 Issue

U-4s and U-5s Cost Morgan Stanley DW $2.2 Million

Imagine having to keep track of 13,000 Form U-4s and U-5s.

Giving new meaning to the phrase "the devilís in the details," the NASD announced last week that Morgan Stanley DW agreed to pay $2.2 million to settle charges that it failed to keep more than 1,800 U-4s and U-5s up-to-date. Morgan Stanley also agreed to suspend registration of new brokers for one week and to hire an independent consultant to assess the firmís supervisory systems and procedures in the reporting area.

A brokerís obligation to accurately and promptly file information about representatives "cannot be ignored," said NASD vice chairman Mary Schapiro in a statement announcing the fine. "Negligence on the scale demonstrated in this case merits particularly strong sanctions."

The NASD also said that Morgan Stanley failed to maintain and enforce effective supervisory systems and procedures in the reporting area: "The firm, among other things, failed to assign clear responsibilities and tasks to its management and employees; to ensure that employees were accountable for the performance of their assigned tasks within clearly defined time periods, and to allocate sufficient resources, including personnel and other resources, to ensure timely filings."

The NASD said it was investigating other brokers for similar violations.

Although advisers file Forms U-4s and U-5s for their investment adviser representatives on the NASDís CRD system, advisers are not subject to direct NASD oversight (unless they are dual registrants and are themselves NASD members).