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New York Stock Exchange


Morgan Stanley


$19 million for a variety of regulatory infractions, including failure to supervise two rogue brokers.

The big Wall Street firm had previously announced the fine, one of the larger ones ever handed down by the NYSE's regulatory arm.

An NYSE hearing panel found that Morgan Stanley "failed to have systems in place reasonably designed to ensure that it complied with its regulatory obligations.''

The infractions cited by the NYSE included the firm's failure to deliver stock prospectuses to 141,000 customers, improper background checks on employees and inadequate monitoring of broker correspondence.

A significant portion of the fine stemmed from Morgan Stanley's failure to properly supervise two former brokers who misappropriated $61.5 million from the firm's customers. The brokers, Carlos Soto and a person identified only by the initials "A.L.,'' have each pleaded guilty in federal court to a related criminal charge.

Of the two brokers, Soto's actions were the most damaging. The NYSE says the former broker, who worked in the firm's San Juan, Puerto Rico, office, misappropriated $56 million in customer money in a "deceptive scheme'' that dates back to 1991.

Soto told investors he'd put their money into low-risk U.S. government bonds. Instead, he transferred the money to an outside bank account with the intent of investing in a number of speculative investments. To further the scheme, the broker established a number of fictitious accounts.

Soto was fired last February, a week before he was arrested and arraigned by federal authorities.

The NYSE hearing panel found that Morgan Stanley did not properly supervise Soto, or investigate suspicious activity by the broker.

"Red flags indicating the possibility of fraudulent activity were undetected or ignored, and other anomalies in Soto's customer accounts were not adequately investigated,'' the hearing panel said.