Morgan Stanley offers $15M fine for e-mail violations

Firm was under SEC investigation for failing to save e-mails

By Reuters

February 14, 2006 12:00 PM ET

Reuters - 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 e-mails.
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 brokerage.
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 documents.
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 innocence.
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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