Morgan Stanley has been fined £1.4 million for breaches of Principles 2 and 3 in relation to trader mis-marking which led to the firm making a negative adjustment of $120 million. Morgan Stanley failed to ensure adequate supervision of part of its credit trading business resulting in failure to correctly price certain positions and failure to prevent or detect the mis-marking. In particular, it failed to ensure adequate oversight of the valuation process and reliance on independent sources. It also failed to adjust its systems and controls in response to increased volatility and decreased liquidity in the credit markets (FSA Final Notice - Morgan Stanley & Co International Plc, (PDF 112KB), 13 May 2009). The senior trader involved was prohibited and fined £105,000 for lack of integrity and for being knowingly concerned in the firm’s breaches. He had mis-marked his positions, by-passed and manipulated the firm’s control process and sought to hide losses (FSA Final Notice - Matthew Sebastian Piper, (PDF 152KB), 13 May 2009).
A sole trading mortgage broker has been prohibited and had his part IV permission cancelled in connection with breaches of Principle 1 and Principle 3. In particular, he submitted mortgage applications containing which he knew or should have known contained incorrect information and failed to verify client information (FSA Final Notice - Sofique Ullah trading as M A Financial Services and MA Mortgages, (PDF 164KB),14 May 2009).