Morgan Stanley’s FINRA Failure Highlights a Problem


Reports indicate that Morgan Stanley’s (NYSE:MS) recent failure to report a felony charge is part of an ongoing, persistent problem.  Financial firms are failing to to properly report infractions to FINRA’s central database, which is inforamtion that investors rely on to examine stockbrokers and other financial professionals.

NYT Dealbook has the story.  Driving his black Mercedes-Benz over the Fourth of July weekend, a Morgan Stanley Smith Barney broker, Martin Joel Erzinger, hit a cyclist, leaving the rider seriously injured on the side of the road.

Not long after, police found Mr. Erzinger in the parking lot of an abandoned Pizza Hut, removing the side mirror and bumper from his car, according to court documents. Mr. Erzinger told officers he didn’t remember striking anybody.

Mr. Erzinger was charged with a felony over the summer and pleaded guilty to two lesser misdemeanor charges in December. Morgan Stanley Smith Barney, which was supposed to tell regulators within 30 days of the initial charges, took months to report the incident.

Now the Financial Industry Regulatory Authority, Wall Street’s self-policing organization, is looking at whether the brokerage firm violated securities laws by not disclosing the charges in a timely fashion.

“Finra is investigating the matter,” said Nancy Condon, a spokeswoman for the regulator. “There are serious questions about whether the reporting obligations were met.”

The case casts a light on a persistent problem: the failure of financial firms to properly report infractions to Finra’s central database, a critical tool that large and small investors rely on to vet stockbrokers and other financial professionals.

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