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BrokerCheck Report

MORGAN STANLEY

Section Title

Report Summary

Firm History

CRD# 149777

1

10

Firm Profile 2 - 9

Page(s)

Firm Operations 11 - 48

Disclosure Events 49

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MORGAN STANLEY

CRD# 149777

SEC# 8-68191

Main Office Location

2000 WESTCHESTER AVENUEPURCHASE, NY 10577-2530Regulated by FINRA New York Office

Mailing Address

100 SOUTH CHARLES STREET4TH FLOORBALTIMORE, MD 21201

This firm is a brokerage firm and an investmentadviser firm. For more information aboutinvestment adviser firms, visit the SEC'sInvestment Adviser Public Disclosure website at:

Business Telephone Number

914-225-1000

https://www.adviserinfo.sec.gov

Report Summary for this Firm

This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.

Disclosure Events

Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.

Are there events disclosed about this firm? Yes

The following types of disclosures have beenreported:

Type Count

Regulatory Event 42

Arbitration 99

Firm Profile

This firm is classified as a limited liability company.

This firm was formed in Delaware on 02/02/2009.

Its fiscal year ends in December.

Firm History

Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.

Firm Operations

Is this brokerage firm currently suspended with anyregulator? No

This firm conducts 23 types of businesses.

This firm is affiliated with financial or investmentinstitutions.

This firm has referral or financial arrangements withother brokers or dealers.

This firm is registered with:

• the SEC• 4 Self-Regulatory Organizations• 53 U.S. states and territories

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1©2018 FINRA. All rights reserved. Report about MORGAN STANLEY

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This firm is classified as a limited liability company.

This firm was formed in Delaware on 02/02/2009.

CRD#

This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.

Firm Profile

Firm Names and Locations

Its fiscal year ends in December.

MORGAN STANLEY SMITH BARNEY LLC

SEC#

149777

8-68191

Main Office Location

Mailing Address

Business Telephone Number

Doing business as MORGAN STANLEY

914-225-1000

Regulated by FINRA New York Office

2000 WESTCHESTER AVENUEPURCHASE, NY 10577-2530

100 SOUTH CHARLES STREET4TH FLOORBALTIMORE, MD 21201

Other Names of this Firm

Name Where is it used

GRAYSTONE CONSULTING AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY






AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

MORGAN STANLEY CONSULTING GROUP AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

MORGAN STANLEY PRIVATE WEALTH MANAGEMENT AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

MORGAN STANLEY SMITH BARNEY AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

MORGAN STANLEY WEALTH MANAGEMENT AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY





This section provides information relating to all direct owners and executive officers of the brokerage firm.

Direct Owners and Executive Officers

Firm Profile

Position

Percentage of Ownership

Is this a public reportingcompany?

Position Start Date

Does this owner direct themanagement or policies ofthe firm?

MORGAN STANLEY DOMESTIC HOLDINGS, INC.

MEMBER

75% or more

Domestic Entity

01/2017

Yes

Is this a domestic or foreignentity or an individual?

Legal Name & CRD# (if any):

Position



Position Start Date


FINN, JED

DIRECTOR

Less than 5%

No

Individual

02/2016

Yes

5658048



Position


Position Start Date

HANSEN, TIMOTHY GERARD

CHIEF COMPLIANCE OFFICER (IA ONLY )

Less than 5%

Individual

03/2011

4956475








Direct Owners and Executive Officers (continued)

Firm Profile




Less than 5%

No

Yes

Position



Position Start Date


HEUSSER, NORMAN WILSON

CHIEF FINANCIAL OFFICER AND EXECUTIVE DIRECTOR

Less than 5%

No

Individual

08/2017

Yes

1859711



Position



Position Start Date


HUNEKE, BENJAMIN CORDT

DIRECTOR

Less than 5%

No

Individual

02/2016

Yes

2796985



JANOVER, JAMES TROY

2818307








Firm Profile

Position



Position Start Date


DIRECTOR

Less than 5%

No

Individual

02/2016

Yes

2818307


Position



Position Start Date


MORANO, DAVID

CHIEF OPERATIONS OFFICER

Less than 5%

No

Individual

02/2016

Yes

2189287



Position


Position Start Date


O'CONNOR, SHELLEY SUZANNE

DIRECTOR, CO-CHAIRMAN, CO-PRESIDENT AND CO-CHIEF EXECUTIVEOFFICER

Less than 5%

Individual

08/2014

Yes

1327260









Firm Profile



No

Yes

Position



Position Start Date


RICHTER, ROSE-ANNE NANCY

CHIEF COMPLIANCE OFFICER

Less than 5%

No

Individual

06/2016

Yes

1771193



Position



Position Start Date


SANTOS, STEVEN MANUEL

DESIGNATED PRINCIPAL - TEXAS

Less than 5%

No

Individual

06/2011

Yes

1832309



SAPERSTEIN, ANDREW MICHAEL

Individual

4728253









Firm Profile

Position



Position Start Date


DIRECTOR, CO-CHAIRMAN, CO-PRESIDENT AND CO-CHIEF EXECUTIVEOFFICER

Less than 5%

No

Individual

02/2016

Yes







This section provides information relating to any indirect owners of the brokerage firm.

Indirect Owners

Firm Profile

MORGAN STANLEY

SHAREHOLDER

MORGAN STANLEY CAPITAL MANAGEMENT LLC

75% or more

Yes

Domestic Entity

10/2002

Yes



Company through whichindirect ownership isestablished

Relationship to Direct Owner

Relationship Established




MORGAN STANLEY CAPITAL MANAGEMENT LLC

SHAREHOLDER

MOGAN STANLEY DOMESTIC HOLDINGS INC.

75% or more

No

Domestic Entity

03/2007

Yes



Company through whichindirect ownership isestablished

Relationship to Direct Owner

Relationship Established









Firm History

This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.

No information reported.






Firm Operations

RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.

This firm is currently registered with the SEC, 4 SROs and 53 U.S. states and territories.

SEC Registration Questions

This firm is registered with the SEC as:

A broker-dealer:

A broker-dealer and government securities broker or dealer:

A government securities broker or dealer only:

This firm has ceased activity as a government securities broker or dealer:

Yes

Yes

No

No

Federal Regulator Status Date Effective

SEC Approved 05/19/2009

Self-Regulatory Organization Status Date Effective

FINRA Approved 05/19/2009

NYSE American LLC Approved 06/23/2009

Nasdaq Stock Market Approved 06/01/2009

New York Stock Exchange Approved 05/19/2009






Firm Operations

Registrations (continued)

U.S. States &Territories

Status Date Effective

Alabama Approved 05/19/2009

Alaska Approved 05/20/2009

Arizona Approved 05/19/2009

Arkansas Approved 05/21/2009

California Approved 05/21/2009

Colorado Approved 05/20/2009

Connecticut Approved 05/19/2009

Delaware Approved 05/20/2009

District of Columbia Approved 05/20/2009

Florida Approved 05/20/2009

Georgia Approved 05/20/2009

Hawaii Approved 05/19/2009

Idaho Approved 05/19/2009

Illinois Approved 05/19/2009

Indiana Approved 05/20/2009

Iowa Approved 05/20/2009

Kansas Approved 05/19/2009

Kentucky Approved 05/21/2009

Louisiana Approved 05/21/2009

Maine Approved 05/20/2009

Maryland Approved 05/20/2009

Massachusetts Approved 05/22/2009

Michigan Approved 05/21/2009

Minnesota Approved 05/19/2009

Mississippi Approved 05/19/2009

Missouri Approved 05/19/2009

Montana Approved 05/19/2009

Nebraska Approved 04/14/2009

Nevada Approved 05/20/2009

New Hampshire Approved 05/22/2009

New Jersey Approved 05/20/2009

New Mexico Approved 05/21/2009

New York Approved 05/19/2009

U.S. States &Territories

Status Date Effective

North Carolina Approved 05/20/2009

North Dakota Approved 05/20/2009

Ohio Approved 05/20/2009

Oklahoma Approved 05/20/2009

Oregon Approved 05/22/2009

Pennsylvania Approved 05/21/2009

Puerto Rico Approved 05/19/2009

Rhode Island Approved 05/20/2009

South Carolina Approved 05/20/2009

South Dakota Approved 05/20/2009

Tennessee Approved 05/26/2009

Texas Approved 05/19/2009

Utah Approved 05/19/2009

Vermont Approved 05/21/2009

Virgin Islands Approved 05/27/2009

Virginia Approved 05/20/2009

Washington Approved 05/19/2009

West Virginia Approved 05/21/2009

Wisconsin Approved 05/21/2009

Wyoming Approved 05/20/2009






Firm Operations

Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.

This firm currently conducts 23 types of businesses.

Types of Business

Exchange member engaged in exchange commission business other than floor activities

Broker or dealer making inter-dealer markets in corporation securities over-the-counter

Broker or dealer retailing corporate equity securities over-the-counter

Broker or dealer selling corporate debt securities

Underwriter or selling group participant (corporate securities other than mutual funds)

Mutual fund underwriter or sponsor

Mutual fund retailer

U S. government securities dealer

U S. government securities broker

Municipal securities dealer

Municipal securities broker

Broker or dealer selling variable life insurance or annuities

Solicitor of time deposits in a financial institution

Broker or dealer selling oil and gas interests

Put and call broker or dealer or option writer

Broker or dealer selling securities of non-profit organizations (e.g., churches, hospitals)

Investment advisory services

Non-exchange member arranging for transactions in listed securities by exchange member

Trading securities for own account

Private placements of securities

Broker or dealer selling interests in mortgages or other receivables

Broker or dealer involved in a networking, kiosk or similar arrangment with a: bank, savings bank or association, orcredit union

Other - APPLICANT ALSO INTENDS TO ACT AS A BROKER OR DEALER ENGAGING IN UNDERWRITINGMUNICIPAL SECURITIES, REPOS AND REVERSE-REPOS, OFFERING ON-LINE TRADING/ELECTRONICTRADING, ENGAGING IN SELLING SECURITIES FUTURES PRODUCTS, AND A BROKER OR DEALER SELLINGINTERESTS IN UNREGISTERED PRIVATE INVESTMENT FUNDS. IN ADDITION, APPLICANT WILL CONDUCTRESEARCH AND SOFT DOLLAR ACTIVITIES, AND PROVIDE MERGERS AND ACQUISITION ADVISORYSERVICES.






Other Types of Business

This firm does effect transactions in commodities, commodity futures, or commodity options.This firm does engage in other non-securities business.

Non-Securities Business Description: APPLICANT ENGAGES IN OTHER NON-SECURITIES BUSINESSINCLUDING TRANSACTIONS IN FOREIGN EXCHANGE, PRECIOUSMETALS, CERTIFICATES OF DEPOSIT, AND NON-SECURITIES BASEDFUTURES. IN ADDITION, APPLICANT ENGAGES IN NON-CLIENT FACINGHEDGING IN NON-SECURITIES PRODUCTS WHICH IS INCIDENTAL TOITS TRADING BUSINESS.

Other - APPLICANT ALSO INTENDS TO ACT AS A BROKER OR DEALER ENGAGING IN UNDERWRITINGMUNICIPAL SECURITIES, REPOS AND REVERSE-REPOS, OFFERING ON-LINE TRADING/ELECTRONICTRADING, ENGAGING IN SELLING SECURITIES FUTURES PRODUCTS, AND A BROKER OR DEALER SELLINGINTERESTS IN UNREGISTERED PRIVATE INVESTMENT FUNDS. IN ADDITION, APPLICANT WILL CONDUCTRESEARCH AND SOFT DOLLAR ACTIVITIES, AND PROVIDE MERGERS AND ACQUISITION ADVISORYSERVICES.





Firm Operations

Clearing Arrangements

This firm does not hold or maintain funds or securities or provide clearing services for other broker-dealer(s).

Introducing Arrangements

This firm does refer or introduce customers to other brokers and dealers.

Name: MORGAN STANLEY & CO. LLC

Business Address: 1585 BROADWAYNEW YORK, NY 10036-8293

CRD #: 8209

Effective Date: 02/02/2009

Description: APPLICANT WILL INTRODUCE CUSTOMER ACCOUNTS TO MORGANSTANLEY & CO LLC FOR CLEARANCE AND SETTLEMENT OFSECURITIES TRANSACTIONS.






Firm Operations

Industry Arrangements

This firm does have books or records maintained by a third party.

This firm does have accounts, funds, or securities maintained by a third party.

This firm does have customer accounts, funds, or securities maintained by a third party.

Name: CITIGROUP GLOBAL MARKETS INC.

Business Address: 390-388 GREENWICH STREETNEW YORK, NY 10013-2396

CRD #: 7059


Description: CERTAIN OF APPLICANT'S BOOKS OR RECORDS WILL BE MAINTAINEDAT CITIGROUP GLOBAL MARKETS INC.



CRD #: 8209


Description: CERTAIN OF APPLICANT'S BOOKS OR RECORDS WILL BE MAINTAINEDAT MORGAN STANLEY & CO LLC.



CRD #: 8209


Description: CERTAIN OF APPLICANT'S ACCOUNTS, FUNDS OR SECURITIES WILL BEHELD OR MAINTAINED WITH MORGAN STANLEY & CO. LLC.



CRD #: 8209


Description: ACCOUNTS, FUNDS OR SECURITIES OF CUSTOMERS OF THEAPPLICANT WILL BE HELD BY MORGAN STANLEY & CO LLC PURSUANTTO A FULLY-DISCLOSED CLEARING AGREEMENT.






Firm Operations

Industry Arrangements (continued)

This firm does not have individuals who control its management or policies through agreement.

This firm does not have individuals who wholly or partly finance the firm's business.

Control Persons/Financing

Description: ACCOUNTS, FUNDS OR SECURITIES OF CUSTOMERS OF THEAPPLICANT WILL BE HELD BY MORGAN STANLEY & CO LLC PURSUANTTO A FULLY-DISCLOSED CLEARING AGREEMENT.






Firm Operations

Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.

This firm is, directly or indirectly:

· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.

No

Yes

INDONESIA

Yes

02/02/2009

PART OF 20/F, WORLD TRADE CENTER 2JI. JENDERAL SUDIRMAN KAV.29-31JAKARTA, INDONESIA

PT. MORGAN STANLEY SEKURITAS INDONESIA is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONALLIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATEPARENT OF THE APPLICANT.

Description:

Investment AdvisoryActivities:

Securities Activities:

Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

RUSSIA

Yes

02/02/2009

21 1-YA TVERSKAYA-YAMSKAYAMOSCOW, RUSSIAN FEDERATION

OOO MORGAN STANLEY BANK is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY GROUP (EUROPE)WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATE PARENT OFTHE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations

Organization Affiliates (continued)

No

Yes

AUSTRALIA

Yes

02/02/2009

LEVEL 39, CHIFLEY TOWER, 2 CHIFLEY SQUARESYDNEY NSW 2000, AUSTRALIA

MORGAN STANLEY WEALTH MANAGEMENT AUSTRALIA PTY LTD is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY DOMESTICHOLDINGS, INC., WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

TAIWAN

Yes

02/02/2009

207 TUN HWA SOUTH ROAD, SEC. 214TH & 22ND FLOORS, TAIPEI METROTAIPEI, TAIWAN 106

MORGAN STANLEY TAIWAN LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY & CO.INTERNATIONAL PLC WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

SAUDI ARABIA

Yes

02/02/2009

AL MA'ATHER STREETAL RASHID TOWER, FLOOR 10RIYADH, SAUDI ARABIA 11586

MORGAN STANLEY SAUDI ARABIA is under common control with the firm.

Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

Yes

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY MIDDLE EAST INC.,WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATE PARENT OFTHE APPLICANT.

Description:



No

Yes

MEXICO

Yes

02/02/2009

PASEO DE LOS TAMARINDOS 90, TORRE 1, PISO 29PASEO DE LOS TAMARINDOS 90, TORRE 1, PISO 29CIUDAD DE MEXICO, MEXICO 05120

MORGAN STANLEY MÉXICO, CASA DE BOLSA, S.A. DE C.V. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONALLIMITED WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATEPARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

TURKEY

Yes

02/02/2009

ESENTEPE BUYUKDERE CADDESI NO:171METROCITY IS MERKEZI A BLOK KAT:24ISTANBUL, TURKEY 34330

MORGAN STANLEY MENKUL DEGERLER A.S. is under common control with the firm.

THIS COMPANY IS CONTROLLED BY MORGAN STANLEY MAURITIUSCOMPANY LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

Yes

INDIA

Yes

02/02/2009

18F, TOWER 2, ONE INDIABULLS CENTRE 841SENAPATI BAPAT MARGMUMBAI, INDIA 400013

MORGAN STANLEY INDIA COMPANY PRIVATE LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INDIA SECURITIESPRIVATE LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

VIETNAM

Yes

02/02/2009

8 THIEN QUANT STREET NGUYEN DU WARDHAI BA TRUNG DISTRICTHANOI, VIETNAM

MORGAN STANLEY GATEWAY SECURITIES JCS is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY ASIA (SINGAPORE)PTE., WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATEPARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

SINGAPORE

Yes

02/02/2009

#16-01 CAPITAL SQUARE23 CHURCH STREETSINGAPORE, SINGAPORE 049481

MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD is under common control with the firm.

Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

Yes

SINGAPORE

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY ASIA(SINGAPORE)PTE, WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

No

Yes

SPAIN

Yes

02/02/2009

C/SERRANO 5528006MADRID, SPAIN

MORGAN STANLEY S.V., S.A.U. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY HOLDINGS S.L.U.,WHICH IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATE PARENT OFTHE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

JAPAN

Yes

05/01/2010

OTEMACHI FINANCIAL CITY SOUTH TOWER9-7, OTEMACHI 1-CHOME, CHIYODA-KUTOKYO, JAPAN

MORGAN STANLEY MUFG SECURITIES CO., LTD. is under common control with the firm.

MORGAN STANLEY MUFG SEUCRITIES CO., LTD. IS CONTROLLED BYMORGAN STANLEY, AN ULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


Yes

No

No

06/01/2009

1585 BROADWAYNEW YORK, NY 10036

134366

MORGAN STANLEY PRIVATE EQUITY ASIA, INC. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENTOF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

Yes

No

No

04/02/2012

522 FIFTH AVENUENEW YORK, NY 10036

163747

MORGAN STANLEY SMITH BARNEY PRIVATE MANAGEMENT II LLC is under common control with the firm.

MORGAN STANLEY PRIVATE MANAGEMENT II LLC IS CONTROLLED BYMORGAN STANLEY, AN ULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

No

06/01/2011

485 LEXINGTON AVENUE, 12TH FLOORNEW YORK, NY 10017

111397

MORGAN STANLEY SMITH BARNEY PRIVATE MANAGEMENT LLC is under common control with the firm.

Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:






Firm Operations


Yes

No

MORGAN STANLEY SMITH BARNEY PRIVATE MANAGEMENT LLC ISCONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OF THEAPPLICANT.

Description:



Country:

Yes

No

No

06/01/2009

485 LEXINGTON AVENUE, 12TH FLOORNEW YORK, NY 10017

111386

MORGAN STANLEY SMITH BARNEY VENTURE SERVICES LLC is under common control with the firm.

MORGAN STANLEY SMITH BARNEY VENTURE SERVICES LLC ISCONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OF THEAPPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

Yes

No

No

02/02/2009

2000 WESTCHESTER AVENUEPURCHASE, NY 10577

137463

CONSULTING GROUP ADVISORY SERVICES LLC is under common control with the firm.

CONSULTING GROUP ADVISORY SERVICES IS CONTROLLED BY MORGANSTANLEY, AN ULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:






Firm Operations

Organization Affiliates (continued)CONSULTING GROUP ADVISORY SERVICES IS CONTROLLED BY MORGANSTANLEY, AN ULTIMATE PARENT OF THE APPLICANT.

No

Yes

No

02/02/2009

2000 WESTCHESTER AVENUEPURCHASE, NY 10577

SBHU LIFE AGENCY INC. is controlled by the firm.

MORGAN STANLEY SMITH BARNEY LLC IS THE SOLE SHAREHOLDER OFSBHU LIFE AGENCY, INC.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

ENGLAND

Yes

02/02/2009

25 CABOT SQUARECANARY WHARFLONDON, ENGLAND E14 4QA

MORGAN STANLEY BANK INTERNATIONAL LIMITED is under common control with the firm.

THE ENTITY IS CONTROLLED BY MORGAN STANLEY GROUP (EUROPE)WHICH IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENTCOMAPNY OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

No

02/02/2009

ONE TOWER BRIDGE100 FRONT STREETWEST CONSHOHOCKEN, PA 19428

PRIVATE INVESTMENT PARTNERS INC is under common control with the firm.


Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


Yes

No

THE ENTITY IS CONTROLLED BY MS HOLDINGS INC. WHICH ISCONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OF THEAPPLICANT.

Description:



Yes

No

No

02/02/2009


MSRESS III MANAGER LLC is under common control with the firm.

THE ENTITY IS CONTROLLED BY MSRESS III, INC. WHICH IS CONTROLLEDBY MORGAN STANLEY.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

Yes

No

No

02/02/2009


MSREF V LLC is under common control with the firm.

THE ENTITY IS CONTROLLED BY MSREF V INC. WHICH IS CONTROLLED BYMORGAN STANLEY, AN ULTIMATE PARENT COMAPNY OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

02/02/2009


MSREF REAL ESTATE ADVISOR, INC. is under common control with the firm.

Effective Date:

Business Address:






Firm Operations


Yes

No

No

02/02/2009

THE ENTITY IS CONTROLLED BY MSRESS III MANAGER LLC WHICH ISCONTROLLED BY MSRESS III, INC., WHICH IS CONTROLLED BY MORGANSTANLEY, AN ULTIMATE PARENT COMAPNY OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Yes

Yes

No

02/02/2009

1585 BROADWAYNEW YORK, NY 10036-8293

8209

MORGAN STANLEY & CO. LLC controls the firm.

APPLICANT IS CONTROLLED BY MORGAN STANLEY & CO. INCORPORATED.Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

No

No

No

02/02/2009


MORGAN STANLEY CAPITAL GROUP INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations

Organization Affiliates (continued)THIS ENTITY IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENTOF THE APPLICANT.

No

Yes

No

02/02/2009


36142

PRIME DEALER SERVICES CORP. is controlled by the firm.

APPLICANT IS 100% OWNER OF PRIME DEALER SERVICES CORP., AREGISTERED BROKER-DEALER.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

Yes

No

No

02/02/2009

1585 BROADWAYREAL ESTATE-37TH FLOORNEW YORK, NY 10036

MSREF IV, LLC is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

No

02/02/2009


MSREF III, INC. is under common control with the firm.


Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


Yes

No


Description:



Yes

No

No

02/02/2009


MSREF II, INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

No

02/02/2009


MSL INCORPORATED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

02/02/2009

1221 AVENUE OF THE AMERICAS33RD FLOORNEW YORK, NY 10020

MSCP III LLC is under common control with the firm.

Effective Date:

Business Address:






Firm Operations


Yes

No

No

02/02/2009


Description:



Country:

Foreign Entity:

Effective Date:

No

Yes

JAPAN

Yes

02/02/2009

YEBISU GARD PLACE TOWERTOKYO, JAPAN

MSAM/KOKUSAI (CAYMAN ISLANDS), INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

Yes

No

No

02/02/2009

1585 BROADWAY34TH FLOORNEW YORK, NY 10036

MS CAPITAL PARTNERS ADVISER INC is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY HOLDINGSINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations

Organization Affiliates (continued)THIS ENTITY IS CONTROLLED BY MORGAN STANLEY HOLDINGSINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

No

Yes

UNITED KINGDOM

Yes

02/02/2009

25 CABOT SQUARECANARY WHARFLONDON, UNITED KINGDOM E14 4QA

MORSTAN NOMINEES LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY HOLDINGSINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

GERMANY

Yes

02/02/2009

JUNGHOFSTRASSE 13-15FRANKFURT AM MAINFRANKFURT, GERMANY 60311

MORGAN STANLEY WERTPAPIERE GMBH is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY UK GROUP, WHICH ISCONTROLLED BY MORGAN STANLEY INTERNATIONAL LIMITED, WHICH ISCONTROLLED BY MORGAN STANLEY INTERNATIONAL HOLDINGSINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

02/02/2009


MORGAN STANLEY UK GROUP is under common control with the firm.

