By Chelsey Dulaney
Morgan Stanley & Co. LLC will pay $4 million to settle
charges that it failed to stop a rogue trader from fraudulently
trading $525 million worth of Apple stock in 2012, the Securities
and Exchange Commission said Wednesday.
The SEC on Wednesday penalized Morgan Stanley for violating a
market access rules when it failed to uphold credit limits for the
firm where the trader worked, Rochdale Securities LLC.
In October 2012, the trader routed a series of orders to
purchase Apple stock to Morgan Stanley's electronic trading desk,
which allows institutional customers direct market access.
The amount exceeded Rochdale's daily trading limit of $200
million. Morgan Stanley's desk increased Rochdale's limit to $750
million without conducting adequate due diligence, the SEC
said.
Rochdale took a $5.3 million loss on the trades, causing the
business to fall below its capital requirements and close last
year. The trader, meanwhile, has been charged with fraud and
sentenced to 30 months in prison
The SEC's investigation found that Morgan Stanley didn't have
sufficient risk management controls in place to prevent the
trades.
Morgan Stanley didn't admit or deny the findings, according to
the SEC statement.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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