Morgan Stanley fined $12.5 million for claiming that 9/11 destroyed e-mails
Sept. 27 (Bloomberg) — Morgan Stanley, the second-largest securities firm, will pay $12.5 million to settle regulatory claims it wrongly withheld e-mails in arbitration cases by saying they were lost in the Sept. 11 attacks, the company’s third sanction since 2002 for mishandling the records.
The firm’s Morgan Stanley DW subsidiary failed on “numerous occasions” to produce e-mails for plaintiffs and regulators, the Financial Industry Regulatory Authority said in a statement today. The accord is the first of its kind, providing $9.5 million to claimants affected by the lapses, said Finra, the Washington-based brokerage regulator.
“Hiding behind the events of Sept. 11 to avoid litigation obligations is unseemly,” said Steven Caruso, president of the Public Investors Arbitration Bar Association and a partner at the New York office of Maddox Hargett & Caruso PC. “This sets a new standard for how low a firm will go to take advantage of their clients.”
Days after the terrorist attacks destroyed Morgan Stanley’s 12 e-mail servers in New York, the company recovered millions of messages from backup tapes, Finra said. Additional data were stored on networks and individual computers throughout the firm.
Still, Morgan Stanley “routinely” claimed all e-mails before October 2001 were gone, the regulator said. The company later allowed much of the data to be erased.
Go to original by David Scheer, Bloomberg News