Effective Date:

Business Address:






Firm Operations


No

Yes

UNITED KINGDOM

Yes

02/02/2009

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONALLIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY INTERNATIONALHOLDINGS INC., WHICH IS CONTROLLED BY MORGAN STANLEY CAPITALMANAGEMENT LLC, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

No

Yes

GERMANY

Yes

02/02/2009


MORGAN STANLEY TRADING GMBH & CO., KG is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

GERMANY

Yes

02/02/2009


MORGAN STANLEY TRADING BETEILIGUNGS-GMBH is under common control with the firm.



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY & CO.INCORPORATED, AN ULTIMATE PARENT OF THE APPLICANT.

Description:


No

Yes

No

02/02/2009


MORGAN STANLEY SERVICES INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

UNITED KINGDOM

Yes

02/02/2009


MORGAN STANLEY SECURITIES LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY UK GROUP WHICH ISCONTORLLED BY MORGAN STANLEY INTERNATIONAL LIMITED, WHICH ISCONTROLLED BY MORGAN STANLEY INTERNATIONAL HOLDINGS, WHICHIS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OF THEAPPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:


MORGAN STANLEY REAL ESTATE ADVISOR, INC. is under common control with the firm.

Business Address:






Firm Operations


Yes

No

No

02/02/2009



Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

CHANNEL ISLANDS

Yes

02/02/2009

22 GRENVILLE STREETST. HELIERJERSEY, CHANNEL ISLANDS JE4 8PX

MORGAN STANLEY OVERSEAS SERVICES (JERSEY) LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

CAYMAN ISLANDS

Yes

02/02/2009

C/O M&C CORPORATE SERVICES LTD.PO BOX 309GT, GEORGE TOWNGRAND CAYMAN, CAYMAN ISLANDS

MORGAN STANLEY OFFSHORE INVESTMENT COMPANY LTD. is under common control with the firm.



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


THIS ENTITY IS CONTROLLED BY MOPRGAN STANLEY CAPITAL HOLDINGS,WHICH IS CONTROLLED BY MORGAN STANLEY INTERNATIONAL INCORP.WHICH IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OFTHE APPLICANT.

Description:

No

Yes

CAYMAN ISLANDS

Yes

02/02/2009

PO BOX 309GT, UGLAND HOUSES. CHURCH ST., GEORGE TOWNGRAND CAYMAN, CAYMAN ISLANDS

MORGAN STANLEY ASIA HOLDINGS LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

Yes

No

ENGLAND

Yes

02/02/2009

24 CABOT SQUARECANARY WHARFLONDON, ENGLAND E14 4QA

MORGAN STANLEY INVESTMENT MANAGEMENT LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

02/02/2009

1221 AVENUE OF THE AMERICASNEW YORK, NY 10020

MORGAN STANLEY INVESTMENT MANAGEMENT INC. is under common control with the firm.

Effective Date:

Business Address:






Firm Operations


Yes

No

No

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY CAPITALMANAGEMENT LLC, WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Yes

No

SINGAPORE

Yes

02/02/2009

80 RAFFLES PLACEUOB PLAZA 1, UNIT 4201SINGAPORE, SINGAPORE 04862

MORGAN STANLEY INVESTMENT MANAGEMENT COMPANY is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANELY ASIA PACIFIC(HOLDINGS) LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

No

No

02/02/2009


MORGAN STANLEY INTERNATIONAL INCORPORATED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations

Organization Affiliates (continued)THIS ENTITY IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENTOF THE APPLICANT.

Description:

Yes

No

No

02/02/2009


MORGAN STANLEY INFRASTRUCTURE INC. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MS HOLDINGS INCORPORATED, WHICHIS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENT OF THEAPPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

INDIA

Yes

02/02/2009

FORBES BUILDINGCHARANJIT RAI MARGFORT MUMBAI, INDIA 400 001

MORGAN STANLEY INDIA SECURITIES PRIVATE LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

UNITED KINGDOM

Yes

02/02/2009

25 CABOT SQUARECANARY WHARF, LONDON E14 4QA

MORGAN STANLEY GROUP (EUROPE) is under common control with the firm.

Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

Yes

UNITED KINGDOM

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONALLIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATEPARENT OF THE APPLICANT.

Description:



Country:

No

Yes

No

02/02/2009


MORGAN STANLEY EMERGING MARKETS INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

MAURITIUS

Yes

02/02/2009

10, FRERE FELIX DE VALOSIS STREETPORT LOUIS, MAURITIUS

MORGAN STANLEY MAURITIUS COMPANY LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

30344

MORGAN STANLEY DISTRIBUTION, INC. is under common control with the firm.

CRD #:






Firm Operations


No

Yes

No

02/02/2008

ONE TOWER BRIDGEWEST CONSHOHOCKEN, PA 19426

APPLICANT IS UNDER COMMON CONTROL WITH MORGAN STANLEYDISTRIBUTION INC., A REGISTERED BROKER/DEALER.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

No

02/02/2009


MORGAN STANLEY INSURANCE SERVICES INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

HONG KONG

Yes

02/02/2009

30TH FLOOR, THREE EXCHANGE SQUARE8 CONNAUGHT PLACECENTRAL HONG KONG, HONG KONG

MORGAN STANLEY HONG KONG SECURITIES LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY (HONG KONG)HOLDINGS LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations



Description:

No

Yes

BRAZIL

Yes

02/02/2009

AV. PRES. JUSCELINO KUBITSCHEK50-70 E80, ANDARES, ITAIM BIBISAN PAULO-S.P., BRAZIL 04543-000

MORGAN STANLEY PRESTACAO DE SERVICOS E COMERCIO DE COMMODITIES LTDA. is under commoncontrol with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY LATIN AMERICAINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

BRAZIL

Yes

02/02/2009

AVENIDA BRIGADEIRO FARIA LIMA, 3600FLOOR 6SAO PAULO-SP, BRAZIL 04538-132

MORGAN STANLEY CORRETORA DE TITULOS E VALORES MOBILIARIOS S.A. is under common control withthe firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY LATIN AMERICAINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

23 CHURCH STREET#16-01 CAPITAL SQUARESINGAPORE, SINGAPORE 049481

MORGAN STANLEY CAPITAL GROUP (SINGAPORE) PTE. is under common control with the firm.

Business Address:






Firm Operations


No

Yes

SINGAPORE

No

02/02/2009


THIS ENTITY IS CONTROLLED BY MORGAN STANLEY ASIA PACIFIC(HOLDINGS) LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

AUSTRALIA

Yes

02/02/2009

LEVEL 38, THE CHIFLEY TOWER2 CHIFLEY SQUARESYDNEY, AUSTRALIA NSW 2000

MORGAN STANLEY AUSTRALIA SECURITIES LIMITED is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONALINCORPORATED, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

HONG KONG

Yes

02/02/2009

30TH FLOOR, THREE EXCHANGE SQUARE8 CONNAUGHT PLACECENTRAL HONG KONG, HONG KONG

MORGAN STANLEY ASIA LIMITED is under common control with the firm.



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No


Description:


No

Yes

SINGAPORE

Yes

02/02/2009


MORGAN STANLEY ASIA (SINGAPORE) PTE. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY BY MORGAN STANLEY ASIA PACIFIC(HOLDINGS) LIMITED, WHICH IS CONTROLLED BY MORGAN STANLEY, THEULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

No

02/02/2009


MORGAN STANLEY CAPITAL I INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

02/02/2009


MORGAN STANLEY CAPITAL GROUP INC. is under common control with the firm.

Effective Date:

Business Address:






Firm Operations


No

Yes

No

02/02/2009

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY, THE ULTIMATEPARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

No

Yes

LUXEMBOURG

Yes

02/02/2009

38-40 RUE SAINTE ZITHELUXEMBOURG, LLUXEMBOURG L-2763

MORGAN STANLEY CAPITAL (LUXEMBOURG) S.A. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

CANADA

Yes

02/02/2009

181 BAY STREET, SUITE 3700PO BOX 776TORONTO, ONTARIO, CANADA M5J 2T3

MORGAN STANLEY CANADA LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


Yes

No

INDIA

Yes

02/02/2009

FORBES HOUSE 5TH FLOORCHARANJIT RAI, MARG FORTMUMBAI, INDIA 400 001

MORGAN STANLEY INVESTMENT MANAGEMENT PRIVATE LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

Yes

No

JAPAN

Yes

02/02/2009

YEBISU GARDEN PLACE TOWER20-3 EBISU, 4-CHOME, SHIBUYA-KUTOKYO, JAPAN 150

126071

MORGAN STANLEY INVESTMENT MANAGEMENT (JAPAN) CO., LTD. is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY JAPAN (HOLDINGS)LTD, WHICH IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATE PARENTOF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

No

02/02/2009

ONE TOWER BRIDGE100 FRONT STREET - SUITE 100WEST CONSHOHOCKEN, PA 19428

MORGAN STANLEY ALTERNATIVE INVESTMENT PARTNERS LP is under common control with the firm.

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


Yes

No

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INVESTMENTMANAGEMENT INC., WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Yes

No

No

02/02/2009

ONE TOWER BRIDGE100 FRONT STREET - SUITE 100WEST CONSHOHOCKEN, PA 19428

MORGAN STANLEY AIP GP LP is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INVESTMENTMANAGEMENT, WHICH IS CONTROLLED BY MORGAN STANLEY, ANULTIMATE PARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

KINGDOM

Yes

02/02/2009

25 CABOT SQUARELONDON, UNITED KINGDOM E14 4QA

MORGAN STANLEY & CO. LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No

Yes

UNITED KINGDOM

Yes

02/02/2009

25 CABOT SQUARECANARY WHARF, UNITED KINGDOM E14 4QA

MORGAN STANLEY & CO. INTERNATIONAL PLC is under common control with the firm.

THIS ENTITY IS CONTROLLED BY MORGAN STANLEY INTERNATIONLIMITED WHICH IS CONTROLLED BY MORGAN STANLEY, AN ULTIMATEPARENT OF THE APPLICANT.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

No

No

02/02/2009


MORGAN STANLEY is controlled by the firm.

APPLICANT IS CONTROLLED BY MORGAN STANLEY (PARENT), ADELAWARE CORPORATION.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

02/02/2009

No

02/02/2009


DEAN WITTER REYNOLDS INSURANCE SERVICES (SOUTH DAKOTA) INC. is under common control with thefirm.



Country:

Foreign Entity:

Effective Date:

Business Address:






Firm Operations


No


Description:


No

Yes

UNITED KINGDOM

Yes

02/02/2009

25 CABOT SQUARECANARY WHARF, UNITED KINGDOM E14 4QA

DEAN WITTER IDWRRBS) LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

PEC

No

02/02/2009

EVERBRIGHT BUILDING, ROOM 21086 FU XING MEN WAI AVENUEBEIJING, PEC 1000045 PRC

CHINA INTERNATIONAL CAPITAL CORPORATION LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

This firm is directly or indirectly, controlled by the following:

· bank holding company· national bank· state member bank of the Federal Reserve System






Firm Operations


· state non-member bank· savings bank or association· credit union· or foreign bank

Effective Date:

Business Address:

Description: MORGAN STANLEY IS THE 100% OWNER OF MORGAN STANLEY & CO. INC.WHICH IS IN TURN THE 51% OWNER OF MORGAN STANLEY SMITH BARNEYHOLDINGS LLC WHICH IS THE 100% OWNER OF THE APPLICANT.

MORGAN STANLEY is a Bank Holding Company and controls the firm.

02/02/2009







Disclosure Events

All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.

Final On AppealPending

Regulatory Event 0 42 0

Arbitration N/A 99 N/A






Disclosure Event Details

What you should know about reported disclosure events:

1. BrokerCheck provides details for any disclosure event that was reported in CRD. It also includessummary information regarding FINRA arbitration awards in cases where the brokerage firm wasnamed as a respondent.

2. Certain thresholds must be met before an event is reported to CRD, for example: o A law enforcement agency must file formal charges before a brokerage firm is required to disclose a

particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:

o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.

4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.

§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently

being appealed.§ A "final" event has been concluded and its resolution is not subject to change.

o A final event generally has a disposition of adjudicated, settled or otherwise resolved.§ An "adjudicated" matter includes a disposition by (1) a court of law in a criminal or civil matter,

or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.

§ A "settled" matter generally involves an agreement by the parties to resolve the matter.Please note that firms may choose to settle customer disputes or regulatory matters forbusiness or other reasons.

§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.

5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.

Regulatory - Final

This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.

Disclosure 1 of 42

Reporting Source: Regulator

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT DID NOTSEND APPROXIMATELY FOUR MILLION MARGIN DISCLOSURES ASREQUIRED UNDER FINRA RULE 2264(B) DURING 2012, 2013 AND 2014. THEFINDINGS STATED THAT FINRA RULE 2264(B) PROVIDES THAT, NOT LESSTHAN ONCE A CALENDAR YEAR, A MEMBER DELIVER IN PAPER ORELECTRONIC FORM CERTAIN MARGIN DISCLOSURES SPECIFIED IN THERULE TO ALL NON-INSTITUTIONAL CUSTOMERS WITH MARGIN ACCOUNTS.THESE DISCLOSURES ALERT CUSTOMERS TO RISKS AND PROCEDURESRELATING TO TRADING SECURITIES ON MARGIN. FROM 2012 THROUGH2014, THE FIRM HAD A PROCESS IN PLACE TO COMPLY WITH ITSOBLIGATIONS UNDER FINRA RULE 2264(B) THAT RELIED ON VARIOUSINDIVIDUALS AND GROUPS PROVIDING REQUIRED DISCLOSURES FORINCLUSION IN MAILINGS TO CUSTOMERS. PRIOR TO 2015, THE FIRM DIDNOT FORMALLY DESIGNATE ANY ONE PERSON OR GROUP TO ENSURETHAT REQUIRED YEARLY MARGIN DISCLOSURE STATEMENTS UNDERRULE 2264(B) WERE INCLUDED IN MAILINGS TO CUSTOMERS WITHMARGIN ACCOUNTS.

Current Status: Final






Initiated By: FINRA

Principal Sanction(s)/ReliefSought:

Other Sanction(s)/ReliefSought:

Date Initiated: 11/17/2017

Docket/Case Number: 2016049857301

Principal Product Type: No Product

Other Product Type(s):

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT DID NOTSEND APPROXIMATELY FOUR MILLION MARGIN DISCLOSURES ASREQUIRED UNDER FINRA RULE 2264(B) DURING 2012, 2013 AND 2014. THEFINDINGS STATED THAT FINRA RULE 2264(B) PROVIDES THAT, NOT LESSTHAN ONCE A CALENDAR YEAR, A MEMBER DELIVER IN PAPER ORELECTRONIC FORM CERTAIN MARGIN DISCLOSURES SPECIFIED IN THERULE TO ALL NON-INSTITUTIONAL CUSTOMERS WITH MARGIN ACCOUNTS.THESE DISCLOSURES ALERT CUSTOMERS TO RISKS AND PROCEDURESRELATING TO TRADING SECURITIES ON MARGIN. FROM 2012 THROUGH2014, THE FIRM HAD A PROCESS IN PLACE TO COMPLY WITH ITSOBLIGATIONS UNDER FINRA RULE 2264(B) THAT RELIED ON VARIOUSINDIVIDUALS AND GROUPS PROVIDING REQUIRED DISCLOSURES FORINCLUSION IN MAILINGS TO CUSTOMERS. PRIOR TO 2015, THE FIRM DIDNOT FORMALLY DESIGNATE ANY ONE PERSON OR GROUP TO ENSURETHAT REQUIRED YEARLY MARGIN DISCLOSURE STATEMENTS UNDERRULE 2264(B) WERE INCLUDED IN MAILINGS TO CUSTOMERS WITHMARGIN ACCOUNTS.

Resolution Date: 11/17/2017

Resolution:

Other Sanctions Ordered:

Sanction Details: THE FIRM WAS CENSURED AND FINED $150,000. FINES PAID IN FULL ONNOVEMBER 28, 2017.

Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?

No

Sanctions Ordered: CensureMonetary/Fine $150,000.00

Acceptance, Waiver & Consent(AWC)





https://www.finra.org/industry/disciplinary-actions/finra-disciplinary-actions-online?search=2016049857301


Sanction Details: THE FIRM WAS CENSURED AND FINED $150,000. FINES PAID IN FULL ONNOVEMBER 28, 2017.

iReporting Source: Firm

Initiated By: FINRA


Civil and Administrative Penalt(ies) /Fine(s)






Allegations: FINRA ALLEGED THAT THE FIRM DID NOT SEND CERTAIN MARGINDISCLOSURES TO CLIENTS AS REQUIRED UNDER FINRA RULE 2264(B)DURING 2012, 2013 AND 2014 IN VIOLATION OF FINRA RULES 2010 AND2264(B).



Resolution:


Sanction Details: THE FINE OF $150,000 WAS PAID ON NOVEMBER 29, 2017.

Firm Statement ON NOVEMBER 17, 2017, MORGAN STANLEY SMITH BARNEY LLC WASASSESSED A FINE OF $150,000 BY FINRA IN CONNECTION WITHALLEGATIONS THAT THE FIRM DID NOT SEND CERTAIN MARGINDISCLOSURES TO CLIENTS AS REQUIRED UNDER FINRA RULE 2264(B)DURING 2012, 2013 AND 2014 IN VIOLATION OF FINRA RULES 2010 AND2264(B).



Disclosure 2 of 42

i









Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM AND WRITTENSUPERVISORY PROCEDURES (WSPS) REASONABLY DESIGNED TODETECT AND PREVENT UNSUITABLE SHORT-TERM TRADING OF UNITINVESTMENT TRUSTS (UITS). THE FINDINGS STATED THAT THE FIRMEXECUTED MORE THAN $33.4 BILLION IN UIT TRANSACTIONS GENERATINGMORE THAN $650 MILLION IN SALES CREDITS AND COMMISSIONS. THE$33.4 BILLION IN UIT TRANSACTIONS INCLUDED MORE THAN $5.2 BILLIONIN UIT TRANSACTIONS INVOLVING "EARLY ROLLOVERS," DEFINED BY THEFIRM AS UITS ROLLED OVER MORE THAN 100 DAYS BEFORE MATURITY.THE FIRM FAILED TO ADEQUATELY SUPERVISE REPRESENTATIVES' SALESOF UITS IN SEVERAL RESPECTS. FIRST, ALTHOUGH THE FIRM'SCOMPLIANCE PROCEDURES NOTED THAT "UITS ARE INTENDED TO BELONG-TERM INVESTMENTS," THE FIRM'S PROCEDURES OFFEREDINSUFFICIENT GUIDANCE TO SUPERVISORS REGARDING HOW THEYSHOULD MONITOR AND REVIEW UIT TRANSACTIONS TO DETECTUNSUITABLE SHORT-TERM TRADING OF UITS, INCLUDING SHORT-TERMROLLOVERS. ALSO, THE FIRM CONDUCTED NO TRAINING FORREGISTERED REPRESENTATIVES SPECIFIC TO UITS. THE FINDINGS ALSOSTATED THAT, THE FIRM HAD AN INADEQUATE SYSTEM TO DETECTPOTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS. THE FIRM'SORDER ENTRY SYSTEM ALERTED SUPERVISORS TO SHORT-TERM UIT "SWITCHES," WHICH THE FIRM'S PROCEDURES DEFINED AS THEPURCHASE OF A UIT WITHIN 60 DAYS OF THE SALE OF EITHER AN OPEN-END MUTUAL FUND OR UIT. WHEN SUCH A SWITCH WAS IDENTIFIED, THEFIRM REQUIRED THAT THE REPRESENTATIVE PROVIDE A JUSTIFICATIONFOR THE SWITCH, AND A SUPERVISOR REVIEW AND APPROVE THETRANSACTION PRIOR TO ITS EXECUTION. IF THE SUPERVISOR APPROVEDTHE TRANSACTION, THE FIRM INSERTED ADDITIONAL DISCLOSURELANGUAGE ON THE TRADE CONFIRMATION NOTIFYING THE CUSTOMERTHAT THE SWITCH COULD RESULT IN NEW SALES CHARGES. FURTHER,CERTAIN UIT SWITCH TRANSACTIONS APPEARED ON THE FIRM'S MULTI-PRODUCT SWITCH REPORT, A SURVEILLANCE REPORT THE FIRM ISSUEDTO SUPERVISORS AS A TOOL TO ASSIST WITH THE SUPERVISION OF SUCHTRANSACTIONS. THE FINDINGS ALSO INCLUDED THAT, THE FIRMEXCLUDED UIT ROLLOVERS FROM THE DEFINITION OF A "SWITCH" IN ITSPOLICIES AND PROCEDURES. AS A RESULT, IF A REPRESENTATIVESELECTED "ROLLOVER" AS THE JUSTIFICATION FOR A UIT SWITCH IN THEFIRM'S ORDER ENTRY SYSTEM, UIT ROLLOVERS WERE NOT ROUTED TOSUPERVISORS FOR REVIEW AND APPROVAL PRIOR TO EXECUTION. INADDITION, THE FIRM DID NOT INCLUDE DISCLOSURE LANGUAGE ONTRADE CONFIRMATIONS FOR UIT ROLLOVERS. ALSO, BECAUSE THE FIRMEXCLUDED UIT ROLLOVERS FROM THE DEFINITION OF A "SWITCH," UITROLLOVERS THAT OTHERWISE WOULD HAVE APPEARED ON THE FIRM'SMULTI-PRODUCT SWITCH REPORT WERE OMITTED FROM THE REPORT.THEREFORE, THE FIRM HAD NO AUTOMATED MECHANISM TO DETECTSHORT-TERM UIT ROLLOVERS. FINRA FOUND THAT HUNDREDS OF FIRMREPRESENTATIVES EXECUTED SHORT-TERM UIT ROLLOVERS INTHOUSANDS OF CUSTOMER ACCOUNTS. IN JUNE 2015, THE FIRMMODIFIED ITS POLICIES AND PROCEDURES TO INCLUDE UIT ROLLOVERSIN THE SWITCH DEFINITION, THEREBY MAKING UIT ROLLOVERSEXECUTED MORE THAN 100 DAYS PRIOR TO MATURITY SUBJECT TO THEFIRM'S SUPERVISORY REVIEW AND APPROVAL PROCESS.







