[ISN] Morgan Stanley offers $15M fine for e-mail violations
isn at c4i.org
Thu Feb 16 05:41:11 EST 2006
FEBRUARY 14, 2006
NEW YORK -- U.S. investment bank Morgan Stanley has offered to pay $15
million to resolve an investigation by U.S. regulators into its
failure to retain e-mail messages, according to a regulatory filing.
The Wall Street firm said it had reached "an agreement in principle"
with the U.S. Securities and Exchange Commission's Division of
Enforcement to resolve an investigation into its preservation of
The fine would be one of the largest penalties ever imposed on a Wall
Street firm for failing to preserve records.
U.S. market regulators had threatened to fine Morgan Stanley for
failing to keep e-mails in several recent cases brought against the
Morgan Stanley said the proposal has yet to be presented to the SEC,
and no assurance can be given that it will be accepted.
The firm said part of the fine would go to regulators.
Morgan Stanley also said it was discussing resolution of related
charges with the National Association of Securities Dealers, although
no agreement has been reached.
The investigation has been ongoing, with Morgan Stanley last April
saying that SEC staff had recommended actions against the firm for
failing to comply with a 2002 order relating to retention of e-mails.
E-mail played a central role in a $1.58 billion judgment against
Morgan Stanley and in favor of Ronald Perelman, the billionaire
investor who said he was defrauded by the Wall Street company over the
sale of a business and focused on the firm's inability to produce
The judge in that case, frustrated by Morgan Stanley's inability to
produce e-mail documents demanded by Perelman's lawyers -- the firm
said backup tapes had been overwritten -- took the unusual step of
switching the burden of proof so that Morgan Stanley had to prove its
The firm told the SEC that it was working to rectify its problems and
pleaded for leniency, saying the transgressions happened when former
CEO Philip Purcell, who stepped down last June after a shareholder
campaign for his ouster, was running the firm.
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