Initiated By: FINRA





Principal Product Type: Unit Investment Trust(s)


WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM AND WRITTENSUPERVISORY PROCEDURES (WSPS) REASONABLY DESIGNED TODETECT AND PREVENT UNSUITABLE SHORT-TERM TRADING OF UNITINVESTMENT TRUSTS (UITS). THE FINDINGS STATED THAT THE FIRMEXECUTED MORE THAN $33.4 BILLION IN UIT TRANSACTIONS GENERATINGMORE THAN $650 MILLION IN SALES CREDITS AND COMMISSIONS. THE$33.4 BILLION IN UIT TRANSACTIONS INCLUDED MORE THAN $5.2 BILLIONIN UIT TRANSACTIONS INVOLVING "EARLY ROLLOVERS," DEFINED BY THEFIRM AS UITS ROLLED OVER MORE THAN 100 DAYS BEFORE MATURITY.THE FIRM FAILED TO ADEQUATELY SUPERVISE REPRESENTATIVES' SALESOF UITS IN SEVERAL RESPECTS. FIRST, ALTHOUGH THE FIRM'SCOMPLIANCE PROCEDURES NOTED THAT "UITS ARE INTENDED TO BELONG-TERM INVESTMENTS," THE FIRM'S PROCEDURES OFFEREDINSUFFICIENT GUIDANCE TO SUPERVISORS REGARDING HOW THEYSHOULD MONITOR AND REVIEW UIT TRANSACTIONS TO DETECTUNSUITABLE SHORT-TERM TRADING OF UITS, INCLUDING SHORT-TERMROLLOVERS. ALSO, THE FIRM CONDUCTED NO TRAINING FORREGISTERED REPRESENTATIVES SPECIFIC TO UITS. THE FINDINGS ALSOSTATED THAT, THE FIRM HAD AN INADEQUATE SYSTEM TO DETECTPOTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS. THE FIRM'SORDER ENTRY SYSTEM ALERTED SUPERVISORS TO SHORT-TERM UIT "SWITCHES," WHICH THE FIRM'S PROCEDURES DEFINED AS THEPURCHASE OF A UIT WITHIN 60 DAYS OF THE SALE OF EITHER AN OPEN-END MUTUAL FUND OR UIT. WHEN SUCH A SWITCH WAS IDENTIFIED, THEFIRM REQUIRED THAT THE REPRESENTATIVE PROVIDE A JUSTIFICATIONFOR THE SWITCH, AND A SUPERVISOR REVIEW AND APPROVE THETRANSACTION PRIOR TO ITS EXECUTION. IF THE SUPERVISOR APPROVEDTHE TRANSACTION, THE FIRM INSERTED ADDITIONAL DISCLOSURELANGUAGE ON THE TRADE CONFIRMATION NOTIFYING THE CUSTOMERTHAT THE SWITCH COULD RESULT IN NEW SALES CHARGES. FURTHER,CERTAIN UIT SWITCH TRANSACTIONS APPEARED ON THE FIRM'S MULTI-PRODUCT SWITCH REPORT, A SURVEILLANCE REPORT THE FIRM ISSUEDTO SUPERVISORS AS A TOOL TO ASSIST WITH THE SUPERVISION OF SUCHTRANSACTIONS. THE FINDINGS ALSO INCLUDED THAT, THE FIRMEXCLUDED UIT ROLLOVERS FROM THE DEFINITION OF A "SWITCH" IN ITSPOLICIES AND PROCEDURES. AS A RESULT, IF A REPRESENTATIVESELECTED "ROLLOVER" AS THE JUSTIFICATION FOR A UIT SWITCH IN THEFIRM'S ORDER ENTRY SYSTEM, UIT ROLLOVERS WERE NOT ROUTED TOSUPERVISORS FOR REVIEW AND APPROVAL PRIOR TO EXECUTION. INADDITION, THE FIRM DID NOT INCLUDE DISCLOSURE LANGUAGE ONTRADE CONFIRMATIONS FOR UIT ROLLOVERS. ALSO, BECAUSE THE FIRMEXCLUDED UIT ROLLOVERS FROM THE DEFINITION OF A "SWITCH," UITROLLOVERS THAT OTHERWISE WOULD HAVE APPEARED ON THE FIRM'SMULTI-PRODUCT SWITCH REPORT WERE OMITTED FROM THE REPORT.THEREFORE, THE FIRM HAD NO AUTOMATED MECHANISM TO DETECTSHORT-TERM UIT ROLLOVERS. FINRA FOUND THAT HUNDREDS OF FIRMREPRESENTATIVES EXECUTED SHORT-TERM UIT ROLLOVERS INTHOUSANDS OF CUSTOMER ACCOUNTS. IN JUNE 2015, THE FIRMMODIFIED ITS POLICIES AND PROCEDURES TO INCLUDE UIT ROLLOVERSIN THE SWITCH DEFINITION, THEREBY MAKING UIT ROLLOVERSEXECUTED MORE THAN 100 DAYS PRIOR TO MATURITY SUBJECT TO THEFIRM'S SUPERVISORY REVIEW AND APPROVAL PROCESS.


Resolution:

Other Sanctions Ordered: INTEREST

Sanction Details: THE FIRM WAS CENSURED, FINED $3,250,000, AND ORDERED TO PAYRESTITUTION TO 3,020 CUSTOMER ACCOUNTS IN THE AMOUNT OF$9,786,964.88, PLUS INTEREST. FINES PAID IN FULL ON OCTOBER 13, 2017.

Regulator Statement IN RESOLVING THIS MATTER, FINRA HAS RECOGNIZED THE FIRM'SCOOPERATION IN HAVING: (1) INITIATED, PRIOR TO INTERVENTION BY AREGULATOR, A FIRM-WIDE INVESTIGATION TO IDENTIFY THE SCOPE OFPOTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS, WHICHINVESTIGATION INCLUDED, AMONG OTHER THINGS, THE INTERVIEW OFMORE THAN 65 FIRM PERSONNEL AND THE RETENTION OF AN OUTSIDECONSULTANT TO CONDUCT A STATISTICAL ANALYSIS OF UIT ROLLOVERSAT THE FIRM; (2) IDENTIFIED CUSTOMERS HARMED BY POTENTIALLYUNSUITABLE SHORT-TERM UIT ROLLOVERS AND ESTABLISHED A PLAN TOPROVIDE REMEDIATION TO THOSE CUSTOMERS; AND (3) PROVIDEDSUBSTANTIAL ASSISTANCE TO FINRA IN ITS INVESTIGATION.


No

Sanctions Ordered: CensureMonetary/Fine $3,250,000.00Disgorgement/Restitution







www.finra.org/brokercheck User GuidanceIN RESOLVING THIS MATTER, FINRA HAS RECOGNIZED THE FIRM'SCOOPERATION IN HAVING: (1) INITIATED, PRIOR TO INTERVENTION BY AREGULATOR, A FIRM-WIDE INVESTIGATION TO IDENTIFY THE SCOPE OFPOTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS, WHICHINVESTIGATION INCLUDED, AMONG OTHER THINGS, THE INTERVIEW OFMORE THAN 65 FIRM PERSONNEL AND THE RETENTION OF AN OUTSIDECONSULTANT TO CONDUCT A STATISTICAL ANALYSIS OF UIT ROLLOVERSAT THE FIRM; (2) IDENTIFIED CUSTOMERS HARMED BY POTENTIALLYUNSUITABLE SHORT-TERM UIT ROLLOVERS AND ESTABLISHED A PLAN TOPROVIDE REMEDIATION TO THOSE CUSTOMERS; AND (3) PROVIDEDSUBSTANTIAL ASSISTANCE TO FINRA IN ITS INVESTIGATION.


Initiated By: FINRA




CENSURE AND RESTITUTION



Principal Product Type: Unit Investment Trust(s)


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT VIOLATED NASDRULE 3010 AND FINRA RULES 3110 AND 2010 BY FAILING TO ESTABLISHAND MAINTAIN A SUPERVISORY SYSTEM AND WRITTEN SUPERVISORYPROCEDURES (WSPS) REASONABLY DESIGNED TO DETECT AND PREVENTPOTENTIALLY UNSUITABLE SHORT-TERM TRADING OF UNIT INVESTMENTTRUSTS (UITS), INCLUDING THAT THE FIRM FAILED TO ADEQUATELYSUPERVISE REPRESENTATIVES' SALES OF UITS BY PROVIDINGINSUFFICIENT GUIDANCE TO SUPERVISORS REGARDING HOW THEYSHOULD MONITOR AND REVIEW UIT TRANSACTIONS TO DETECTUNSUITABLE SHORT-TERM TRADING OF UITS, INCLUDING SHORT-TERMROLLOVERS. THE FIRM ALSO FAILED TO CONDUCT TRAINING FORREGISTERED REPRESENTATIVES SPECIFIC TO UITS DURING THERELEVANT PERIOD AND HAD AN INADEQUATE SYSTEM, INCLUDING NOAUTOMATED MECHANISM, TO DETECT POTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS. IN JUNE 2015, THE FIRM MODIFIED ITS POLICIESAND PROCEDURES TO INCLUDE UIT ROLLOVERS IN THE SWITCHDEFINITION, THEREBY MAKING UIT ROLLOVERS EXECUTED MORE THAN100 DAYS PRIOR TO MATURITY SUBJECT TO THE FIRM'S SUPERVISORYREVIEW AND APPROVAL PROCESS.


Resolution: Acceptance, Waiver & Consent(AWC)55©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Resolution:


Sanction Details: THE FINE OF $3,250,000.00 WAS PAID ON OCTOBER 13, 2017. RESTITUTIONTO BE PAID WITHIN 120 DAYS.

Firm Statement IN RESOLVING THIS MATTER, FINRA HAS RECOGNIZED THE FIRM'SCOOPERATION IN HAVING: (1) INITIATED, PRIOR TO INTERVENTION BY AREGULATOR, A FIRM-WIDE INVESTIGATION TO IDENTIFY THE SCOPE OFPOTENTIALLY UNSUITABLE SHORT-TERM UIT ROLLOVERS; (2) IDENTIFIEDCUSTOMERS HARMED BY POTENTIALLY UNSUITABLE SHORT-TERM UITROLLOVERS AND ESTABLISHED A PLAN TO PROVIDED REMEDIATION TOTHOSE CUSTOMERS; AND 3) PROVIDED SUBSTANTIAL ASSISTANCE TOFINRA IN ITS INVESTIGATION.



Disclosure 3 of 42

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ROUTINELYFAILED TO SHOW THE CORRECT ORDER RECEIPT TIME AND/OREXECUTION ON BROKERAGE ORDER MEMORANDUM FOR TRADES INNATIONAL MARKET SYSTEM (NMS) STOCK EXECUTED THROUGH THEFIRM'S "VERBAL TRADE" PROCESS BY ITS PREFERRED SECURITIESTRADING DESK. THE FINDINGS STATED THAT THE FIRM ROUTINELY FAILEDTO REPORT THE CORRECT EXECUTION TIME TO THE FINRA TRADEREPORTING FACILITY (TRF) FOR TRADES IN NMS STOCKS EXECUTEDTHROUGH THE FIRM'S "VERBAL TRADE" PROCESS BY ITS PREFERREDSECURITIES TRADING DESK. IN ADDITION, THE FIRM FAILED TO TRANSMITSUCH TRADES TO THE TRF WITHIN THE TIME REQUIRED BY FINRA RULE7230A. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FORSUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITHRESPECT TO CERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS,AND/OR FINRA RULES, CONCERNING RECORDATION OF ORDER RECEIPTTIME AND EXECUTION TIME, TRADE REPORTING, AND BEST EXECUTIONREQUIREMENTS AS THEY PERTAIN TO NMS PREFERRED SECURITIES. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TOCONTEMPORANEOUSLY OR PARTIALLY EXECUTE CUSTOMER ORDERS INOTC SECURITIES AFTER IT TRADED EACH SUBJECT SECURITY FOR ITSOWN MARKET-MAKING ACCOUNT AT A PRICE THAT WOULD HAVESATISFIED EACH CUSTOMER'S LIMIT ORDER. THE FIRM'S SUPERVISORYSYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH RESPECT TO CERTAIN APPLICABLESECURITIES LAWS AND REGULATIONS, AND/OR FINRA RULES,CONCERNING FINRA RULE 5320 (TRADING AHEAD) AS IT PERTAINS TOEXECUTED AND UNEXECUTED ORDERS IN OTC PREFERRED SECURITIES.THE FINDINGS ALSO INCLUDED THAT IN TRANSACTIONS FOR OR WITH ACUSTOMER IN PREFERRED SECURITIES, THE FIRM FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS. THE FIRM'S SUPERVISORYSYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH RESPECT TO CERTAIN APPLICABLESECURITIES LAWS AND REGULATIONS, AND/OR FINRA RULES,CONCERNING BEST EXECUTION REQUIREMENTS AS THEY PERTAIN TONEW ISSUE NON-CONVERTIBLE PREFERRED OTC SECURITIES. FINRAFOUND THAT THE FIRM FAILED TO EXECUTE ORDERS IN PREFERREDSECURITIES FULLY AND PROMPTLY, AND IN SOME OF THOSE INSTANCES,FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THATTHE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE ASPOSSIBLE UNDER PREVAILING MARKET CONDITIONS.







Initiated By: FINRA





Principal Product Type: Other

Other Product Type(s): EXCHANGE-TRADED PREFERRED SECURITIES / OVER-THE-COUNTER("OTC") SECURITIES

WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ROUTINELYFAILED TO SHOW THE CORRECT ORDER RECEIPT TIME AND/OREXECUTION ON BROKERAGE ORDER MEMORANDUM FOR TRADES INNATIONAL MARKET SYSTEM (NMS) STOCK EXECUTED THROUGH THEFIRM'S "VERBAL TRADE" PROCESS BY ITS PREFERRED SECURITIESTRADING DESK. THE FINDINGS STATED THAT THE FIRM ROUTINELY FAILEDTO REPORT THE CORRECT EXECUTION TIME TO THE FINRA TRADEREPORTING FACILITY (TRF) FOR TRADES IN NMS STOCKS EXECUTEDTHROUGH THE FIRM'S "VERBAL TRADE" PROCESS BY ITS PREFERREDSECURITIES TRADING DESK. IN ADDITION, THE FIRM FAILED TO TRANSMITSUCH TRADES TO THE TRF WITHIN THE TIME REQUIRED BY FINRA RULE7230A. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FORSUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITHRESPECT TO CERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS,AND/OR FINRA RULES, CONCERNING RECORDATION OF ORDER RECEIPTTIME AND EXECUTION TIME, TRADE REPORTING, AND BEST EXECUTIONREQUIREMENTS AS THEY PERTAIN TO NMS PREFERRED SECURITIES. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TOCONTEMPORANEOUSLY OR PARTIALLY EXECUTE CUSTOMER ORDERS INOTC SECURITIES AFTER IT TRADED EACH SUBJECT SECURITY FOR ITSOWN MARKET-MAKING ACCOUNT AT A PRICE THAT WOULD HAVESATISFIED EACH CUSTOMER'S LIMIT ORDER. THE FIRM'S SUPERVISORYSYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH RESPECT TO CERTAIN APPLICABLESECURITIES LAWS AND REGULATIONS, AND/OR FINRA RULES,CONCERNING FINRA RULE 5320 (TRADING AHEAD) AS IT PERTAINS TOEXECUTED AND UNEXECUTED ORDERS IN OTC PREFERRED SECURITIES.THE FINDINGS ALSO INCLUDED THAT IN TRANSACTIONS FOR OR WITH ACUSTOMER IN PREFERRED SECURITIES, THE FIRM FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS. THE FIRM'S SUPERVISORYSYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH RESPECT TO CERTAIN APPLICABLESECURITIES LAWS AND REGULATIONS, AND/OR FINRA RULES,CONCERNING BEST EXECUTION REQUIREMENTS AS THEY PERTAIN TONEW ISSUE NON-CONVERTIBLE PREFERRED OTC SECURITIES. FINRAFOUND THAT THE FIRM FAILED TO EXECUTE ORDERS IN PREFERREDSECURITIES FULLY AND PROMPTLY, AND IN SOME OF THOSE INSTANCES,FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THATTHE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE ASPOSSIBLE UNDER PREVAILING MARKET CONDITIONS.


Resolution:


No








Other Sanctions Ordered: FINRA HAS NOT IMPOSED UNDERTAKINGS IN THIS MATTER BECAUSE THEFIRM HAS ADDRESSED THE SUPERVISORY AND TRAINING DEFICIENCIESIDENTIFIED BY FINRA DURING ITS REVIEWS.

Sanction Details: THE FIRM WAS CENSURED, FINED $500,000, AND ORDERED TO PAY THETOTAL AMOUNT OF $103,219.25, PLUS INTEREST, IN RESTITUTION TOINVESTORS. FINES PAID IN FULL ON SEPTEMBER 12, 2017.

Regulator Statement FINRA CASE NO. 20120347147 (INCLUDES 20120352216, 20140434333 AND20150465578)


No

Sanctions Ordered: CensureMonetary/Fine $500,000.00Disgorgement/Restitution


Initiated By: FINRA








Other Product Type(s): EXCHANGE-TRADED PREFERRED SECURITIES / OVER-THE-COUNTER("OTC") SECURITIES

Allegations: FINRA ALLEGED THAT THE FIRM FAILED TO TRANSMIT TRADES TO THE TRFWITHIN THE TIME LIMIT REQUIRED BY FINRA RULE 7230A.



Resolution:










Sanction Details: THE FINE OF $500,000 WAS PAID ON SEPTEMBER 12, 2017. RESTITUTIONTO BE PAID WITHIN 120 DAYS.

Firm Statement ON AUGUST 22, 2017, WITHOUT ADMITTING OR DENYING THE FINDINGS,THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS THAT IT ROUTINELY FAILED TO SHOW THE CORRECT TIME OFORDER RECEIPT AND/OR EXECUTION ON THE MEMORANDUM OFBROKERAGE ORDERS FOR TRADES IN NATIONAL MARKET SYSTEM (NMS)STOCK EXECUTED THROUGH THE FIRM'S TRADE PROCESS BY ITSPREFERRED SECURITIES TRADING DESK. THE FINDINGS STATED THATTHE FIRM ROUTINELY FAILED TO REPORT THE CORRECT TIME OFEXECUTION TO THE FINRA TRADE REPORTING FACILITY (TRF) FORTRADES IN NMS STOCKS EXECUTED THROUGH THE FIRM'S TRADEPROCESS BY ITS PREFERRED SECURITIES TRADING DESK. IN ADDITION,THE FIRM FAILED TO TRANSMIT SUCH TRADES TO THE TRF WITHIN THETIME REQUIRED BY FINRA RULE 7230A.

THE FINDINGS ALSO STATED THAT IN 1,851 INSTANCES, THE FIRM FAILEDTO CONTEMPORANEOUSLY OR PARTIALLY EXECUTE 683 CUSTOMERORDERS IN 66 OVER-THE-COUNTER (OTC) SECURITIES AFTER IT TRADEDEACH SUBJECT SECURITY FOR ITS OWN MARKET-MAKING ACCOUNT AT APRICE THAT WOULD HAVE SATISFIED EACH CUSTOMER'S LIMIT ORDER. IN74 TRANSACTIONS FOR OR WITH A CUSTOMER IN PREFERREDSECURITIES, THE FIRM FAILED TO USE REASONABLE DILIGENCE TOASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY ORSELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITSCUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILINGMARKET CONDITIONS. FINRA FOUND THAT IN 100 INSTANCES, THE FIRMFAILED TO EXECUTE ORDERS IN PREFERRED SECURITIES FULLY ANDPROMPTLY, AND IN 23 OF THOSE SAME INSTANCES, THE FIRM FAILED TOUSE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS.

THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOCERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS, AND/OR THERULES OF FINRA, CONCERNING: (I) RECORDATION OF ORDER RECEIPTTIME AND EXECUTION TIME, TRADE REPORTING, AND BEST EXECUTIONREQUIREMENTS AS THEY PERTAIN TO NMS PREFERRED SECURITIES; (II)FINRA RULE 5320 (TRADING AHEAD) AS IT PERTAINS TO EXECUTED ANDUNEXECUTED ORDERS IN OTC PREFERRED SECURITIES; AND (III) BESTEXECUTION REQUIREMENTS AS THEY PERTAIN TO NEW ISSUE NON-CONVERTIBLE PREFERRED OTC SECURITIES.

THE FIRM AGREED TO A CENSURE AND TO A FINE OF $500,000(COMPRISED OF $105,000 FOR RECORDKEEPING AND TRADE REPORTINGVIOLATIONS, $160,000 FOR TRADING AHEAD VIOLATIONS, $10,000 FORBEST EXECUTION VIOLATIONS, $25,000 FOR MARKET ORDER TIMELINESSVIOLATIONS, AND $200,000 FOR SUPERVISION VIOLATIONS), AND AGREEDTO PAY RESTITUTION OF $103,219.25, PLUS INTEREST.







ON AUGUST 22, 2017, WITHOUT ADMITTING OR DENYING THE FINDINGS,THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS THAT IT ROUTINELY FAILED TO SHOW THE CORRECT TIME OFORDER RECEIPT AND/OR EXECUTION ON THE MEMORANDUM OFBROKERAGE ORDERS FOR TRADES IN NATIONAL MARKET SYSTEM (NMS)STOCK EXECUTED THROUGH THE FIRM'S TRADE PROCESS BY ITSPREFERRED SECURITIES TRADING DESK. THE FINDINGS STATED THATTHE FIRM ROUTINELY FAILED TO REPORT THE CORRECT TIME OFEXECUTION TO THE FINRA TRADE REPORTING FACILITY (TRF) FORTRADES IN NMS STOCKS EXECUTED THROUGH THE FIRM'S TRADEPROCESS BY ITS PREFERRED SECURITIES TRADING DESK. IN ADDITION,THE FIRM FAILED TO TRANSMIT SUCH TRADES TO THE TRF WITHIN THETIME REQUIRED BY FINRA RULE 7230A.

THE FINDINGS ALSO STATED THAT IN 1,851 INSTANCES, THE FIRM FAILEDTO CONTEMPORANEOUSLY OR PARTIALLY EXECUTE 683 CUSTOMERORDERS IN 66 OVER-THE-COUNTER (OTC) SECURITIES AFTER IT TRADEDEACH SUBJECT SECURITY FOR ITS OWN MARKET-MAKING ACCOUNT AT APRICE THAT WOULD HAVE SATISFIED EACH CUSTOMER'S LIMIT ORDER. IN74 TRANSACTIONS FOR OR WITH A CUSTOMER IN PREFERREDSECURITIES, THE FIRM FAILED TO USE REASONABLE DILIGENCE TOASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY ORSELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITSCUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILINGMARKET CONDITIONS. FINRA FOUND THAT IN 100 INSTANCES, THE FIRMFAILED TO EXECUTE ORDERS IN PREFERRED SECURITIES FULLY ANDPROMPTLY, AND IN 23 OF THOSE SAME INSTANCES, THE FIRM FAILED TOUSE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS.

THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOCERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS, AND/OR THERULES OF FINRA, CONCERNING: (I) RECORDATION OF ORDER RECEIPTTIME AND EXECUTION TIME, TRADE REPORTING, AND BEST EXECUTIONREQUIREMENTS AS THEY PERTAIN TO NMS PREFERRED SECURITIES; (II)FINRA RULE 5320 (TRADING AHEAD) AS IT PERTAINS TO EXECUTED ANDUNEXECUTED ORDERS IN OTC PREFERRED SECURITIES; AND (III) BESTEXECUTION REQUIREMENTS AS THEY PERTAIN TO NEW ISSUE NON-CONVERTIBLE PREFERRED OTC SECURITIES.

THE FIRM AGREED TO A CENSURE AND TO A FINE OF $500,000(COMPRISED OF $105,000 FOR RECORDKEEPING AND TRADE REPORTINGVIOLATIONS, $160,000 FOR TRADING AHEAD VIOLATIONS, $10,000 FORBEST EXECUTION VIOLATIONS, $25,000 FOR MARKET ORDER TIMELINESSVIOLATIONS, AND $200,000 FOR SUPERVISION VIOLATIONS), AND AGREEDTO PAY RESTITUTION OF $103,219.25, PLUS INTEREST.

Disclosure 4 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN 14 PAIRS OFTRANSACTIONS AND IN 13 MUNICIPAL BOND TRANSACTIONS, THE FIRMPURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROM ACUSTOMER, OR SOLD MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TOA CUSTOMER, AT AN AGGREGATE PRICE (INCLUDING ANY MARKUP ORMARKDOWN) THAT WAS NOT FAIR AND REASONABLE, TAKING INTOCONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BESTJUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALERAS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THETRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED INCONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER,OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THETOTAL AMOUNT OF THE TRANSACTION. THE FINDINGS STATED THAT IN SIXMUNICIPAL BOND TRANSACTIONS, THE FIRM PURCHASED MUNICIPALSECURITIES FOR ITS OWN ACCOUNT FROM A CUSTOMER AT ANAGGREGATE PRICE (INCLUDING ANY MARKUP OR MARKDOWN) THAT WASNOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALLRELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER,DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKETVALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OFANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THETRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THETRANSACTION, THE FACT THAT THE BROKER, DEALER, OR MUNICIPALSECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL, AMOUNTOF THE TRANSACTION. THE FINDINGS ALSO STATED THAT IN TWOMUNICIPAL BOND TRANSACTIONS, THE FIRM PURCHASED OR SOLDMUNICIPAL SECURITIES AS AGENT FOR A CUSTOMER FOR A COMMISSIONOR SERVICE CHARGE THAT WAS IN EXCESS OF A FAIR AND REASONABLEAMOUNT, TAKING INTO CONSIDERATION ALL RELEVANT FACTORS,INCLUDING THE AVAILABILITY OF THE SECURITIES INVOLVED IN THETRANSACTION, THE EXPENSE OF EXECUTING OR FILLING THECUSTOMER'S ORDER, THE VALUE OF THE SERVICES RENDERED BY THEBROKER, DEALER OR MUNICIPAL SECURITIES DEALER, AND THE AMOUNTOF ANY OTHER COMPENSATION RECEIVED OR TO BE RECEIVED BY THEBROKER, DEALER, OR MUNICIPAL SECURITIES DEALER IN CONNECTIONWITH THE TRANSACTION.







Initiated By: FINRA





Principal Product Type: Debt - Municipal


WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN 14 PAIRS OFTRANSACTIONS AND IN 13 MUNICIPAL BOND TRANSACTIONS, THE FIRMPURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROM ACUSTOMER, OR SOLD MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TOA CUSTOMER, AT AN AGGREGATE PRICE (INCLUDING ANY MARKUP ORMARKDOWN) THAT WAS NOT FAIR AND REASONABLE, TAKING INTOCONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BESTJUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALERAS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THETRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED INCONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER,OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THETOTAL AMOUNT OF THE TRANSACTION. THE FINDINGS STATED THAT IN SIXMUNICIPAL BOND TRANSACTIONS, THE FIRM PURCHASED MUNICIPALSECURITIES FOR ITS OWN ACCOUNT FROM A CUSTOMER AT ANAGGREGATE PRICE (INCLUDING ANY MARKUP OR MARKDOWN) THAT WASNOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALLRELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER,DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKETVALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OFANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THETRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THETRANSACTION, THE FACT THAT THE BROKER, DEALER, OR MUNICIPALSECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL, AMOUNTOF THE TRANSACTION. THE FINDINGS ALSO STATED THAT IN TWOMUNICIPAL BOND TRANSACTIONS, THE FIRM PURCHASED OR SOLDMUNICIPAL SECURITIES AS AGENT FOR A CUSTOMER FOR A COMMISSIONOR SERVICE CHARGE THAT WAS IN EXCESS OF A FAIR AND REASONABLEAMOUNT, TAKING INTO CONSIDERATION ALL RELEVANT FACTORS,INCLUDING THE AVAILABILITY OF THE SECURITIES INVOLVED IN THETRANSACTION, THE EXPENSE OF EXECUTING OR FILLING THECUSTOMER'S ORDER, THE VALUE OF THE SERVICES RENDERED BY THEBROKER, DEALER OR MUNICIPAL SECURITIES DEALER, AND THE AMOUNTOF ANY OTHER COMPENSATION RECEIVED OR TO BE RECEIVED BY THEBROKER, DEALER, OR MUNICIPAL SECURITIES DEALER IN CONNECTIONWITH THE TRANSACTION.


Resolution:


Sanction Details: THE FIRM WAS CENSURED, FINED $115,000 AND ORDERED TO PAYRESTITUTION TO INVESTORS IN THE TOTAL AMOUNT OF $55,284.28, PLUSINTEREST. FINE PAID IN FULL ON FEBRUARY 24, 2017.

Regulator Statement THE TOTAL AMOUNT OF RESTITUTION ARISING FROM THE VIOLATIONS IS$57,159.52. HOWEVER, THE FIRM ALREADY HAS PAID RESTITUTION TOADDRESS SOME OF THE VIOLATIONS. THE REMAINING AMOUNT TO BEPAID IS $55,284.28.


No










Initiated By: FINRA




CENSURE, DISGORGEMENT/RESTITUTION


Docket/Case Number: 20140402891-01



Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED MSRB RULES G-17, G-30(A) ANDG-30(B) BY PURCHASING OR SELLING CERTAIN MUNICIPAL SECURITIESFOR ITS OWN ACCOUNT TO A CUSTOMER AT A PRICE THAT WAS NOT FAIRAND REASONABLE, OR INCLUDING A COMMISSION OR SERVICE CHARGETHAT WAS IN EXCESS OF A FAIR AND REASONABLE AMOUNT.



Resolution:

Other Sanctions Ordered: DISGORGEMENT/RESTITUTION AMOUNT: $57,159.52

Sanction Details: THE $115,000 PENALTY WAS PAID ON FEBRUARY 24, 2017.

Firm Statement WITHOUT ADMITTING OR DENYING THE FINDINGS, ON FEBRUARY 15, 2017,MORGAN STANLEY SMITH BARNEY LLC (FIRM) AND FINRA ENTERED INTO ALETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC) TO SETTLEALLEGATIONS THAT THE FIRM VIOLATED MSRB RULES G-17, G-30(A) ANDG-30(B) BY PURCHASING OR SELLING CERTAIN MUNICIPAL SECURITIESFOR ITS OWN ACCOUNT TO A CUSTOMER AT A PRICE THAT WAS NOT FAIRAND REASONABLE, OR INCLUDING A COMMISSION OR SERVICE CHARGETHAT WAS IN EXCESS OF A FAIR AND REASONABLE AMOUNT. WITHOUTADMITTING OR DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSUREAND FINE OF $115,000, AS WELL AS AGREEING TO PAY RESTITUTION OF$57,159.52.








WITHOUT ADMITTING OR DENYING THE FINDINGS, ON FEBRUARY 15, 2017,MORGAN STANLEY SMITH BARNEY LLC (FIRM) AND FINRA ENTERED INTO ALETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC) TO SETTLEALLEGATIONS THAT THE FIRM VIOLATED MSRB RULES G-17, G-30(A) ANDG-30(B) BY PURCHASING OR SELLING CERTAIN MUNICIPAL SECURITIESFOR ITS OWN ACCOUNT TO A CUSTOMER AT A PRICE THAT WAS NOT FAIRAND REASONABLE, OR INCLUDING A COMMISSION OR SERVICE CHARGETHAT WAS IN EXCESS OF A FAIR AND REASONABLE AMOUNT. WITHOUTADMITTING OR DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSUREAND FINE OF $115,000, AS WELL AS AGREEING TO PAY RESTITUTION OF$57,159.52.

Disclosure 5 of 42

i


Allegations: SEC IA RELEASE 4649/FEBRUARY 14, 2017: THE SECURITIES ANDEXCHANGE COMMISSION (COMMISSION) DEEMS IT APPROPRIATE AND INTHE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TOSECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940(ADVISERS ACT) AGAINST MORGAN STANLEY SMITH BARNEY, LLC. FROMMID-2010 TO MID-2015, MORGAN STANLEY SMITH BARNEY, LLC (MSSB)SOLICITED ADVISORY CLIENTS WITH OVER 600 NON-DISCRETIONARYADVISORY ACCOUNTS TO PURCHASE SINGLE-INVERSE EXCHANGE-TRADED FUNDS (ETFS), WITHOUT IMPLEMENTING MSSB'S WRITTENCOMPLIANCE POLICIES AND PROCEDURES, WHICH WERE DESIGNED TOPREVENT VIOLATIONS OF THE OF THE ADVISERS ACT, INCLUDING ITSANTIFRAUD PROVISIONS.MSSB'S COMPLIANCE POLICIES AND PROCEDURES, WHICH WEREADOPTED IN MARCH 2010, HAD TWO KEY REQUIREMENTS BEFOREADVISORY CLIENTS WITH NON-DISCRETIONARY ACCOUNTS PURCHASEDSINGLE-INVERSE ETFS: (1) EACH CLIENT WAS TO SIGN A CLIENTDISCLOSURE NOTICE, WHICH EXPLAINED CERTAIN RISKS ASSOCIATEDWITH INVESTING IN THESE SECURITIES AND THE CLIENT DISCLOSURENOTICE WAS TO BE MAINTAINED; AND (2) A MSSB SUPERVISOR WAS TOCONDUCT RISK REVIEWS TO EVALUATE THE SUITABILITY OF THESEINVESTMENTS FOR THAT ADVISORY CLIENT. FOR ABOUT 44% OF THEAPPROXIMATELY 1,400 NON-DISCRETIONARY ADVISORY ACCOUNTS THATPURCHASED SINGLE-INVERSE ETFS ON A SOLICITED BASIS, A CLIENTDISCLOSURE NOTICE WAS NOT SIGNED BY THE CLIENT PRIOR TO THEPURCHASE OF SINGLE-INVERSE ETFS. IN ADDITION, FOR CLIENTS WHOSEPURCHASES OF A SINGLE-INVERSE ETF WERE EXECUTED WITHOUTOBTAINING A SIGNED CLIENT DISCLOSURE NOTICE, THE RISK REVIEWSWERE EITHER DEFICIENT OR NOT CONDUCTED. MSSB ALSO FAILED TOIMPLEMENT OTHER OF ITS COMPLIANCE POLICIES AND PROCEDURESFOR NON-DISCRETIONARY ADVISORY CLIENTS INVESTING IN THESESECURITIES, INCLUDING THAT THE POSITIONS BE MONITORED ON ANONGOING BASIS, THAT THE PURCHASE OF SINGLE-INVERSE ETFS BE AHEDGE, AND THAT FINANCIAL ADVISORS COMPLETE SINGLE-INVERSE ETFTRAINING. MANY OF MSSB'S NON-DISCRETIONARY ADVISORY CLIENTSHELD THE SECURITIES FOR MONTHS OR YEARS, DESPITE THE FACT THATTHE CLIENT DISCLOSURE NOTICE STATED THAT SINGLE-INVERSE ETFSARE TYPICALLY UNSUITABLE FOR INVESTORS WHO PLAN TO HOLD THEMFOR LONGER THAN ONE TRADING SESSION UNLESS USED AS PART OF ATRADING OR HEDGING STRATEGY. MSSB SOLICITED SOME OF THESECLIENTS TO PURCHASE SINGLE-INVERSE ETFS IN RETIREMENTACCOUNTS WITH LONG-TERM TIME HORIZONS. MANY OF THE CLIENTSEXPERIENCED LOSSES ASSOCIATED WITH THEIR INVESTMENTS IN THESINGLE-INVERSE ETFS. MSSB KNEW THE SOLICITATION OF THESESECURITIES WAS A CONCERN FOR REGULATORS. IN 2010, MSSB ADOPTEDCOMPLIANCE POLICIES AND PROCEDURES FOR NON-TRADITIONAL ETFSTO MEET INVESTMENT ADVISOR AND BROKER-DEALER REQUIREMENTS.NEVERTHELESS, MSSB WAS AWARE OF WEAKNESSES AND DEFICIENCIESIN THE IMPLEMENTATION OF ITS COMPLIANCE POLICIES ANDPROCEDURES. FOR EXAMPLE, A 2010 EXAM CONDUCTED BY THE SEC'SOFFICE OF COMPLIANCE INSPECTIONS AND EXAMINATIONS (OCIE)IDENTIFIED WEAKNESSES WITH MSSB'S DOCUMENTATION OF RISKREVIEWS AND ITS MONITORING OF THE HEDGING REQUIREMENT, YETMSSB FAILED TO TAKE SUFFICIENT CORRECTIVE MEASURES. MSSB'SINTERNAL TESTING FROM 2012 TO 2014 ALSO SHOWED COMPLIANCEDEFICIENCIES WITH NON-DISCRETIONARY ADVISORY ACCOUNTS IN ATLEAST 12 OFFICES. IN ADDITION, AN MSSB 2013 INTERNAL AUDIT REPORTNOTED INADEQUATE MONITORING OF MSSB'S IMPLEMENTATION OF ITSSINGLE-INVERSE ETF POLICY. ACCORDINGLY, MSSB FAILED TOADEQUATELY IMPLEMENT ITS COMPLIANCE POLICIES AND PROCEDURES,WHICH WERE DESIGNED TO PREVENT UNSUITABLE RECOMMENDATIONSOF SINGLE-INVERSE ETFS FOR ADVISORY CLIENTS WITH NON-DISCRETIONARY ADVISORY ACCOUNTS. MSSB'S FAILURE TO ADEQUATELYIMPLEMENT ITS COMPLIANCE POLICIES AND PROCEDURES WAS AWILLFUL VIOLATION OF SECTION 206(4) OF THE ADVISERS ACT AND RULE206(4)-7 THEREUNDER.







Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION






Other Product Type(s): SINGLE-INVERSE EXCHANGE-TRADED FUNDS

SEC IA RELEASE 4649/FEBRUARY 14, 2017: THE SECURITIES ANDEXCHANGE COMMISSION (COMMISSION) DEEMS IT APPROPRIATE AND INTHE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TOSECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940(ADVISERS ACT) AGAINST MORGAN STANLEY SMITH BARNEY, LLC. FROMMID-2010 TO MID-2015, MORGAN STANLEY SMITH BARNEY, LLC (MSSB)SOLICITED ADVISORY CLIENTS WITH OVER 600 NON-DISCRETIONARYADVISORY ACCOUNTS TO PURCHASE SINGLE-INVERSE EXCHANGE-TRADED FUNDS (ETFS), WITHOUT IMPLEMENTING MSSB'S WRITTENCOMPLIANCE POLICIES AND PROCEDURES, WHICH WERE DESIGNED TOPREVENT VIOLATIONS OF THE OF THE ADVISERS ACT, INCLUDING ITSANTIFRAUD PROVISIONS.MSSB'S COMPLIANCE POLICIES AND PROCEDURES, WHICH WEREADOPTED IN MARCH 2010, HAD TWO KEY REQUIREMENTS BEFOREADVISORY CLIENTS WITH NON-DISCRETIONARY ACCOUNTS PURCHASEDSINGLE-INVERSE ETFS: (1) EACH CLIENT WAS TO SIGN A CLIENTDISCLOSURE NOTICE, WHICH EXPLAINED CERTAIN RISKS ASSOCIATEDWITH INVESTING IN THESE SECURITIES AND THE CLIENT DISCLOSURENOTICE WAS TO BE MAINTAINED; AND (2) A MSSB SUPERVISOR WAS TOCONDUCT RISK REVIEWS TO EVALUATE THE SUITABILITY OF THESEINVESTMENTS FOR THAT ADVISORY CLIENT. FOR ABOUT 44% OF THEAPPROXIMATELY 1,400 NON-DISCRETIONARY ADVISORY ACCOUNTS THATPURCHASED SINGLE-INVERSE ETFS ON A SOLICITED BASIS, A CLIENTDISCLOSURE NOTICE WAS NOT SIGNED BY THE CLIENT PRIOR TO THEPURCHASE OF SINGLE-INVERSE ETFS. IN ADDITION, FOR CLIENTS WHOSEPURCHASES OF A SINGLE-INVERSE ETF WERE EXECUTED WITHOUTOBTAINING A SIGNED CLIENT DISCLOSURE NOTICE, THE RISK REVIEWSWERE EITHER DEFICIENT OR NOT CONDUCTED. MSSB ALSO FAILED TOIMPLEMENT OTHER OF ITS COMPLIANCE POLICIES AND PROCEDURESFOR NON-DISCRETIONARY ADVISORY CLIENTS INVESTING IN THESESECURITIES, INCLUDING THAT THE POSITIONS BE MONITORED ON ANONGOING BASIS, THAT THE PURCHASE OF SINGLE-INVERSE ETFS BE AHEDGE, AND THAT FINANCIAL ADVISORS COMPLETE SINGLE-INVERSE ETFTRAINING. MANY OF MSSB'S NON-DISCRETIONARY ADVISORY CLIENTSHELD THE SECURITIES FOR MONTHS OR YEARS, DESPITE THE FACT THATTHE CLIENT DISCLOSURE NOTICE STATED THAT SINGLE-INVERSE ETFSARE TYPICALLY UNSUITABLE FOR INVESTORS WHO PLAN TO HOLD THEMFOR LONGER THAN ONE TRADING SESSION UNLESS USED AS PART OF ATRADING OR HEDGING STRATEGY. MSSB SOLICITED SOME OF THESECLIENTS TO PURCHASE SINGLE-INVERSE ETFS IN RETIREMENTACCOUNTS WITH LONG-TERM TIME HORIZONS. MANY OF THE CLIENTSEXPERIENCED LOSSES ASSOCIATED WITH THEIR INVESTMENTS IN THESINGLE-INVERSE ETFS. MSSB KNEW THE SOLICITATION OF THESESECURITIES WAS A CONCERN FOR REGULATORS. IN 2010, MSSB ADOPTEDCOMPLIANCE POLICIES AND PROCEDURES FOR NON-TRADITIONAL ETFSTO MEET INVESTMENT ADVISOR AND BROKER-DEALER REQUIREMENTS.NEVERTHELESS, MSSB WAS AWARE OF WEAKNESSES AND DEFICIENCIESIN THE IMPLEMENTATION OF ITS COMPLIANCE POLICIES ANDPROCEDURES. FOR EXAMPLE, A 2010 EXAM CONDUCTED BY THE SEC'SOFFICE OF COMPLIANCE INSPECTIONS AND EXAMINATIONS (OCIE)IDENTIFIED WEAKNESSES WITH MSSB'S DOCUMENTATION OF RISKREVIEWS AND ITS MONITORING OF THE HEDGING REQUIREMENT, YETMSSB FAILED TO TAKE SUFFICIENT CORRECTIVE MEASURES. MSSB'SINTERNAL TESTING FROM 2012 TO 2014 ALSO SHOWED COMPLIANCEDEFICIENCIES WITH NON-DISCRETIONARY ADVISORY ACCOUNTS IN ATLEAST 12 OFFICES. IN ADDITION, AN MSSB 2013 INTERNAL AUDIT REPORTNOTED INADEQUATE MONITORING OF MSSB'S IMPLEMENTATION OF ITSSINGLE-INVERSE ETF POLICY. ACCORDINGLY, MSSB FAILED TOADEQUATELY IMPLEMENT ITS COMPLIANCE POLICIES AND PROCEDURES,WHICH WERE DESIGNED TO PREVENT UNSUITABLE RECOMMENDATIONSOF SINGLE-INVERSE ETFS FOR ADVISORY CLIENTS WITH NON-DISCRETIONARY ADVISORY ACCOUNTS. MSSB'S FAILURE TO ADEQUATELYIMPLEMENT ITS COMPLIANCE POLICIES AND PROCEDURES WAS AWILLFUL VIOLATION OF SECTION 206(4) OF THE ADVISERS ACT AND RULE206(4)-7 THEREUNDER.


Resolution:


No

Order







Sanction Details: IN ANTICIPATION OF THE INSTITUTION OF THESE PROCEEDINGS, MSSBHAS SUBMITTED AN OFFER OF SETTLEMENT THAT THE COMMISSION HASDETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSIONDEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST TO IMPOSE THESANCTIONS AGREED TO IN MSSB'S OFFER. ACCORDINGLY, PURSUANT TOSECTIONS 203(E) AND 203(K) OF THE ADVISERS ACT, IT IS HEREBYORDERED THAT: MSSB IS CENSURED AND SHALL CEASE AND DESISTFROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTUREVIOLATIONS OF SECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7PROMULGATED THEREUNDER. MSSB SHALL, WITHIN 15 DAYS OF THEENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF$8 MILLION TO THE COMMISSION FOR TRANSFER TO THE GENERAL FUNDOF THE UNITED STATES TREASURY.


No

Sanctions Ordered: CensureMonetary/Fine $8,000,000.00Cease and Desist/Injunction






CENSURE, CEASE AND DESIST ORDER




Other Product Type(s): EXCHANGE TRADED FUNDS

Allegations: BETWEEN EARLY 2010, AND MID-2015, MSSB FAILED TO ADEQUATELYIMPLEMENT ITS INTERNAL POLICIES APPLICABLE TO SOLICITEDINVESTMENTS IN EIGHT SINGLE INVERSE ETFS IN SOME NON-DISCRETIONARY ADVISORY ACCOUNTS, WHICH THE SEC ALLEGEDVIOLATED THE INVESTMENT ADVISERS ACT, SECTION 206(4) AND RULE206(4)-7.








CENSURE, CEASE AND DESIST ORDER


Resolution:


Sanction Details: THE FINE OF $8,000,000 WAS PAID ON FEBRUARY 24, 2017.

Firm Statement ON FEBRUARY 14, 2017, THE SEC INSTITUTED AN ORDER TO SETTLE ANADMINISTRATIVE ACTION WITH MORGAN STANLEY SMITH BARNEY LLCCONCERNING THE IMPLEMENTATION OF INTERNAL POLICIES APPLICABLETO SOLICITED INVESTMENTS IN EIGHT SINGLE INVERSE ETFS (SIETFS) INSOME NON-DISCRETIONARY ADVISORY ACCOUNTS FROM EARLY 2010THROUGH MID- 2015 THAT THE SEC ALLEGED CONSTITUTED A VIOLATIONOF THE INVESTMENT ADVISERS ACT, SECTION 206(4) AND RULE 206(4)-7.THE ORDER INCLUDED A CENSURE, CEASE AND DESIST, AND FINE ASDESCRIBED ABOVE.


Order

Disclosure 6 of 42

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Allegations: SEC ADMIN RELEASE 33-10290, JANUARY 24, 2017: THE SEC DEEMS ITAPPROPRIATE THAT CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBYARE, INSTITUTED PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF1933 AGAINST MORGAN STANLEY SMITH BARNEY LLC (THE "FIRM"). INANTICIPATION OF THE INSTITUTION OF THESE PROCEEDINGS, THE FIRMHAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSIONHAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESEPROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ONBEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS APARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS HEREIN,EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER IT AND THESUBJECT MATTER OF THESE PROCEEDINGS, WHICH ARE ADMITTED,RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTINGCEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 8A OF THESECURITIES ACT OF 1933, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER. ON THE BASIS OF THIS ORDER AND RESPONDENT'SOFFER, THE COMMISSION FINDS THAT THIS PROCEEDING RELATES TO AFOREIGN EXCHANGE TRADING PROGRAM DEVELOPED BY A COMPANY(THE "COMPANY")THAT WAS SOLD THROUGH CERTAIN FIRM FINANCIALADVISORS BETWEEN AUGUST 2010 AND JULY 2011. FIFTEEN INVESTORS(THE "RELEVANT INVESTORS")-EACH OF WHOM ALSO HAD A PRE-EXISTINGRELATIONSHIP WITH ONE OF THREE FIRM FINANCIAL ADVISORS AS ABROKERAGE CUSTOMER, ADVISORY CLIENT, OR BOTH-INVESTED IN THETRADING PROGRAM FOLLOWING PITCHES THAT WERE BASED ON THETRADING PROGRAM'S PAST PERFORMANCE AND RISK METRICS. THEPITCHES WERE MADE ORALLY AND USED WRITTEN MATERIALSPREPARED BY THE COMPANY. THE WRITTEN MATERIALS, HOWEVER,WERE RENDERED MATERIALLY MISLEADING BECAUSE THEY FAILED TOADEQUATELY DISCLOSE THAT THE RELEVANT INVESTORS COULD BEPLACED INTO THE PROGRAM USING SUBSTANTIALLY MORE LEVERAGETHAN WAS DISCLOSED AND THAT MARK-UPS WOULD BE CHARGED ONEACH TRADE. THE ORAL PRESENTATIONS MADE TO THE RELEVANTINVESTORS CONTAINED THESE SAME OMISSIONS. WHEN THE COMPANYTRADING MODELS BEGAN GENERATING LOSSES, THE RELEVANTINVESTORS SUFFERED LOSSES THAT WERE INCREASED BY THE AMOUNTOF LEVERAGE USED AND THE UNDISCLOSED MARK-UPS. AS A RESULT OFTHIS CONDUCT, THE FIRM VIOLATED SECTION 17(A)(2) OF THESECURITIES ACT.









Cease and Desist





Other Product Type(s): FOREIGN EXCHANGE TRADING PROGRAM

SEC ADMIN RELEASE 33-10290, JANUARY 24, 2017: THE SEC DEEMS ITAPPROPRIATE THAT CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBYARE, INSTITUTED PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF1933 AGAINST MORGAN STANLEY SMITH BARNEY LLC (THE "FIRM"). INANTICIPATION OF THE INSTITUTION OF THESE PROCEEDINGS, THE FIRMHAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSIONHAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESEPROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ONBEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS APARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS HEREIN,EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER IT AND THESUBJECT MATTER OF THESE PROCEEDINGS, WHICH ARE ADMITTED,RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTINGCEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 8A OF THESECURITIES ACT OF 1933, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER. ON THE BASIS OF THIS ORDER AND RESPONDENT'SOFFER, THE COMMISSION FINDS THAT THIS PROCEEDING RELATES TO AFOREIGN EXCHANGE TRADING PROGRAM DEVELOPED BY A COMPANY(THE "COMPANY")THAT WAS SOLD THROUGH CERTAIN FIRM FINANCIALADVISORS BETWEEN AUGUST 2010 AND JULY 2011. FIFTEEN INVESTORS(THE "RELEVANT INVESTORS")-EACH OF WHOM ALSO HAD A PRE-EXISTINGRELATIONSHIP WITH ONE OF THREE FIRM FINANCIAL ADVISORS AS ABROKERAGE CUSTOMER, ADVISORY CLIENT, OR BOTH-INVESTED IN THETRADING PROGRAM FOLLOWING PITCHES THAT WERE BASED ON THETRADING PROGRAM'S PAST PERFORMANCE AND RISK METRICS. THEPITCHES WERE MADE ORALLY AND USED WRITTEN MATERIALSPREPARED BY THE COMPANY. THE WRITTEN MATERIALS, HOWEVER,WERE RENDERED MATERIALLY MISLEADING BECAUSE THEY FAILED TOADEQUATELY DISCLOSE THAT THE RELEVANT INVESTORS COULD BEPLACED INTO THE PROGRAM USING SUBSTANTIALLY MORE LEVERAGETHAN WAS DISCLOSED AND THAT MARK-UPS WOULD BE CHARGED ONEACH TRADE. THE ORAL PRESENTATIONS MADE TO THE RELEVANTINVESTORS CONTAINED THESE SAME OMISSIONS. WHEN THE COMPANYTRADING MODELS BEGAN GENERATING LOSSES, THE RELEVANTINVESTORS SUFFERED LOSSES THAT WERE INCREASED BY THE AMOUNTOF LEVERAGE USED AND THE UNDISCLOSED MARK-UPS. AS A RESULT OFTHIS CONDUCT, THE FIRM VIOLATED SECTION 17(A)(2) OF THESECURITIES ACT.


Resolution:


Yes

Sanctions Ordered: Monetary/Fine $2,250,000.00Disgorgement/RestitutionCease and Desist/Injunction

Order






Other Sanctions Ordered: PREJUDGMENT INTEREST

Sanction Details: THE FIRM SHALL CEASE AND DESIST AND SHALL PAY DISGORGEMENT OF$624,458.27, PREJUDGMENT INTEREST OF $89,277.34, AND A CIVIL MONEYPENALTY IN THE AMOUNT OF $2,250,000.

Regulator Statement IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATETO IMPOSE THE SANCTIONS AGREED TO IN THE FIRM'S OFFER.ACCORDINGLY, IT IS HEREBY ORDERED THAT PURSUANT TO SECTION 8AOF THE SECURITIES ACT, RESPONDENT CEASE AND DESIST FROMCOMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONSOF SECTION 17(A)(2) OF THE SECURITIES ACT; AND SHALL, WITHIN 21DAYS OF THE ENTRY OF THIS ORDER, PAY DISGORGEMENT OF$624,458.27, PREJUDGMENT INTEREST OF $89,277.34, AND A CIVIL MONEYPENALTY IN THE AMOUNT OF $2,250,000 TO THE SEC.





Cease and Desist





Other Product Type(s): FOREIGN EXCHANGE

Allegations: FROM AUGUST 2010 TO JULY 2011, CITIGROUP GLOBAL MARKETS, INC.DEVELOPED A FOREIGN EXCHANGE TRADING PROGRAM, KNOWN ASCITIFX ALPHA; CITIGROUP GLOBAL MARKETS, INC. PROVIDED WRITTENMATERIALS AND ORAL PRESENTATIONS THAT WERE RENDEREDMATERIALLY MISLEADING AND FAILED TO ADEQUATELY DISCLOSE TO THE15 RELEVANT INVESTORS THAT THEY COULD BE PLACED INTO APROGRAM USING LEVERAGE AND THAT MARK-UPS WOULD BE CHARGEDON EACH TRADE. MSSB FINANCIAL ADVISORS DID NOT QUESTION THEMATERIALS PROVIDED BY CITIGROUP GLOBAL MARKETS, INC.


Resolution: Decision







Other Sanctions Ordered: DISGORGEMENT - $624,458.27PREJUDGMENT INTEREST - $89,277.34

Sanction Details: THE CIVIL MONETARY PENALTY, DISGORGEMENT AND INTEREST WEREPAID ON FEBRUARY 3, 2017 TOTALING $2,963,735.61.

Firm Statement ON JANUARY 24, 2017, THE U.S. SECURITIES AND EXCHANGE COMMISSIONISSUED AN ORDER INSTITUTING CEASE AND DESIST PROCEEDINGS ANDIMPOSING THE FOLLOWING SANCTIONS: DISGORGEMENT OF $624,458.27,PREJUDGMENT INTEREST OF $89,277.34 AND CIVIL MONEY PENALTY OF$2,250,000 IN CONNECTION WITH THE ABOVE ALLEGATIONS.


Disclosure 7 of 42

i


Allegations: SEC ADMIN RELEASE 34-79794, IA RELEASE 4607 / JANUARY 13, 2017: THESECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED AGAINST MORGAN STANLEY SMITH BARNEY,LLC ("MSSB" OR "RESPONDENT"). ON THE BASIS OF THIS ORDER ANDRESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESEPROCEEDINGS ARISE OUT OF ERRORS BY MSSB IN ADVISORY CLIENT FEEBILLING, CUSTODY EXAMINATION VIOLATIONS, AND BOOKS AND RECORDSVIOLATIONS UNDER THE ADVISERS ACT. MSSB IS A DUALLY REGISTEREDINVESTMENT ADVISER AND BROKER-DEALER. IT WAS FORMED PURSUANTTO A COMBINATION OF THE ADVISORY BUSINESSES OF THE GLOBALWEALTH MANAGEMENT GROUP, A BUSINESS SEGMENT OF MORGANSTANLEY & CO. ("MORGAN STANLEY"), AND THE SMITH BARNEY DIVISION("CITI SMITH BARNEY") OF CITIGROUP GLOBAL MARKETS, INC. ("CGMI"), ASUBSIDIARY OF CITIGROUP INC. BETWEEN APPROXIMATELY 2002 AND2016, MSSB AND ITS PREDECESSOR MORGAN STANLEY INADVERTENTLYOVERCHARGED MORE THAN 149,000 ADVISORY CLIENT ACCOUNTS ATOTAL OF $16,169,215 IN ADVISORY FEES DUE PRIMARILY TO CODING ANDOTHER ERRORS IN ITS BILLING SYSTEMS AND PROCESSES. THERE ARE36 DIFFERENT CATEGORIES OF ERRORS RESULTING IN OVERCHARGES.SIX OF THE ERROR CATEGORIES, WHICH ACCOUNT FOR 58 PERCENT OFTHE FEES OVERBILLED, ORIGINATED WITH CITI SMITH BARNEY AND 30ORIGINATED WITH MORGAN STANLEY OR MSSB. MSSB ALSO VIOLATEDTHE CUSTODY RULE UNDER THE ADVISERS ACT AS IT RELATES TO THEANNUAL SURPRISE CUSTODY EXAMINATION. FURTHER, MSSB VIOLATEDTHE BOOKS AND RECORDS PROVISIONS OF THE ADVISERS ACT ANDRULES THEREUNDER WITH RESPECT TO MAINTENANCE OF CLIENTCONTRACTS. FINALLY, MSSB FAILED TO ADOPT AND IMPLEMENTREASONABLY DESIGNED COMPLIANCE POLICIES AND PROCEDURES TOPREVENT THESE VIOLATIONS OF THE ADVISERS ACT.GENERALLY, MSSB INADVERTENTLY OVERCHARGED FEES TO LEGACYCITI SMITH BARNEY ADVISORY ACCOUNTS. FROM 2009 THROUGH 2015,FOR 15,152 ADVISORY CLIENT ACCOUNTS, MSSB INADVERTENTLYCHARGED ADVISORY FEES IN EXCESS OF WHAT HAD BEEN DISCLOSEDTO, AND AGREED BY, ITS LEGACY CITI SMITH BARNEY CLIENTS. MSSBRECEIVED A TOTAL OF $9,437,750 IN EXCESS FEES AS A RESULT OF THESEBILLING ERRORS. MSSB HAS REIMBURSED THIS AMOUNT, IN ADDITION TO$1,164,513 IN INTEREST, TO AFFECTED CLIENTS. ALSO, MSSBINADVERTENTLY OVERCHARGED FEES TO LEGACY MORGAN STANLEYAND MSSB ADVISORY ACCOUNTS. FROM 2002 TO 2009 AND FROM 2009 TO2016, FOR 134,240 CLIENT ACCOUNTS, MORGAN STANLEY AND MSSB,RESPECTIVELY, INADVERTENTLY CHARGED FEES IN EXCESS OF WHATWAS DISCLOSED TO, AND AGREED BY THEIR CLIENTS, AS A RESULT OF 30FEE BILLING ISSUES THAT CARRIED OVER FROM MORGAN STANLEY ORORIGINATED WITH MSSB ("MSSB ORIGINATING FEE ISSUES"). MSSBRECEIVED A TOTAL OF $6,731,465 IN EXCESS FEES AS A RESULT OF THESEBILLING ERRORS. MSSB HAS REIMBURSED THIS AMOUNT ALONG WITH ANADDITIONAL $889,528 IN PERFORMANCE REBATES FOR THE IARRESEARCH ISSUE, PLUS $417,622 IN INTEREST, TO AFFECTED CLIENTS. ASA RESULT OF THE CONDUCT DESCRIBED ABOVE, MSSB WILLFULLYVIOLATED SECTION 206(2) OF THE ADVISERS ACT, WILLFULLY VIOLATEDSECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-2 THEREUNDER,WILLFULLY VIOLATED SECTION 206(4) OF THE ADVISERS ACT AND RULE206(4)-7 THEREUNDER AND WILLFULLY VIOLATED SECTION 204(A) OF THEADVISERS ACT AND RULES 204-2(A)(10) AND 204-2(E)(1) THEREUNDER.









Cease and Desist





Other Product Type(s): UNSPECIFIED SECURITIES

SEC ADMIN RELEASE 34-79794, IA RELEASE 4607 / JANUARY 13, 2017: THESECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED AGAINST MORGAN STANLEY SMITH BARNEY,LLC ("MSSB" OR "RESPONDENT"). ON THE BASIS OF THIS ORDER ANDRESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESEPROCEEDINGS ARISE OUT OF ERRORS BY MSSB IN ADVISORY CLIENT FEEBILLING, CUSTODY EXAMINATION VIOLATIONS, AND BOOKS AND RECORDSVIOLATIONS UNDER THE ADVISERS ACT. MSSB IS A DUALLY REGISTEREDINVESTMENT ADVISER AND BROKER-DEALER. IT WAS FORMED PURSUANTTO A COMBINATION OF THE ADVISORY BUSINESSES OF THE GLOBALWEALTH MANAGEMENT GROUP, A BUSINESS SEGMENT OF MORGANSTANLEY & CO. ("MORGAN STANLEY"), AND THE SMITH BARNEY DIVISION("CITI SMITH BARNEY") OF CITIGROUP GLOBAL MARKETS, INC. ("CGMI"), ASUBSIDIARY OF CITIGROUP INC. BETWEEN APPROXIMATELY 2002 AND2016, MSSB AND ITS PREDECESSOR MORGAN STANLEY INADVERTENTLYOVERCHARGED MORE THAN 149,000 ADVISORY CLIENT ACCOUNTS ATOTAL OF $16,169,215 IN ADVISORY FEES DUE PRIMARILY TO CODING ANDOTHER ERRORS IN ITS BILLING SYSTEMS AND PROCESSES. THERE ARE36 DIFFERENT CATEGORIES OF ERRORS RESULTING IN OVERCHARGES.SIX OF THE ERROR CATEGORIES, WHICH ACCOUNT FOR 58 PERCENT OFTHE FEES OVERBILLED, ORIGINATED WITH CITI SMITH BARNEY AND 30ORIGINATED WITH MORGAN STANLEY OR MSSB. MSSB ALSO VIOLATEDTHE CUSTODY RULE UNDER THE ADVISERS ACT AS IT RELATES TO THEANNUAL SURPRISE CUSTODY EXAMINATION. FURTHER, MSSB VIOLATEDTHE BOOKS AND RECORDS PROVISIONS OF THE ADVISERS ACT ANDRULES THEREUNDER WITH RESPECT TO MAINTENANCE OF CLIENTCONTRACTS. FINALLY, MSSB FAILED TO ADOPT AND IMPLEMENTREASONABLY DESIGNED COMPLIANCE POLICIES AND PROCEDURES TOPREVENT THESE VIOLATIONS OF THE ADVISERS ACT.GENERALLY, MSSB INADVERTENTLY OVERCHARGED FEES TO LEGACYCITI SMITH BARNEY ADVISORY ACCOUNTS. FROM 2009 THROUGH 2015,FOR 15,152 ADVISORY CLIENT ACCOUNTS, MSSB INADVERTENTLYCHARGED ADVISORY FEES IN EXCESS OF WHAT HAD BEEN DISCLOSEDTO, AND AGREED BY, ITS LEGACY CITI SMITH BARNEY CLIENTS. MSSBRECEIVED A TOTAL OF $9,437,750 IN EXCESS FEES AS A RESULT OF THESEBILLING ERRORS. MSSB HAS REIMBURSED THIS AMOUNT, IN ADDITION TO$1,164,513 IN INTEREST, TO AFFECTED CLIENTS. ALSO, MSSBINADVERTENTLY OVERCHARGED FEES TO LEGACY MORGAN STANLEYAND MSSB ADVISORY ACCOUNTS. FROM 2002 TO 2009 AND FROM 2009 TO2016, FOR 134,240 CLIENT ACCOUNTS, MORGAN STANLEY AND MSSB,RESPECTIVELY, INADVERTENTLY CHARGED FEES IN EXCESS OF WHATWAS DISCLOSED TO, AND AGREED BY THEIR CLIENTS, AS A RESULT OF 30FEE BILLING ISSUES THAT CARRIED OVER FROM MORGAN STANLEY ORORIGINATED WITH MSSB ("MSSB ORIGINATING FEE ISSUES"). MSSBRECEIVED A TOTAL OF $6,731,465 IN EXCESS FEES AS A RESULT OF THESEBILLING ERRORS. MSSB HAS REIMBURSED THIS AMOUNT ALONG WITH ANADDITIONAL $889,528 IN PERFORMANCE REBATES FOR THE IARRESEARCH ISSUE, PLUS $417,622 IN INTEREST, TO AFFECTED CLIENTS. ASA RESULT OF THE CONDUCT DESCRIBED ABOVE, MSSB WILLFULLYVIOLATED SECTION 206(2) OF THE ADVISERS ACT, WILLFULLY VIOLATEDSECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-2 THEREUNDER,WILLFULLY VIOLATED SECTION 206(4) OF THE ADVISERS ACT AND RULE206(4)-7 THEREUNDER AND WILLFULLY VIOLATED SECTION 204(A) OF THEADVISERS ACT AND RULES 204-2(A)(10) AND 204-2(E)(1) THEREUNDER.

Resolution: Order 70©2018 FINRA. All rights reserved. Report about MORGAN STANLEY






Resolution:

Other Sanctions Ordered: UNDERTAKINGS

Sanction Details: RESPONDENT MSSB SHALL CEASE AND DESIST FROM COMMITTING ORCAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS204(A), 206(2) AND 206(4) OF THE ADVISERS ACT AND RULES 204-2(A)(10),204-2(E)(1), 206(4)-2 AND 206(4)-7 PROMULGATED THEREUNDER, ISCENSURED, AND PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF$13,000,000. RESPONDENT MSSB SHALL COMPLY WITH THEUNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT.

Regulator Statement IN ANTICIPATION OF THE INSTITUTION OF THESE PROCEEDINGS,RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE OFFER)WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THEFOREGOING, THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLICINTEREST TO IMPOSE THE SANCTIONS AGREED TO IN THERESPONDENT'S OFFER.ACCORDINGLY, IT IS HEREBY ORDERED THAT RESPONDENT MSSB SHALLCEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONSAND ANY FUTURE VIOLATIONS OF SECTIONS 204(A), 206(2) AND 206(4) OFTHE ADVISERS ACT AND RULES 204-2(A)(10), 204-2(E)(1), 206(4)-2 AND206(4)-7 PROMULGATED THEREUNDER, IS CENSURED, AND WITHIN TEN(10) DAYS OF THE ENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY INTHE AMOUNT OF $13,000,000. RESPONDENT MSSB SHALL COMPLY WITHTHE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT.


Yes


Order


Allegations: THE SEC FOUND THAT FROM 2009 THROUGH 2015, MSSB INADVERTENTLYCHARGED ADVISORY FEES IN EXCESS OF WHAT HAD BEEN DISCLOSEDTO, AND AGREED TO BY, ITS LEGACY CGM CLIENTS, AND, FROM 2002 TO2009 AND FROM 2009 TO 2016, MS&CO. AND MSSB, RESPECTIVELY,INADVERTENTLY CHARGED FEES IN EXCESS OF WHAT WAS DISCLOSEDTO AND AGREED TO BY THEIR CLIENTS. THE SEC ALSO FOUND THAT MSSBFAILED TO COMPLY WITH REQUIREMENTS REGARDING ANNUAL SURPRISECUSTODY EXAMINATIONS FOR THE YEARS 2011 AND 2012, DID NOTMAINTAIN CERTAIN CLIENT CONTRACTS, AND FAILED TO ADOPT ANDIMPLEMENT WRITTEN COMPLIANCE POLICIES AND PROCEDURESREASONABLY DESIGNED TOPREVENT VIOLATIONS OF THE INVESTMENT ADVISERS ACT OF 1940 (THE "ADVISERS ACT"). THE SEC FOUND THAT MSSB WILLFULLY VIOLATEDSECTIONS 204(A), 206(2) AND 206(4) OF THE INVESTMENT ADVISERS ACTOF 1940 AND RULES 204-2(A)(10), 204-2(E)(1), 206(4)-2 AND 206(4)-7THEREUNDER.









Cease and Desist


CENSURE, CIVIL PENALTY AND UNDERTAKINGS





THE SEC FOUND THAT FROM 2009 THROUGH 2015, MSSB INADVERTENTLYCHARGED ADVISORY FEES IN EXCESS OF WHAT HAD BEEN DISCLOSEDTO, AND AGREED TO BY, ITS LEGACY CGM CLIENTS, AND, FROM 2002 TO2009 AND FROM 2009 TO 2016, MS&CO. AND MSSB, RESPECTIVELY,INADVERTENTLY CHARGED FEES IN EXCESS OF WHAT WAS DISCLOSEDTO AND AGREED TO BY THEIR CLIENTS. THE SEC ALSO FOUND THAT MSSBFAILED TO COMPLY WITH REQUIREMENTS REGARDING ANNUAL SURPRISECUSTODY EXAMINATIONS FOR THE YEARS 2011 AND 2012, DID NOTMAINTAIN CERTAIN CLIENT CONTRACTS, AND FAILED TO ADOPT ANDIMPLEMENT WRITTEN COMPLIANCE POLICIES AND PROCEDURESREASONABLY DESIGNED TOPREVENT VIOLATIONS OF THE INVESTMENT ADVISERS ACT OF 1940 (THE "ADVISERS ACT"). THE SEC FOUND THAT MSSB WILLFULLY VIOLATEDSECTIONS 204(A), 206(2) AND 206(4) OF THE INVESTMENT ADVISERS ACTOF 1940 AND RULES 204-2(A)(10), 204-2(E)(1), 206(4)-2 AND 206(4)-7THEREUNDER.


Resolution:


Sanction Details: MSSB CONSENTED, WITHOUT ADMITTING OR DENYING THE FINDINGS, TOA CENSURE; TO CEASE AND DESIST FROM COMMITTING OR CAUSINGFUTURE VIOLATIONS; TO CERTAIN UNDERTAKINGS RELATED TO FEEBILLING, BOOKS AND RECORDS AND CLIENT NOTICES; AND TO PAY A CIVILPENALTY OF $13,000,000. THE CIVIL PENALTY WAS PAID ON JANUARY 19,2017.

Firm Statement IN DETERMINING TO ACCEPT THE OFFER RESULTING IN THE JANUARY 13,2017 ORDER, THE SEC CONSIDERED THE REMEDIAL EFFORTS PROMPTLYUNDERTAKEN BY MSSB.


Order

Disclosure 8 of 42

i






Disclosure 8 of 42


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TODELIVER TO CUSTOMERS APPROXIMATELY 2.1 MILLION PROSPECTUSESAND FAILED TO IMPLEMENT A REASONABLE SUPERVISORY SYSTEMENSURING DELIVERY OF PROSPECTUSES. THE FINDINGS STATED THATTHE FIRM MADE REQUIRED PROSPECTUSES AVAILABLE TO CUSTOMERSTHROUGH AN ONLINE PLATFORM IF THE CUSTOMER ELECTED TORECEIVE PAPERLESS TRANSACTION CONFIRMATIONS VIA ONLINEDELIVERY. AFTER DEPLOYMENT OF A SYSTEM UPDATE TO CHANGEVARIOUS FEATURES OF THE ONLINE PLATFORM IN NOVEMBER 2013, THEFIRM DID NOT TEST A HYPERLINK TO THE PROSPECTUS TO ENSURE THATTHEY REMAINED AVAILABLE TO ONLINE CUSTOMERS. AS A RESULT OF THESYSTEM UPDATE, THE HYPERLINK WAS NOT PLACED ON THE ONLINETRANSACTION CONFIRMATION DURING A NINE MONTH PERIOD. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TO DELIVER INVESTMENTOBJECTIVE CHANGE LETTERS IF INVESTMENT OBJECTIVE CHANGESWERE NOT APPROVED ON THE SAME DAY REQUESTED AND FAILED TOIMPLEMENT A REASONABLE SUPERVISORY SYSTEM TO ENSURE THEIRDELIVERY. THE FIRM EMPLOYED AN AUTOMATED SYSTEM TO ENSURETHAT INVESTMENT OBJECTIVE CHANGE LETTERS WERE DELIVERED.DURING THE FOURTH QUARTER OF 2013, THE FIRM MADE A SYSTEMCHANGE THAT RESULTED IN FAILURES IN DELIVERING INVESTMENTOBJECTIVE CHANGE LETTERS UNDER CERTAIN CIRCUMSTANCES. DUE TOA CODING ERROR IN THE SYSTEM CHANGE, WHEN A SUPERVISORAPPROVED AN INVESTMENT OBJECTIVE CHANGE ON A DAY OTHER THANTHE SAME DAY THE FINANCIAL ADVISOR ENTERED THE CHANGE FOR THECUSTOMER'S ACCOUNT, THE SYSTEM DID NOT GENERATE AND SEND ACONFIRMATION LETTER. AS A RESULT, THE FIRM'S SYSTEM FAILED TOGENERATE AND SEND APPROXIMATELY 23,500 INVESTMENT OBJECTIVECHANGE LETTERS TO CUSTOMERS. IN MOST CASES, THE FIRMREFLECTED INVESTMENT OBJECTIVES ON CUSTOMERS' MONTHLYACCOUNT STATEMENTS. FOR CUSTOMERS THAT OPTED NOT TO RECEIVEMONTHLY ACCOUNT STATEMENTS, THE INVESTMENT OBJECTIVECHANGES WERE NOT CONFIRMED TO CUSTOMERS IN A TIMELY MANNER.SEPARATELY, IF AN INVESTMENT OBJECTIVE CHANGE WAS ENTERED BUTNOT APPROVED WITHIN 29 DAYS, THE SYSTEM AUTOMATICALLYREJECTED THE PROPOSED CHANGE. IN SUCH CIRCUMSTANCE, ACUSTOMER'S INVESTMENT OBJECTIVE WOULD NOT BE CHANGED AND NOINVESTMENT CHANGE CONFIRMATION LETTER WAS SENT. WHERE THEPROPOSED CHANGE WAS AUTOMATICALLY REJECTED, THE FIRM DID NOTHAVE AN ADEQUATE NOTIFICATION SYSTEM THAT BROUGHT THE AUTOREJECTED CHANGE TO A SUPERVISOR'S OR FINANCIAL ADVISOR'SATTENTION FOR REVIEW AND ACTION TO DETERMINE IF THE CHANGEWAS REJECTED IN ERROR. THE FINDINGS ALSO INCLUDED THAT THE FIRMFAILED TO SEND INVESTMENT OBJECTIVE CHANGE LETTERS AS A RESULTOF A CODING ERROR RELATED TO ACCOUNT NUMBER CHANGES. IN THEPERIOD BETWEEN AT LEAST JUNE 2012 AND JUNE 2016, THE FIRM FAILEDTO SEND AT LEAST 4,000 LETTERS TO CUSTOMERS CONFIRMINGCHANGES IN THEIR INVESTMENT OBJECTIVES WITHIN 30 DAYS OF THECHANGE. DUE TO THE SYSTEM CODING ERROR, THE FIRM SYSTEMINCORRECTLY VIEWED ACCOUNTS UNDERGOING ACCOUNT NUMBERCHANGES AS CLOSED AND THUS SUPPRESSED THE TRANSMITTAL OF THEINVESTMENT OBJECTIVE CHANGE LETTERS. WHILE THE FIRM'S SYSTEMSCONTAINED THE UPDATED INFORMATION, IT DID NOT CONFIRMINVESTMENT OBJECTIVE CHANGES THROUGH THE CONFIRMATIONLETTERS IT OTHERWISE WOULD HAVE SENT. AS A RESULT, THE FIRMFAILED TO ENSURE THAT IT MET ITS OBLIGATIONS TO CONFIRMINVESTMENT OBJECTIVE CHANGES. BY REASON OF THE FOREGOING,THE FIRM FAILED TO REASONABLY ENFORCE ITS SUPERVISORY SYSTEMAND, AS A RESULT, FAILED TO SEND AND RETAIN THE REQUIREDINVESTMENT OBJECTIVE CHANGE LETTERS.







Initiated By: FINRA


Other


N/A





WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TODELIVER TO CUSTOMERS APPROXIMATELY 2.1 MILLION PROSPECTUSESAND FAILED TO IMPLEMENT A REASONABLE SUPERVISORY SYSTEMENSURING DELIVERY OF PROSPECTUSES. THE FINDINGS STATED THATTHE FIRM MADE REQUIRED PROSPECTUSES AVAILABLE TO CUSTOMERSTHROUGH AN ONLINE PLATFORM IF THE CUSTOMER ELECTED TORECEIVE PAPERLESS TRANSACTION CONFIRMATIONS VIA ONLINEDELIVERY. AFTER DEPLOYMENT OF A SYSTEM UPDATE TO CHANGEVARIOUS FEATURES OF THE ONLINE PLATFORM IN NOVEMBER 2013, THEFIRM DID NOT TEST A HYPERLINK TO THE PROSPECTUS TO ENSURE THATTHEY REMAINED AVAILABLE TO ONLINE CUSTOMERS. AS A RESULT OF THESYSTEM UPDATE, THE HYPERLINK WAS NOT PLACED ON THE ONLINETRANSACTION CONFIRMATION DURING A NINE MONTH PERIOD. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TO DELIVER INVESTMENTOBJECTIVE CHANGE LETTERS IF INVESTMENT OBJECTIVE CHANGESWERE NOT APPROVED ON THE SAME DAY REQUESTED AND FAILED TOIMPLEMENT A REASONABLE SUPERVISORY SYSTEM TO ENSURE THEIRDELIVERY. THE FIRM EMPLOYED AN AUTOMATED SYSTEM TO ENSURETHAT INVESTMENT OBJECTIVE CHANGE LETTERS WERE DELIVERED.DURING THE FOURTH QUARTER OF 2013, THE FIRM MADE A SYSTEMCHANGE THAT RESULTED IN FAILURES IN DELIVERING INVESTMENTOBJECTIVE CHANGE LETTERS UNDER CERTAIN CIRCUMSTANCES. DUE TOA CODING ERROR IN THE SYSTEM CHANGE, WHEN A SUPERVISORAPPROVED AN INVESTMENT OBJECTIVE CHANGE ON A DAY OTHER THANTHE SAME DAY THE FINANCIAL ADVISOR ENTERED THE CHANGE FOR THECUSTOMER'S ACCOUNT, THE SYSTEM DID NOT GENERATE AND SEND ACONFIRMATION LETTER. AS A RESULT, THE FIRM'S SYSTEM FAILED TOGENERATE AND SEND APPROXIMATELY 23,500 INVESTMENT OBJECTIVECHANGE LETTERS TO CUSTOMERS. IN MOST CASES, THE FIRMREFLECTED INVESTMENT OBJECTIVES ON CUSTOMERS' MONTHLYACCOUNT STATEMENTS. FOR CUSTOMERS THAT OPTED NOT TO RECEIVEMONTHLY ACCOUNT STATEMENTS, THE INVESTMENT OBJECTIVECHANGES WERE NOT CONFIRMED TO CUSTOMERS IN A TIMELY MANNER.SEPARATELY, IF AN INVESTMENT OBJECTIVE CHANGE WAS ENTERED BUTNOT APPROVED WITHIN 29 DAYS, THE SYSTEM AUTOMATICALLYREJECTED THE PROPOSED CHANGE. IN SUCH CIRCUMSTANCE, ACUSTOMER'S INVESTMENT OBJECTIVE WOULD NOT BE CHANGED AND NOINVESTMENT CHANGE CONFIRMATION LETTER WAS SENT. WHERE THEPROPOSED CHANGE WAS AUTOMATICALLY REJECTED, THE FIRM DID NOTHAVE AN ADEQUATE NOTIFICATION SYSTEM THAT BROUGHT THE AUTOREJECTED CHANGE TO A SUPERVISOR'S OR FINANCIAL ADVISOR'SATTENTION FOR REVIEW AND ACTION TO DETERMINE IF THE CHANGEWAS REJECTED IN ERROR. THE FINDINGS ALSO INCLUDED THAT THE FIRMFAILED TO SEND INVESTMENT OBJECTIVE CHANGE LETTERS AS A RESULTOF A CODING ERROR RELATED TO ACCOUNT NUMBER CHANGES. IN THEPERIOD BETWEEN AT LEAST JUNE 2012 AND JUNE 2016, THE FIRM FAILEDTO SEND AT LEAST 4,000 LETTERS TO CUSTOMERS CONFIRMINGCHANGES IN THEIR INVESTMENT OBJECTIVES WITHIN 30 DAYS OF THECHANGE. DUE TO THE SYSTEM CODING ERROR, THE FIRM SYSTEMINCORRECTLY VIEWED ACCOUNTS UNDERGOING ACCOUNT NUMBERCHANGES AS CLOSED AND THUS SUPPRESSED THE TRANSMITTAL OF THEINVESTMENT OBJECTIVE CHANGE LETTERS. WHILE THE FIRM'S SYSTEMSCONTAINED THE UPDATED INFORMATION, IT DID NOT CONFIRMINVESTMENT OBJECTIVE CHANGES THROUGH THE CONFIRMATIONLETTERS IT OTHERWISE WOULD HAVE SENT. AS A RESULT, THE FIRMFAILED TO ENSURE THAT IT MET ITS OBLIGATIONS TO CONFIRMINVESTMENT OBJECTIVE CHANGES. BY REASON OF THE FOREGOING,THE FIRM FAILED TO REASONABLY ENFORCE ITS SUPERVISORY SYSTEMAND, AS A RESULT, FAILED TO SEND AND RETAIN THE REQUIREDINVESTMENT OBJECTIVE CHANGE LETTERS.


Resolution:

Other Sanctions Ordered: IN RESOLVING THIS MATTER, FINRA HAS RECOGNIZED THE FIRM'SEXTRAORDINARY COOPERATION IN HAVING (1) INITIATED, PRIOR TODETECTION OR INTERVENTION BY A REGULATOR, AN INVESTIGATION TOIDENTIFY THE SCOPE AND EXTENT OF ITS PROSPECTUS DELIVERY ANDRELATED SUPERVISORY FAILURES; (2) MADE A RESCISSION OFFER TOTHOUSANDS OF CUSTOMERS WHO DID NOT RECEIVE PROSPECTUSES VIATHE HYPERLINK AND FULFILLED QUALIFYING OFFERS; (3) RETAINED ANOUTSIDE CONSULTANT TO CONDUCT A COMPREHENSIVE REVIEW OF THEFIRM'S RESCISSION OFFERS AND PROSPECTUS DELIVERY FULFILLMENTSYSTEM AND (4) PROVIDED SUBSTANTIAL ASSISTANCE TO FINRA IN ITSINVESTIGATION. THE FIRM'S REMEDIAL STEPS RESULTED IN A REDUCEDFINE WITH RESPECT TO THE PROSPECTUS DELIVERY-RELATEDVIOLATIONS.


No

Sanctions Ordered: CensureMonetary/Fine $1,500,000.00








Other Sanctions Ordered: IN RESOLVING THIS MATTER, FINRA HAS RECOGNIZED THE FIRM'SEXTRAORDINARY COOPERATION IN HAVING (1) INITIATED, PRIOR TODETECTION OR INTERVENTION BY A REGULATOR, AN INVESTIGATION TOIDENTIFY THE SCOPE AND EXTENT OF ITS PROSPECTUS DELIVERY ANDRELATED SUPERVISORY FAILURES; (2) MADE A RESCISSION OFFER TOTHOUSANDS OF CUSTOMERS WHO DID NOT RECEIVE PROSPECTUSES VIATHE HYPERLINK AND FULFILLED QUALIFYING OFFERS; (3) RETAINED ANOUTSIDE CONSULTANT TO CONDUCT A COMPREHENSIVE REVIEW OF THEFIRM'S RESCISSION OFFERS AND PROSPECTUS DELIVERY FULFILLMENTSYSTEM AND (4) PROVIDED SUBSTANTIAL ASSISTANCE TO FINRA IN ITSINVESTIGATION. THE FIRM'S REMEDIAL STEPS RESULTED IN A REDUCEDFINE WITH RESPECT TO THE PROSPECTUS DELIVERY-RELATEDVIOLATIONS.

Sanction Details: THE FIRM WAS CENSURED AND FINED $1,500,000. FINES PAID IN FULL ON12/16/16.


Initiated By: FINRA




CENSURE





Allegations: FINRA ALLEGED THAT MORGAN STANLEY SMITH BARNEY LLCEXPERIENCED UNRELATED TECHNICAL ISSUES THAT TEMPORARILYDISABLED CERTAIN PROSPECTUS HYPERLINKS ON THE MS ONLINEWEBSITE, AND PREVENTED CERTAIN CLIENT PROFILE CONFIRMATIONLETTERS FROM BEING GENERATED. THE SETTLEMENT RECOGNIZEDMORGAN STANLEY'S EXTRAORDINARY COOPERATION IN IDENTIFYINGAND QUICKLY RESOLVING THE PROSPECTUS ISSUE, AND FURTHERRECOGNIZED THAT PROSPECTUSES WERE AVAILABLE ELSEWHERE ONMS ONLINE, AND CLIENT PROFILE INFORMATION CONTINUED TO BEREFLECTED ON CUSTOMER ACCOUNT STATEMENTS.


Resolution: Acceptance, Waiver & Consent(AWC)








Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $1,500,000.

Firm Statement ON DECEMBER 1, 2016, MORGAN STANLEY SMITH BARNEY LLC AND FINRAENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)IN CONNECTION WITH ALLEGATIONS THAT, THE FIRM EXPERIENCEDUNRELATED TECHNICAL ISSUES THAT TEMPORARILY DISABLED CERTAINPROSPECTUS HYPERLINKS ON THE MS ONLINE WEBSITE, ANDPREVENTED CERTAIN CLIENT PROFILE CONFIRMATION LETTERS FROMBEING GENERATED. WITHOUT ADMITTING OR DENYING THE UNDERLYINGALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUE OF LAW ORFACT, THE FIRM ACCEPTED AND CONSENTED TO ENTRY OF FINDINGS ANDTHE IMPOSITION OF A CENSURE AND FINE OF $1,500,000. THE FINE WASPAID ON 12/15/2016.



Disclosure 9 of 42

i


Initiated By: FINRA



Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN THREEINSTANCES, THE FIRM HAD A FAIL-TO-DELIVER POSITION AT AREGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THATRESULTED FROM A LONG SALE, AND DID NOT CLOSE OUT THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWING SECURITIES OFLIKE KIND AND QUANTITY WITHIN THE TIME FRAME PRESCRIBED BY SECRULE 204(A)(1). THE FINDINGS STATED THAT IN EIGHT INSTANCES, THEFIRM HAD A FAIL-TO-DELIVER POSITION AT A REGISTERED CLEARINGAGENCY IN AN EQUITY SECURITY THAT THE SELLER WAS DEEMED-TO-OWN PURSUANT TO § 242.200 AND INTENDED TO DELIVER ONCE ALLRESTRICTIONS ON DELIVERY HAD BEEN REMOVED, AND DID NOT CLOSEOUT THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWINGSECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIME FRAMEPRESCRIBED BY SEC RULE 204(A)(2) OF REGULATION SHO. THE FIRMALSO EXECUTED 16 SALE ORDERS AND FAILED TO PROPERLY MARK THEORDERS AS SHORT.












Other Product Type(s): UNSPECIFIED EQUITY SECURITIES


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $30,000. FINES PAID IN FULL ON12/9/16.


No




Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN THREEINSTANCES, THE FIRM HAD A FAIL-TO-DELIVERPOSITION AT A REGISTERED CLEARING AGENCY IN AN EQUITY SECURITYTHAT RESULTED FROM A LONG SALE, AND DID NOT CLOSE OUT THE FAIL-TO-DELIVER POSITION BY PURCHASING ORBORROWING SECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIMEFRAME PRESCRIBED BY SEC RULE 204(A)(1). THE FINDINGS STATED THATIN EIGHT INSTANCES, THE FIRM HAD A FAIL-TO DELIVER POSITION AT AREGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THAT THESELLER WAS DEEMED-TO-OWN PURSUANT TO § 242.200 AND INTENDEDTO DELIVER ONCE ALLRESTRICTIONS ON DELIVERY HAD BEEN REMOVED, AND DID NOT CLOSEOUT THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWINGSECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIME FRAMEPRESCRIBED BY SEC RULE 204(A)(2) OF REGULATION SHO. THE FIRMALSO EXECUTED 16 SALE ORDERS AND FAILED TO PROPERLY MARK THEORDERS AS SHORT.








Initiated By: FINRA




CENSURE




Other Product Type(s): UNSPECIFIED EQUITY SECURITIES

WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN THREEINSTANCES, THE FIRM HAD A FAIL-TO-DELIVERPOSITION AT A REGISTERED CLEARING AGENCY IN AN EQUITY SECURITYTHAT RESULTED FROM A LONG SALE, AND DID NOT CLOSE OUT THE FAIL-TO-DELIVER POSITION BY PURCHASING ORBORROWING SECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIMEFRAME PRESCRIBED BY SEC RULE 204(A)(1). THE FINDINGS STATED THATIN EIGHT INSTANCES, THE FIRM HAD A FAIL-TO DELIVER POSITION AT AREGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THAT THESELLER WAS DEEMED-TO-OWN PURSUANT TO § 242.200 AND INTENDEDTO DELIVER ONCE ALLRESTRICTIONS ON DELIVERY HAD BEEN REMOVED, AND DID NOT CLOSEOUT THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWINGSECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIME FRAMEPRESCRIBED BY SEC RULE 204(A)(2) OF REGULATION SHO. THE FIRMALSO EXECUTED 16 SALE ORDERS AND FAILED TO PROPERLY MARK THEORDERS AS SHORT.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $30,000. THE FINE WAS PAIDDECEMBER 9, 2016.

Firm Statement WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN THREEINSTANCES, THE FIRM HAD A FAIL-TO-DELIVERPOSITION AT A REGISTERED CLEARING AGENCY IN AN EQUITY SECURITYTHAT RESULTED FROM A LONG SALE, AND DID NOT CLOSE OUT THE FAIL-TO-DELIVER POSITION BY PURCHASING ORBORROWING SECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIMEFRAME PRESCRIBED BY SEC RULE 204(A)(1). THE FINDINGS STATED THATIN EIGHT INSTANCES, THE FIRM HAD A FAIL-TO DELIVER POSITION AT AREGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THAT THESELLER WAS DEEMED-TO-OWN PURSUANT TO § 242.200 AND INTENDEDTO DELIVER ONCE ALLRESTRICTIONS ON DELIVERY HAD BEEN REMOVED, AND DID NOT CLOSEOUT THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWINGSECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIME FRAMEPRESCRIBED BY SEC RULE 204(A)(2) OF REGULATION SHO. THE FIRMALSO EXECUTED 16 SALE ORDERS AND FAILED TO PROPERLY MARK THEORDERS AS SHORT.









Disclosure 10 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT MORGANSTANLEY SMITH BARNEY LLC ("MSSB", THE "FIRM" OR "RESPONDENT"), INOVER 13 MILLION INSTANCES, REPORTED POSITION TO THE LARGEOPTIONS POSITIONS REPORT SYSTEM (LOPR) WITHOUT THE REQUISITEIN-CONCERT IDENTIFICATION DUE TO THE DUPLICATION OF TWOREQUIRED DATA FIELDS (REFERENCE ID AND REGISTRATION ID) FOR IN-CONCERT SUBMISSIONS.

THE FINDINGS STATED THAT UNBEKNOWNST TO THE FIRM, THEDUPLICATED DATA HAD CAUSED REJECTIONS OF CERTAIN OF ITS IN-CONCERT REPORTS. MSSB'S FAILURE TO REVIEW AND RE-SUBMIT THEREJECTED IN-CONCERT SUBMISSIONS TO THE OPTIONS CLEARINGCORPORATION (OCC) CAUSED POSITIONS REPORTED TO NOT BEIDENTIFIED AS ACTING IN-CONCERT. THE FIRM FAILED TO ACCURATELYOR COMPLETELY REPORT POSITIONS TO THE LOPR AS FOLLOWS: (I) INOVER 500,000 INSTANCES, MSSB REPORTED POSITIONS FOR DOMESTICAND FOREIGN ACCOUNTS TO THE LOPR WITHOUT TAX IDENTIFICATIONNUMBERS ("TINS") OR SOCIAL SECURITY NUMBERS ("SSNS"), INCLUDINGAPPROXIMATELY 100,000 DOMESTIC ACCOUNTS; (II) IN OVER 38 MILLIONINSTANCES, MSSB REPORTED POSITIONS TO THE LOPR IN THE WRONGACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER" POSITIONSWITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; (III) IN OVER 36,000INSTANCES, MSSB REPORTED POSITIONS TO THE LOPR WITH ACCOUNTNAMES EXTENDING INTO THE ADDRESS FIELD, WITH INCOMPLETEADDRESS FIELDS, OR WITH STREET ADDRESSES THAT INCLUDEDADDITIONAL INFORMATION; AND (IV) IN OVER 500,000 INSTANCES, MSSBREPORTED POSITIONS TO THE LOPR WITHOUT A ZIP CODE. IN ASIGNIFICANT BUT UNQUANTIFIED NUMBER OF INSTANCES, MSSB ALSOFAILED TO REPORT, OR ACCURATELY REPORT, REPORTABLE OPTIONSPOSITIONS TO THE LOPR AS FOLLOWS: MSSB FAILED TO CAPTURE FORIN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; MSSB FAILED TO INCLUDE FLEXOPTIONS IN ITS LOPR AGGREGATION; MSSB FAILED TO INCLUDE OPTIONSMARKED AS INACTIVE IN ITS LOPR POSITION FILE; AND MSSBINCORRECTLY POPULATED THE EFFECTIVE DATE OF OPTIONS POSITIONSWITH THE SUBMISSION DATE RATHER THAN THE TRADE DATE.

THE FINDINGS ALSO STATED THAT MSSB FAILED TO HAVE SUPERVISORYSYSTEMS AND CONTROLS IN PLACE, INCLUDING A SEPARATE SYSTEM OFFOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE EXCHANGE'S OPTION REPORTING RULES. MSSBALSO LACKED ADEQUATE WRITTEN SUPERVISORY PROCEDURESREQUIRING REVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPRWERE COMPLETE AND ACCURATE.







Initiated By: NYSE MKT LLC





Principal Product Type: Options


WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT MORGANSTANLEY SMITH BARNEY LLC ("MSSB", THE "FIRM" OR "RESPONDENT"), INOVER 13 MILLION INSTANCES, REPORTED POSITION TO THE LARGEOPTIONS POSITIONS REPORT SYSTEM (LOPR) WITHOUT THE REQUISITEIN-CONCERT IDENTIFICATION DUE TO THE DUPLICATION OF TWOREQUIRED DATA FIELDS (REFERENCE ID AND REGISTRATION ID) FOR IN-CONCERT SUBMISSIONS.

THE FINDINGS STATED THAT UNBEKNOWNST TO THE FIRM, THEDUPLICATED DATA HAD CAUSED REJECTIONS OF CERTAIN OF ITS IN-CONCERT REPORTS. MSSB'S FAILURE TO REVIEW AND RE-SUBMIT THEREJECTED IN-CONCERT SUBMISSIONS TO THE OPTIONS CLEARINGCORPORATION (OCC) CAUSED POSITIONS REPORTED TO NOT BEIDENTIFIED AS ACTING IN-CONCERT. THE FIRM FAILED TO ACCURATELYOR COMPLETELY REPORT POSITIONS TO THE LOPR AS FOLLOWS: (I) INOVER 500,000 INSTANCES, MSSB REPORTED POSITIONS FOR DOMESTICAND FOREIGN ACCOUNTS TO THE LOPR WITHOUT TAX IDENTIFICATIONNUMBERS ("TINS") OR SOCIAL SECURITY NUMBERS ("SSNS"), INCLUDINGAPPROXIMATELY 100,000 DOMESTIC ACCOUNTS; (II) IN OVER 38 MILLIONINSTANCES, MSSB REPORTED POSITIONS TO THE LOPR IN THE WRONGACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER" POSITIONSWITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; (III) IN OVER 36,000INSTANCES, MSSB REPORTED POSITIONS TO THE LOPR WITH ACCOUNTNAMES EXTENDING INTO THE ADDRESS FIELD, WITH INCOMPLETEADDRESS FIELDS, OR WITH STREET ADDRESSES THAT INCLUDEDADDITIONAL INFORMATION; AND (IV) IN OVER 500,000 INSTANCES, MSSBREPORTED POSITIONS TO THE LOPR WITHOUT A ZIP CODE. IN ASIGNIFICANT BUT UNQUANTIFIED NUMBER OF INSTANCES, MSSB ALSOFAILED TO REPORT, OR ACCURATELY REPORT, REPORTABLE OPTIONSPOSITIONS TO THE LOPR AS FOLLOWS: MSSB FAILED TO CAPTURE FORIN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; MSSB FAILED TO INCLUDE FLEXOPTIONS IN ITS LOPR AGGREGATION; MSSB FAILED TO INCLUDE OPTIONSMARKED AS INACTIVE IN ITS LOPR POSITION FILE; AND MSSBINCORRECTLY POPULATED THE EFFECTIVE DATE OF OPTIONS POSITIONSWITH THE SUBMISSION DATE RATHER THAN THE TRADE DATE.

THE FINDINGS ALSO STATED THAT MSSB FAILED TO HAVE SUPERVISORYSYSTEMS AND CONTROLS IN PLACE, INCLUDING A SEPARATE SYSTEM OFFOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE EXCHANGE'S OPTION REPORTING RULES. MSSBALSO LACKED ADEQUATE WRITTEN SUPERVISORY PROCEDURESREQUIRING REVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPRWERE COMPLETE AND ACCURATE.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $1,650,000. PURSUANT TO NYSEMKT RULE 9310(A)(1)(B), THIS AWC BECAME FINAL ON OCTOBER 17, 2016.

Regulator Statement IN RESOLVING THIS MATTER, FINRA HAS TAKEN INTO CONSIDERATION THEFOLLOWING: (I) THE FIRM'S SELF-REPORTING OF THESE LOPRVIOLATIONS AND THE FIRM'S ENSUING COOPERATION THROUGHOUTFINRA'S INVESTIGATION; AND (II) THE SUBSEQUENT REMEDIAL MEASURESIMPLEMENTED BY THE FIRM, INCLUDING SYSTEM AND SURVEILLANCEENHANCEMENTS.THE FIRM WAS CENSURED AND A TOTAL FINE OF $2,200,000, OF WHICH$1,650,000 SHALL BE PAID TO NYSE MKT.


No








IN RESOLVING THIS MATTER, FINRA HAS TAKEN INTO CONSIDERATION THEFOLLOWING: (I) THE FIRM'S SELF-REPORTING OF THESE LOPRVIOLATIONS AND THE FIRM'S ENSUING COOPERATION THROUGHOUTFINRA'S INVESTIGATION; AND (II) THE SUBSEQUENT REMEDIAL MEASURESIMPLEMENTED BY THE FIRM, INCLUDING SYSTEM AND SURVEILLANCEENHANCEMENTS.THE FIRM WAS CENSURED AND A TOTAL FINE OF $2,200,000, OF WHICH$1,650,000 SHALL BE PAID TO NYSE MKT.


Initiated By: NYSE MKT LLC







Allegations: NYSE MKT LLC (EXCHANGE) ALLEGED THAT THE FIRM VIOLATEDEXCHANGE RULE 906(A).NY BY REPORTING NUMEROUS OPTIONSPOSITIONS TO THE LARGE OPTIONS POSITIONS REPORT SYSTEM (LOPR):A) WITHOUT THE REQUISITE IN-CONCERT IDENTIFICATION; B) WITHOUTTAX IDENTIFICATION NUMBERS OR SOCIAL SECURITY NUMBERS; C) INTHE WRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER"POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; D) WITHACCOUNT NAMES EXTENDING INTO THE ADDRESS FIELD, WITHINCOMPLETE ADDRESS FIELDS, OR WITH STREET ADDRESSES THATINCLUDED ADDITIONAL INFORMATION; AND E) WITHOUT A ZIP CODE. INADDITION, THE EXCHANGE ALLEGED THAT IN CONNECTION WITHREPORTING NUMEROUS OPTIONS POSITIONS TO LOPR, THE FIRMVIOLATED EXCHANGE RULE 906(A).NY BY FAILING TO: A) CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDE FLEX OPTIONS IN ITSLOPR AGGREGATION; C) INCLUDE OPTIONS MARKED AS INACTIVE IN ITSLOPR POSITION FILE; AND D) CORRECTLY POPULATE THE EFFECTIVEDATE OF OPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THANTHE TRADE DATE. THE EXCHANGE ALSO ALLEGED THAT THE FIRMVIOLATED EXCHANGE RULE 320.NY BY FAILING TO HAVE SUPERVISORYSYSTEMS AND CONTROLS IN PLACE, INCLUDING A SEPARATE SYSTEM OFFOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE EXCHANGE'S OPTION REPORTING RULES AND BYLACKING ADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRINGREVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPR WERECOMPLETE AND ACCURATE.










CENSURE


Resolution:


Sanction Details: THE FIRM WAS FINED AN AGGREGATE OF $2,200,000, OF WHICH $1,650,000WAS PAID TO NYSE MKT LLC ON NOVEMBER 1, 2016 AND THE BALANCEWAS PAID TO FINRA PURSUANT AN EQUIVALENT SETTLEMENTAGREEMENT ENTERED CONCURRENTLY BETWEEN THE FIRM AND FINRA.

Firm Statement ON OCTOBER 17, 2016, MORGAN STANLEY SMITH BARNEY LLC (FIRM) ANDNYSE MKT LLC (EXCHANGE) ENTERED INTO A LETTER OF ACCEPTANCE,WAIVER, AND CONSENT (AWC) TO SETTLE ALLEGATIONS THAT THE FIRMVIOLATED EXCHANGE RULE 906(A).NY BY REPORTING NUMEROUSOPTIONS POSITIONS TO THE LARGE OPTIONS POSITIONS REPORTSYSTEM (LOPR): A) WITHOUT THE REQUISITE IN-CONCERTIDENTIFICATION; B) WITHOUT TAX IDENTIFICATION NUMBERS OR SOCIALSECURITY NUMBERS; C) IN THE WRONG ACCOUNT TYPE, IN THAT THEFIRM REPORTED "CUSTOMER" POSITIONS WITH AN INACCURATEACCOUNT TYPE OF "FIRM"; D) WITH ACCOUNT NAMES EXTENDING INTOTHE ADDRESS FIELD, WITH INCOMPLETE ADDRESS FIELDS, OR WITHSTREET ADDRESSES THAT INCLUDED ADDITIONAL INFORMATION; AND E)WITHOUT A ZIP CODE. IN ADDITION, THE EXCHANGE ALLEGED THAT INCONNECTION WITH REPORTING NUMEROUS OPTIONS POSITIONS TOLOPR, THE FIRM VIOLATED EXCHANGE RULE 906(A).NY BY FAILING TO: A)CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT ANDPARTNERSHIP ACCOUNTS, ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNT TRANSFERRED TO NEW ACCOUNT NUMBER),CERTAIN FOREIGN ACCOUNTS, CERTAIN FINANCIAL ADVISOR ANDPORTFOLIO MANAGER ACCOUNTS, AND ACCOUNTS WITH THIRD-PARTYTRADING AUTHORITY OVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDEFLEX OPTIONS IN ITS LOPR AGGREGATION; C) INCLUDE OPTIONS MARKEDAS INACTIVE IN ITS LOPR POSITION FILE; AND D) CORRECTLY POPULATETHE EFFECTIVE DATE OF OPTIONS POSITIONS WITH THE SUBMISSIONDATE RATHER THAN THE TRADE DATE. THE EXCHANGE ALSO ALLEGEDTHAT THE FIRM VIOLATED EXCHANGE RULE 320.NY BY FAILING TO HAVESUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING ASEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH THE EXCHANGE'S OPTION REPORTINGRULES AND BY LACKING ADEQUATE WRITTEN SUPERVISORYPROCEDURES REQUIRING REVIEWS TO ENSURE THAT ITS SUBMISSIONSTO THE LOPR WERE COMPLETE AND ACCURATE. WITHOUT ADMITTING ORDENYING THE UNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATIONOF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTEDTO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSURE AND FINEOF $2,200,000, OF WHICH $1,650,000 WAS PAID TO THE EXCHANGE ANDTHE BALANCE WAS PAID TO FINRA PURSUANT TO AN EQUIVALENTSETTLEMENT AGREEMENT ENTERED CONCURRENTLY BETWEEN THEFIRM AND FINRA.








ON OCTOBER 17, 2016, MORGAN STANLEY SMITH BARNEY LLC (FIRM) ANDNYSE MKT LLC (EXCHANGE) ENTERED INTO A LETTER OF ACCEPTANCE,WAIVER, AND CONSENT (AWC) TO SETTLE ALLEGATIONS THAT THE FIRMVIOLATED EXCHANGE RULE 906(A).NY BY REPORTING NUMEROUSOPTIONS POSITIONS TO THE LARGE OPTIONS POSITIONS REPORTSYSTEM (LOPR): A) WITHOUT THE REQUISITE IN-CONCERTIDENTIFICATION; B) WITHOUT TAX IDENTIFICATION NUMBERS OR SOCIALSECURITY NUMBERS; C) IN THE WRONG ACCOUNT TYPE, IN THAT THEFIRM REPORTED "CUSTOMER" POSITIONS WITH AN INACCURATEACCOUNT TYPE OF "FIRM"; D) WITH ACCOUNT NAMES EXTENDING INTOTHE ADDRESS FIELD, WITH INCOMPLETE ADDRESS FIELDS, OR WITHSTREET ADDRESSES THAT INCLUDED ADDITIONAL INFORMATION; AND E)WITHOUT A ZIP CODE. IN ADDITION, THE EXCHANGE ALLEGED THAT INCONNECTION WITH REPORTING NUMEROUS OPTIONS POSITIONS TOLOPR, THE FIRM VIOLATED EXCHANGE RULE 906(A).NY BY FAILING TO: A)CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT ANDPARTNERSHIP ACCOUNTS, ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNT TRANSFERRED TO NEW ACCOUNT NUMBER),CERTAIN FOREIGN ACCOUNTS, CERTAIN FINANCIAL ADVISOR ANDPORTFOLIO MANAGER ACCOUNTS, AND ACCOUNTS WITH THIRD-PARTYTRADING AUTHORITY OVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDEFLEX OPTIONS IN ITS LOPR AGGREGATION; C) INCLUDE OPTIONS MARKEDAS INACTIVE IN ITS LOPR POSITION FILE; AND D) CORRECTLY POPULATETHE EFFECTIVE DATE OF OPTIONS POSITIONS WITH THE SUBMISSIONDATE RATHER THAN THE TRADE DATE. THE EXCHANGE ALSO ALLEGEDTHAT THE FIRM VIOLATED EXCHANGE RULE 320.NY BY FAILING TO HAVESUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING ASEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH THE EXCHANGE'S OPTION REPORTINGRULES AND BY LACKING ADEQUATE WRITTEN SUPERVISORYPROCEDURES REQUIRING REVIEWS TO ENSURE THAT ITS SUBMISSIONSTO THE LOPR WERE COMPLETE AND ACCURATE. WITHOUT ADMITTING ORDENYING THE UNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATIONOF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTEDTO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSURE AND FINEOF $2,200,000, OF WHICH $1,650,000 WAS PAID TO THE EXCHANGE ANDTHE BALANCE WAS PAID TO FINRA PURSUANT TO AN EQUIVALENTSETTLEMENT AGREEMENT ENTERED CONCURRENTLY BETWEEN THEFIRM AND FINRA.

Disclosure 11 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT REPORTEDPOSITIONS TO THE LARGE OPTIONS POSITIONS REPORT SYSTEM (LOPR)WITHOUT THE REQUISITE IN-CONCERT IDENTIFICATION DUE TO THEDUPLICATION OF TWO REQUIRED DATA FIELDS (REFERENCE ID ANDREGISTRATION ID) FOR IN-CONCERT SUBMISSIONS. UNBEKNOWNST TOTHE FIRM, THE DUPLICATED DATA HAD CAUSED REJECTIONS OF CERTAINOF ITS IN-CONCERT REPORTS, AND THE FIRM'S FAILURE TO REVIEW ANDRE-SUBMIT THE REJECTED IN-CONCERT SUBMISSIONS TO THE OPTIONSCLEARING CORPORATION (OCC) CAUSED POSITIONS REPORTED TO NOTBE IDENTIFIED AS ACTING IN-CONCERT. THE FINDINGS STATED THAT THEFIRM FAILED TO ACCURATELY OR COMPLETELY REPORT POSITIONS TOTHE LOPR AS FOLLOWS: THE FIRM REPORTED POSITIONS FORDOMESTIC AND FOREIGN ACCOUNTS TO THE LOPR WITHOUT TAXIDENTIFICATION NUMBERS (TINS) OR SOCIAL SECURITY NUMBERS (SSNS),INCLUDING DOMESTIC ACCOUNTS; THE FIRM REPORTED POSITIONS TOTHE LOPR IN THE WRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER" POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; THE FIRM REPORTED POSITIONS TO THE LOPR WITH ACCOUNTNAMES EXTENDING INTO THE ADDRESS FIELD, WITH INCOMPLETEADDRESS FIELDS, OR WITH STREET ADDRESSES THAT INCLUDEDADDITIONAL INFORMATION; AND THE FIRM REPORTED POSITIONS TO THELOPR WITHOUT A ZIP CODE. THE FINDINGS ALSO STATED THAT THE FIRMALSO FAILED TO REPORT, OR ACCURATELY REPORT, REPORTABLEOPTIONS POSITIONS TO THE LOPR AS FOLLOWS: THE FIRM FAILED TOCAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT ANDPARTNERSHIP ACCOUNTS, ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNT TRANSFERRED TO NEW ACCOUNT NUMBER),CERTAIN FOREIGN ACCOUNTS, CERTAIN FINANCIAL ADVISOR ANDPORTFOLIO MANAGER ACCOUNTS, AND ACCOUNTS WITH THIRD-PARTYTRADING AUTHORITY OVER NON-DISCRETIONARY ACCOUNTS; THE FIRMFAILED TO INCLUDE FLEX OPTIONS IN ITS LOPR AGGREGATION; THE FIRMFAILED TO INCLUDE OPTIONS MARKED AS INACTIVE IN ITS LOPR POSITIONFILE; AND THE FIRM INCORRECTLY POPULATED THE EFFECTIVE DATE OFOPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THAN THETRADE DATE. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TOMAINTAIN AN ADEQUATE SYSTEM OF SUPERVISION, INCLUDING SYSTEMSOF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE RULES GOVERNING THE REPORTING OFPOSITIONS TO THE LOPR. FINRA FOUND THAT THE FIRM ALSO LACKEDADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRING REVIEWSTO DETERMINE THAT ITS LOPR SUBMISSIONS WERE ACCURATE.







Initiated By: FINRA







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT REPORTEDPOSITIONS TO THE LARGE OPTIONS POSITIONS REPORT SYSTEM (LOPR)WITHOUT THE REQUISITE IN-CONCERT IDENTIFICATION DUE TO THEDUPLICATION OF TWO REQUIRED DATA FIELDS (REFERENCE ID ANDREGISTRATION ID) FOR IN-CONCERT SUBMISSIONS. UNBEKNOWNST TOTHE FIRM, THE DUPLICATED DATA HAD CAUSED REJECTIONS OF CERTAINOF ITS IN-CONCERT REPORTS, AND THE FIRM'S FAILURE TO REVIEW ANDRE-SUBMIT THE REJECTED IN-CONCERT SUBMISSIONS TO THE OPTIONSCLEARING CORPORATION (OCC) CAUSED POSITIONS REPORTED TO NOTBE IDENTIFIED AS ACTING IN-CONCERT. THE FINDINGS STATED THAT THEFIRM FAILED TO ACCURATELY OR COMPLETELY REPORT POSITIONS TOTHE LOPR AS FOLLOWS: THE FIRM REPORTED POSITIONS FORDOMESTIC AND FOREIGN ACCOUNTS TO THE LOPR WITHOUT TAXIDENTIFICATION NUMBERS (TINS) OR SOCIAL SECURITY NUMBERS (SSNS),INCLUDING DOMESTIC ACCOUNTS; THE FIRM REPORTED POSITIONS TOTHE LOPR IN THE WRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER" POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; THE FIRM REPORTED POSITIONS TO THE LOPR WITH ACCOUNTNAMES EXTENDING INTO THE ADDRESS FIELD, WITH INCOMPLETEADDRESS FIELDS, OR WITH STREET ADDRESSES THAT INCLUDEDADDITIONAL INFORMATION; AND THE FIRM REPORTED POSITIONS TO THELOPR WITHOUT A ZIP CODE. THE FINDINGS ALSO STATED THAT THE FIRMALSO FAILED TO REPORT, OR ACCURATELY REPORT, REPORTABLEOPTIONS POSITIONS TO THE LOPR AS FOLLOWS: THE FIRM FAILED TOCAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT ANDPARTNERSHIP ACCOUNTS, ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNT TRANSFERRED TO NEW ACCOUNT NUMBER),CERTAIN FOREIGN ACCOUNTS, CERTAIN FINANCIAL ADVISOR ANDPORTFOLIO MANAGER ACCOUNTS, AND ACCOUNTS WITH THIRD-PARTYTRADING AUTHORITY OVER NON-DISCRETIONARY ACCOUNTS; THE FIRMFAILED TO INCLUDE FLEX OPTIONS IN ITS LOPR AGGREGATION; THE FIRMFAILED TO INCLUDE OPTIONS MARKED AS INACTIVE IN ITS LOPR POSITIONFILE; AND THE FIRM INCORRECTLY POPULATED THE EFFECTIVE DATE OFOPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THAN THETRADE DATE. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TOMAINTAIN AN ADEQUATE SYSTEM OF SUPERVISION, INCLUDING SYSTEMSOF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE RULES GOVERNING THE REPORTING OFPOSITIONS TO THE LOPR. FINRA FOUND THAT THE FIRM ALSO LACKEDADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRING REVIEWSTO DETERMINE THAT ITS LOPR SUBMISSIONS WERE ACCURATE.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $2,200,000, OF WHICH $550,000SHALL BE PAID TO FINRA. THE BALANCE OF THE FINE WILL BE PAID TONYSE MKT LLC PURSUANT TO A SEPARATE SETTLEMENT AGREEMENT.FINES PAID IN FULL ON NOVEMBER 7, 2016.


No










Initiated By: FINRA




CENSURE





Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULES 2360(B)(5) AND2010 BY REPORTING NUMEROUS OPTIONS POSITIONS TO THE LARGEOPTIONS POSITIONS REPORT SYSTEM (LOPR): A) WITHOUT THEREQUISITE IN-CONCERT IDENTIFICATION; B) WITHOUT TAXIDENTIFICATION NUMBERS OR SOCIAL SECURITY NUMBERS; C) IN THEWRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER"POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; D) WITHACCOUNT NAMES EXTENDING INTO THE ADDRESS FIELD, WITHINCOMPLETE ADDRESS FIELDS, OR WITH STREET ADDRESSES THATINCLUDED ADDITIONAL INFORMATION; AND E) WITHOUT A ZIP CODE. INADDITION, FINRA ALLEGED THAT IN CONNECTION WITH REPORTINGNUMEROUS OPTIONS POSITIONS TO THE LOPR, THE FIRM VIOLATEDFINRA RULES 2360(B)(5) AND 2010 BY FAILING TO: A) CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDE FLEX OPTIONS IN ITSLOPR AGGREGATION; C) INCLUDE OPTIONS MARKED AS INACTIVE IN ITSLOPR POSITION FILE; AND D) CORRECTLY POPULATE THE EFFECTIVEDATE OF OPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THANTHE TRADE DATE. FINRA ALSO ALLEGED THAT THE FIRM VIOLATED NASDRULE 3010 AND FINRA RULES 3110 AND 2010 BY FAILING TO HAVESUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING ASEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH OPTION REPORTING RULES AND BYLACKING ADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRINGREVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPR WERECOMPLETE AND ACCURATE.








CENSURE


Resolution:


Sanction Details: THE FIRM WAS FINED AN AGGREGATE OF $2,200,000, OF WHICH $1,650,000WAS PAID TO NYSE MKT LLC ON NOVEMBER 1, 2016 AND THE BALANCEWAS PAID TO FINRA PURSUANT AN EQUIVALENT SETTLEMENTAGREEMENT ENTERED CONCURRENTLY BETWEEN THE FIRM AND FINRA.

Firm Statement ON OCTOBER 17, 2016, MORGAN STANLEY SMITH BARNEY LLC (FIRM) ANDFINRA ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT(AWC) TO SETTLE ALLEGATIONS THAT THE FIRM VIOLATED FINRA RULES2360(B)(5) AND 2010 BY REPORTING NUMEROUS OPTIONS POSITIONS TOTHE LARGE OPTIONS POSITIONS REPORT SYSTEM (LOPR): A) WITHOUTTHE REQUISITE IN-CONCERT IDENTIFICATION; B) WITHOUT TAXIDENTIFICATION NUMBERS OR SOCIAL SECURITY NUMBERS; C) IN THEWRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER"POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; D) WITHACCOUNT NAMES EXTENDING INTO THE ADDRESS FIELD, WITHINCOMPLETE ADDRESS FIELDS, OR WITH STREET ADDRESSES THATINCLUDED ADDITIONAL INFORMATION; AND E) WITHOUT A ZIP CODE. INADDITION, FINRA ALLEGED THAT IN CONNECTION WITH REPORTINGNUMEROUS OPTIONS POSITIONS TO THE LOPR, THE FIRM VIOLATEDFINRA RULES 2360(B)(5) AND 2010 BY FAILING TO: A) CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDE FLEX OPTIONS IN ITSLOPR AGGREGATION; C) INCLUDE OPTIONS MARKED AS INACTIVE IN ITSLOPR POSITION FILE; AND D) CORRECTLY POPULATE THE EFFECTIVEDATE OF OPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THANTHE TRADE DATE. FINRA ALSO ALLEGED THAT THE FIRM VIOLATED NASDRULE 3010 AND FINRA RULES 3110 AND 2010 BY FAILING TO HAVESUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING ASEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH THE OPTION REPORTING RULES AND BYLACKING ADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRINGREVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPR WERECOMPLETE AND ACCURATE. WITHOUT ADMITTING OR DENYING THEUNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUEOF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTED TO ENTRY OFFINDINGS AND THE IMPOSITION OF A CENSURE AND FINE OF $2,200,000,OF WHICH $550,000 WAS PAID TO FINRA AND THE BALANCE WAS PAID TONYSE MKT LLC PURSUANT TO AN EQUIVALENT SETTLEMENT AGREEMENTENTERED CONCURRENTLY BETWEEN THE FIRM AND NYSE MKT LLC.








ON OCTOBER 17, 2016, MORGAN STANLEY SMITH BARNEY LLC (FIRM) ANDFINRA ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT(AWC) TO SETTLE ALLEGATIONS THAT THE FIRM VIOLATED FINRA RULES2360(B)(5) AND 2010 BY REPORTING NUMEROUS OPTIONS POSITIONS TOTHE LARGE OPTIONS POSITIONS REPORT SYSTEM (LOPR): A) WITHOUTTHE REQUISITE IN-CONCERT IDENTIFICATION; B) WITHOUT TAXIDENTIFICATION NUMBERS OR SOCIAL SECURITY NUMBERS; C) IN THEWRONG ACCOUNT TYPE, IN THAT THE FIRM REPORTED "CUSTOMER"POSITIONS WITH AN INACCURATE ACCOUNT TYPE OF "FIRM"; D) WITHACCOUNT NAMES EXTENDING INTO THE ADDRESS FIELD, WITHINCOMPLETE ADDRESS FIELDS, OR WITH STREET ADDRESSES THATINCLUDED ADDITIONAL INFORMATION; AND E) WITHOUT A ZIP CODE. INADDITION, FINRA ALLEGED THAT IN CONNECTION WITH REPORTINGNUMEROUS OPTIONS POSITIONS TO THE LOPR, THE FIRM VIOLATEDFINRA RULES 2360(B)(5) AND 2010 BY FAILING TO: A) CAPTURE FOR IN-CONCERT REPORTING CERTAIN JOINT AND PARTNERSHIP ACCOUNTS,ACCOUNTS WITH A STATUS OF CLOSED OR "SWUNG" (CLIENT ACCOUNTTRANSFERRED TO NEW ACCOUNT NUMBER), CERTAIN FOREIGNACCOUNTS, CERTAIN FINANCIAL ADVISOR AND PORTFOLIO MANAGERACCOUNTS, AND ACCOUNTS WITH THIRD-PARTY TRADING AUTHORITYOVER NON-DISCRETIONARY ACCOUNTS; B) INCLUDE FLEX OPTIONS IN ITSLOPR AGGREGATION; C) INCLUDE OPTIONS MARKED AS INACTIVE IN ITSLOPR POSITION FILE; AND D) CORRECTLY POPULATE THE EFFECTIVEDATE OF OPTIONS POSITIONS WITH THE SUBMISSION DATE RATHER THANTHE TRADE DATE. FINRA ALSO ALLEGED THAT THE FIRM VIOLATED NASDRULE 3010 AND FINRA RULES 3110 AND 2010 BY FAILING TO HAVESUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING ASEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNEDTO ACHIEVE COMPLIANCE WITH THE OPTION REPORTING RULES AND BYLACKING ADEQUATE WRITTEN SUPERVISORY PROCEDURES REQUIRINGREVIEWS TO ENSURE THAT ITS SUBMISSIONS TO THE LOPR WERECOMPLETE AND ACCURATE. WITHOUT ADMITTING OR DENYING THEUNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUEOF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTED TO ENTRY OFFINDINGS AND THE IMPOSITION OF A CENSURE AND FINE OF $2,200,000,OF WHICH $550,000 WAS PAID TO FINRA AND THE BALANCE WAS PAID TONYSE MKT LLC PURSUANT TO AN EQUIVALENT SETTLEMENT AGREEMENTENTERED CONCURRENTLY BETWEEN THE FIRM AND NYSE MKT LLC.

Disclosure 12 of 42

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Initiated By: FINRA





Principal Product Type: Debt - Corporate


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREPORT SECURITIZED PRODUCT (SP) TRANSACTIONS WITHIN THE TIMEREQUIRED TO THE TRADE REPORTING AND COMPLIANCE ENGINE(TRACE). THE FINDINGS STATED THAT THE FIRM FAILED TO REPORTTRANSACTIONS IN AGENCY DEBT SECURITIES WITHIN THE TIMEREQUIRED TO TRACE. THE FINDINGS ALSO STATED THAT THE FIRM FAILEDTO REPORT TO TRACE LARGE BLOCK TRANSACTIONS IN TRACE-ELIGIBLECORPORATE DEBT SECURITIES WITHIN 15 MINUTES OF THE TIME OFEXECUTION.



Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $102,500.FINES PAID IN FULL ON NOVEMBER 15, 2016.









Sanction Details: THE FIRM WAS CENSURED AND FINED $102,500.FINES PAID IN FULL ON NOVEMBER 15, 2016.


Initiated By: FINRA







Other Product Type(s): SECURITIZED PRODUCTS, DEBT (AGENCY)

Allegations: FINRA ALLEGED THAT THE FIRM SUBMITTED LATE TRADE REPORTS FORCERTAIN TRACE-ELIGIBLE SECURITIES FROM 3Q14 THROUGH 1Q2015.



Resolution:


Sanction Details: THE FINE OF $102,500 WAS PAID ON NOVEMBER 4, 2016.

Firm Statement ON OCTOBER 17, 2016, FINRA AND MORGAN STANLEY SMITH BARNEY, LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") TO SETTLE ALLEGATIONS THAT THE FIRM: (1) VIOLATED FINRARULES 2010 AND 6730(A) BY FAILING TO TIMELY FILE REPORTS TO TRACE,FOR CERTAIN TRACE-ELIGIBLE SECURITIES FROM 3Q14 THROUGH1Q2015; (2). WITHOUT DENYING OR ADMITTING THE UNDERLYINGALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUE OR LAW ORFACT, THE FIRM ACCEPTED AND CONSENTED TO THE ENTRY OFFINDINGS, THE IMPOSITION OF A CENSURE AND A FINE OF $102,500.



Disclosure 13 of 42

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Initiated By: MASSACHUSETTS SECURITIES DIVISION


Cease and Desist


CENSURE, ADMINISTRATIVE FINE, EQUITABLE CUSTOMER RELIEF


Docket/Case Number: E-2016-0055

URL for Regulatory Action: HTTP://WWW.SEC.STATE.MA.US/SCT/CURRENT/SCTMORGAN/MORGANIDX.HTM

Principal Product Type: Banking Products (Other than CD(s))


Allegations: IN 2014 AND 2015, MORGAN STANLEY ENGAGED IN DISHONEST ANDUNETHICAL CONDUCT IN CONNECTION WITH SALES CONTESTSDESIGNED TO PUSH BANKING & LENDING PRODUCTS ON MORGANSTANLEY'S WEALTH MANAGEMENT CLIENTS. THE SALES CONTESTS,WHICH RAN FOR APPROXIMATELY SIXTEEN MONTHS IN MORGANSTANLEY'S METROWEST-RI COMPLEX, INCENTIVIZED MORGAN STANLEYFINANCIAL ADVISORS TO INCREASE THEIR BANKING & LENDINGPRODUCTION. MORGAN STANLEY FINANCIAL ADVISORS FAILED TODISCLOSE THE ADDITIONAL INCENTIVE OFFERED UNDER THE SALESCONTESTS TO THEIR CLIENTS. ALTHOUGH THE SALES CONTESTS RAN INVIOLATION OF MORGAN STANLEY'S INTERNAL PROHIBITION AGAINSTSALES CONTESTS, MORGAN STANLEY FAILED TO TERMINATE THE SALESCONTESTS IMMEDIATELY AFTER COMPLIANCE AND RISK BECAME AWAREOF THEIR EXISTENCE IN DECEMBER 2014.



Resolution:

Other Sanctions Ordered: WITHIN 120 DAYS OF THE ORDER, MORGAN STANLEY WILL CERTIFY THATIT HAS CONDUCTED A REVIEW OF ITS POLICIES AND PROCEDURESRELATED TO SALES CONTESTS, AND WILL IDENTIFY THE CHANGES ORENHANCEMENTS THAT HAVE BEEN, OR WILL BE MADE, AS A RESULT OFITS REVIEW.


No


Consent






WITHIN 120 DAYS OF THE ORDER, MORGAN STANLEY WILL CERTIFY THATIT HAS CONDUCTED A REVIEW OF ITS POLICIES AND PROCEDURESRELATED TO SALES CONTESTS, AND WILL IDENTIFY THE CHANGES ORENHANCEMENTS THAT HAVE BEEN, OR WILL BE MADE, AS A RESULT OFITS REVIEW.

Sanction Details: MORGAN STANLEY ORDERED TO PAY A $1,000,000 CIVIL PENALTY

Regulator Statement THE ENFORCEMENT SECTION OF THE MASSACHUSETTS SECURITIESDIVISION FILED AN ADMINISTRATIVE COMPLAINT IN THIS MATTER ONOCTOBER 3, 2016. THIS MATTER WAS RESOLVED THROUGH THE ENTRYOF A CONSENT ORDER ON APRIL 7, 2017.


Initiated By: MASSACHUSETTS SECURITIES DIVISION


Cease and Desist


CENSURE, ADMINISTRATIVE FINE AND EQUITABLE RELIEF



Principal Product Type: Banking Products (Other than CD(s))


Allegations: THE MASSACHUSETTS SECURITIES DIVISION ALLEGED THAT MORGANSTANLEY SMITH BARNEY LLC ENGAGED IN DISHONEST AND UNETHICALCONDUCT IN CONNECTION WITH AN EFFORT WITHIN THE METROWEST-RICOMPLEX TO MAKE LENDING PRODUCTS AVAILABLE TO ELIGIBLECUSTOMERS. THE MASSACHUSETTS SECURITIES DIVISION ALSOALLEGED THAT THIS EFFORT CONSTITUTED A SALES CONTEST INCONTRAVENTION OF MORGAN STANLEY SMITH BARNEY LLC INTERNALPOLICY, AND THAT THE FIRM FAILED TO TERMINATE THE EFFORTIMMEDIATELY AFTER IT BECAME AWARE OF IT.



Resolution:


Sanction Details: THE FINE OF $1,000,000 WAS PAID ON APRIL 20, 2017.

Firm Statement ON APRIL 7, 2017, MORGAN STANLEY SMITH BARNEY LLC (FIRM) AND THEMASSACHUSETTS SECURITIES DIVISION ENTERED INTO A CONSENTORDER IN CONNECTION WITH ALLEGATIONS THAT, FROM SEPTEMBER 1,2013 THROUGH APRIL 30, 2015, THE FIRM FAILED TO OBSERVE HIGHSTANDARDS OF COMMERCIAL HONOR AND JUST AN EQUITABLEPRINCIPLES OF TRADE, AND FAILED REASONABLY TO SUPERVISE, INCONNECTION WITH AN EFFORT WITHIN THE METROWEST-RI COMPLEX TOMAKE LENDING PRODUCTS AVAILABLE TO ELIGIBLE CUSTOMERS.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND FINE OF $1,000,000.


Settled






Firm Statement ON APRIL 7, 2017, MORGAN STANLEY SMITH BARNEY LLC (FIRM) AND THEMASSACHUSETTS SECURITIES DIVISION ENTERED INTO A CONSENTORDER IN CONNECTION WITH ALLEGATIONS THAT, FROM SEPTEMBER 1,2013 THROUGH APRIL 30, 2015, THE FIRM FAILED TO OBSERVE HIGHSTANDARDS OF COMMERCIAL HONOR AND JUST AN EQUITABLEPRINCIPLES OF TRADE, AND FAILED REASONABLY TO SUPERVISE, INCONNECTION WITH AN EFFORT WITHIN THE METROWEST-RI COMPLEX TOMAKE LENDING PRODUCTS AVAILABLE TO ELIGIBLE CUSTOMERS.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND FINE OF $1,000,000.

Disclosure 14 of 42

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Reporting Source: Firm

Initiated By: MISSISSIPPI SECRETARY OF STATE, SECURITIES DIVISION




CEASE & DESIST; REIMBURSE COSTS; RESTITUTION


Docket/Case Number: LS-12-0454



Allegations: THE STATE OF MS ALLEGED THE FIRM FAILED TO REASONABLYSUPERVISE CERTAIN OF ITS AGENTS IN THE RIDGELAND, MISSISSIPPIBRANCH SO AS TO PREVENT AND DETECT VIOLATIONS. IN ADDITION,THEY ALLEGED THE FIRM FAILED IN SOME INSTANCES TO ENFORCESUPERVISORY PROCEDURES TO COMPLY WITH THE REQUIREMENTS TOPREVENT AND DETECT VIOLATIONS BY CERTAIN OF ITS AGENTS IN THERIDGELAND, MISSISSIPPI BRANCH.



Resolution:

Other Sanctions Ordered: RESTITUTION: $4,243,815.28

Sanctions Ordered: Monetary/Fine $100,000.00Disgorgement/RestitutionCease and Desist/Injunction

Consent






Other Sanctions Ordered: RESTITUTION: $4,243,815.28

Sanction Details: THE FIRM AGREED TO PAY A $100,000.00 PENALTY, $400,000.00REIMBURSEMENT TO THE DIVISION FOR COSTS AND EXPENSES AND$4,243,815.28 RESTITUTION TO BE CREDITED TO A CUSTOMER FUND. THEPENALTY AND EXPENSES TOTALING $500,000.00 WAS PAID ONSEPTEMBER 6, 2016. THE RESTITUTION WAS PAID ON SEPTEMBER 9,2016.

Firm Statement ON AUGUST 9, 2016, WITHOUT ADMITTING OR DENYING THE FINDINGS OFFACT OR CONCLUSIONS OF LAW, THE FIRM CONSENTED TO THESANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE CERTAIN OF ITS AGENTS IN THE RIDGELAND,MISSISSIPPI BRANCH SO AS TO PREVENT AND DETECT VIOLATIONS. INADDITION, THE FIRM FAILED IN SOME INSTANCES TO ENFORCESUPERVISORY PROCEDURES TO COMPLY WITH THE REQUIREMENTS TOPREVENT AND DETECT VIOLATIONS BY CERTAIN OF ITS AGENTS IN THERIDGELAND, MISSISSIPPI BRANCH.

Disclosure 15 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOADEQUATELY SUPERVISE BY FOLLOWING FIRM POLICIES ANDPROCEDURES TO DETECT AND CAUSE THE REPORTING OF POTENTIALLYSUSPICIOUS TRANSACTIONS. THE FINDINGS STATED THAT SPECIFICALLY,A CLIENT OF THE FIRM, AT ITS BRANCH IN ASHEVILLE, NORTH CAROLINA,WAS ABLE TO KITE CHECKS BETWEEN HIS FINANCIAL MANAGEMENTACCOUNT MAINTAINED AT THE BRANCH AND A SEPARATE BANK ACCOUNTMAINTAINED AT A LOCAL BANK, IN FURTHERANCE OF A FRAUDULENT "PONZI" SCHEME, DESPITE HIS ACTIVITY RAISING RED FLAGS IDENTIFIEDIN FIRM POLICIES AND PROCEDURES AS BEING INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY. THE FINDINGS ALSO STATED THATTHE CLIENT REPRESENTED TO THE FIRM THAT HIS BUSINESS MODEL WASTO FACILITATE "LIKE KIND" REAL ESTATE EXCHANGES PURSUANT TOSECTION 1031 OF THE INTERNAL REVENUE CODE. THE CLIENT ALSOPARTICIPATED IN REAL ESTATE INVESTMENTS AND OTHER INVESTMENTSWITH HIS INVESTORS. HOWEVER, IN FACT, THE CLIENT DID NOT INVESTTHE MONEY AS REPRESENTED TO HIS INVESTORS. INSTEAD, THE CLIENTHAD BEEN ENGAGED IN A FRAUDULENT "PONZI" SCHEME THAT HE KEPTAFLOAT IN PART BY MOVING MONEY BETWEEN THE FIRM'S ACCOUNT ANDTHE LOCAL BANK'S ACCOUNT. FROM 2001 TO 2008, THE FIRM'S ACCOUNTHAD ABOUT $10.7 MILLION IN TOTAL DEPOSITS AND ABOUT $10.2 MILLIONIN TOTAL WITHDRAWALS. BY CONTRAST, IN 2009 AND 2010, THE FIRM'SACCOUNT HAD ABOUT $429 MILLION IN TOTAL DEPOSITS AND ABOUT $424MILLION IN TOTAL WITHDRAWALS. FURTHER, DURING THIS PERIOD OFINCREASED DEPOSIT AND WITHDRAWAL ACTIVITY, THE FIRM'S ACCOUNTHAD ALMOST NO SECURITIES TRANSACTIONS. INSTEAD, THE ACCOUNTWAS USED ALMOST EXCLUSIVELY TO TRANSFER FUNDS BETWEEN THEFIRM'S ACCOUNT AND THE LOCAL BANK'S ACCOUNT. IN FACT, THE CLIENTWAS KITING CHECKS. THE CLIENT WOULD DEPOSIT CHECKS FROM THEBANK'S ACCOUNT INTO THE FIRM'S ACCOUNT AND, ALMOST IMMEDIATELY,WRITE A CHECK FROM THE FIRM'S ACCOUNT BACK TO THE BANK'SACCOUNT. THE FIRM PERMITTED THE CLIENT TO WRITE CHECKS AGAINSTUN-CLEARED FUNDS. THE FINDINGS ALSO INCLUDED THAT THE ACTIVITYIN THE FIRM'S ACCOUNT TRIGGERED RED FLAGS INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY THAT WERE, APPROPRIATELY,IDENTIFIED IN ITS WRITTEN AML POLICIES AND PROCEDURES THAT AREISSUED TO FIRM EMPLOYEES. IN ADDITION, BETWEEN FEBRUARY 2009AND DECEMBER 2010, THE FIRM'S ELECTRONIC ALERT SYSTEMGENERATED ALERTS AS A RESULT OF THE RAPID MOVEMENT OF FUNDSTHROUGH THE FIRM'S ACCOUNT. AS A RESULT OF THESE ALERTS, THEFIRM REVIEWED THE CLIENT RELATIONSHIP IN LATE 2009 AND MET WITHTHE CLIENT IN EARLY 2010. THE ASHEVILLE BRANCH RECEIVED WHAT ITBELIEVED WAS A PLAUSIBLE BUSINESS EXPLANATION FOR THE ACTIVITY.HOWEVER, THE ALERTS AND THE RED FLAGS INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY CONTINUED UNTIL DECEMBER 2010.IN AUGUST 2010, AS A RESULT OF THESE ALERTS, BRANCH AND COMPLEXMANAGEMENT AGAIN REVIEWED THE ACTIVITY IN THE CLIENT'S ACCOUNTWITH THE FIRM. AS A RESULT OF THIS REVIEW, IN NOVEMBER 2010 THEFIRM CONCLUDED THAT IT WOULD NO LONGER PAY THE CLIENT'SCHECKS ON UN-CLEARED FUNDS AND ADVISED THE CLIENT. THE CLIENT'SPONZI SCHEME THEN COLLAPSED WHEN HE BOUNCED SEVERALCHECKS.







Initiated By: FINRA






Other Product Type(s): KITE CHECKS FRAUDULENT "PONZI" SCHEME

WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOADEQUATELY SUPERVISE BY FOLLOWING FIRM POLICIES ANDPROCEDURES TO DETECT AND CAUSE THE REPORTING OF POTENTIALLYSUSPICIOUS TRANSACTIONS. THE FINDINGS STATED THAT SPECIFICALLY,A CLIENT OF THE FIRM, AT ITS BRANCH IN ASHEVILLE, NORTH CAROLINA,WAS ABLE TO KITE CHECKS BETWEEN HIS FINANCIAL MANAGEMENTACCOUNT MAINTAINED AT THE BRANCH AND A SEPARATE BANK ACCOUNTMAINTAINED AT A LOCAL BANK, IN FURTHERANCE OF A FRAUDULENT "PONZI" SCHEME, DESPITE HIS ACTIVITY RAISING RED FLAGS IDENTIFIEDIN FIRM POLICIES AND PROCEDURES AS BEING INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY. THE FINDINGS ALSO STATED THATTHE CLIENT REPRESENTED TO THE FIRM THAT HIS BUSINESS MODEL WASTO FACILITATE "LIKE KIND" REAL ESTATE EXCHANGES PURSUANT TOSECTION 1031 OF THE INTERNAL REVENUE CODE. THE CLIENT ALSOPARTICIPATED IN REAL ESTATE INVESTMENTS AND OTHER INVESTMENTSWITH HIS INVESTORS. HOWEVER, IN FACT, THE CLIENT DID NOT INVESTTHE MONEY AS REPRESENTED TO HIS INVESTORS. INSTEAD, THE CLIENTHAD BEEN ENGAGED IN A FRAUDULENT "PONZI" SCHEME THAT HE KEPTAFLOAT IN PART BY MOVING MONEY BETWEEN THE FIRM'S ACCOUNT ANDTHE LOCAL BANK'S ACCOUNT. FROM 2001 TO 2008, THE FIRM'S ACCOUNTHAD ABOUT $10.7 MILLION IN TOTAL DEPOSITS AND ABOUT $10.2 MILLIONIN TOTAL WITHDRAWALS. BY CONTRAST, IN 2009 AND 2010, THE FIRM'SACCOUNT HAD ABOUT $429 MILLION IN TOTAL DEPOSITS AND ABOUT $424MILLION IN TOTAL WITHDRAWALS. FURTHER, DURING THIS PERIOD OFINCREASED DEPOSIT AND WITHDRAWAL ACTIVITY, THE FIRM'S ACCOUNTHAD ALMOST NO SECURITIES TRANSACTIONS. INSTEAD, THE ACCOUNTWAS USED ALMOST EXCLUSIVELY TO TRANSFER FUNDS BETWEEN THEFIRM'S ACCOUNT AND THE LOCAL BANK'S ACCOUNT. IN FACT, THE CLIENTWAS KITING CHECKS. THE CLIENT WOULD DEPOSIT CHECKS FROM THEBANK'S ACCOUNT INTO THE FIRM'S ACCOUNT AND, ALMOST IMMEDIATELY,WRITE A CHECK FROM THE FIRM'S ACCOUNT BACK TO THE BANK'SACCOUNT. THE FIRM PERMITTED THE CLIENT TO WRITE CHECKS AGAINSTUN-CLEARED FUNDS. THE FINDINGS ALSO INCLUDED THAT THE ACTIVITYIN THE FIRM'S ACCOUNT TRIGGERED RED FLAGS INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY THAT WERE, APPROPRIATELY,IDENTIFIED IN ITS WRITTEN AML POLICIES AND PROCEDURES THAT AREISSUED TO FIRM EMPLOYEES. IN ADDITION, BETWEEN FEBRUARY 2009AND DECEMBER 2010, THE FIRM'S ELECTRONIC ALERT SYSTEMGENERATED ALERTS AS A RESULT OF THE RAPID MOVEMENT OF FUNDSTHROUGH THE FIRM'S ACCOUNT. AS A RESULT OF THESE ALERTS, THEFIRM REVIEWED THE CLIENT RELATIONSHIP IN LATE 2009 AND MET WITHTHE CLIENT IN EARLY 2010. THE ASHEVILLE BRANCH RECEIVED WHAT ITBELIEVED WAS A PLAUSIBLE BUSINESS EXPLANATION FOR THE ACTIVITY.HOWEVER, THE ALERTS AND THE RED FLAGS INDICATIVE OFPOTENTIALLY SUSPICIOUS ACTIVITY CONTINUED UNTIL DECEMBER 2010.IN AUGUST 2010, AS A RESULT OF THESE ALERTS, BRANCH AND COMPLEXMANAGEMENT AGAIN REVIEWED THE ACTIVITY IN THE CLIENT'S ACCOUNTWITH THE FIRM. AS A RESULT OF THIS REVIEW, IN NOVEMBER 2010 THEFIRM CONCLUDED THAT IT WOULD NO LONGER PAY THE CLIENT'SCHECKS ON UN-CLEARED FUNDS AND ADVISED THE CLIENT. THE CLIENT'SPONZI SCHEME THEN COLLAPSED WHEN HE BOUNCED SEVERALCHECKS.









Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $200,000. FINE PAID IN FULL JULY13, 2016.


No




Initiated By: FINRA




CENSURE




Other Product Type(s): CHECK KITING

Allegations: FINRA ALLEGED THAT BETWEEN 2009 AND 2010 MSSB FAILED TOADEQUATELY SUPERVISE BY FOLLOWING FIRM POLICIES ANDPROCEDURES TO DETECT AND CAUSE THE REPORTING OF POTENTIALLYSUSPICIOUS TRANSACTIONS.



Resolution:


Sanction Details: THE FINE OF $200,000 WAS PAID ON 7/11/2016.









Sanction Details: THE FINE OF $200,000 WAS PAID ON 7/11/2016.

Firm Statement WITHOUT ADMITTING OR DENYING THE FINDINGS, MORGAN STANLEYSMITH BARNEY (MSSB) ENTERED INTO A LETTER OF ACCEPTANCE,WAIVER AND CONSENT TO SETTLE ALLEGATIONS THAT MSSB VIOLATEDNASD CONDUCT RULE 3011(A) (FOR CONDUCT ON OR BEFORE DECEMBER31, 2009) AND FINRA RULES 3310(A) (FOR CONDUCT AFTER JANUARY 1,2010) RELATING TO THE ASHEVILLE, NORTH CAROLINA BRANCH OFFICE'SFAILURE TO ADEQUATELY SUPERVISE THE CHECKING ACTIVITIES OF ACLIENT TO DETECT SUSPICIOUS CHECKING ACTIVITY.

Disclosure 16 of 42

i


Allegations: SEC ADMIN RELEASE 34-78021, IA RELEASE 40-4415, JUNE 8, 2016:THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B) AND 21C OF THESECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"), ANDSECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940(THE "ADVISERS ACT"), AGAINST MORGAN STANLEY SMITH BARNEY LLC("MSSB" OR "RESPONDENT").THE PROCEEDING ARISES OUT OF MSSB'S FAILURE TO ADOPT WRITTENPOLICIES AND PROCEDURES REASONABLY DESIGNED TO PROTECTCUSTOMER RECORDS AND INFORMATION, IN VIOLATION OF RULE 30(A) OFREGULATION S-P (17 C.F.R. § 248.30(A)) (THE "SAFEGUARDS RULE"). FROMAT LEAST AUGUST 2001 THROUGH DECEMBER 2014, MSSB STOREDSENSITIVE PERSONALLY IDENTIFIABLE INFORMATION ("PII") OFINDIVIDUALS TO WHOM MSSB PROVIDED BROKERAGE AND INVESTMENTADVISORY SERVICES (REFERRED TO HEREIN AS "CUSTOMERS") ON TWOOF THE FIRM'S APPLICATIONS: THE BUSINESS INFORMATION SYSTEM("BIS") PORTAL AND THE FIXED INCOME DIVISION SELECT ("FID SELECT")PORTAL (COLLECTIVELY, "THE PORTALS"). AN MSSB EMPLOYEE,MISAPPROPRIATED DATA REGARDING APPROXIMATELY 730,000CUSTOMER ACCOUNTS, ASSOCIATED WITH APPROXIMATELY 330,000DIFFERENT HOUSEHOLDS, BY ACCESSING THE PORTALS BETWEEN 2011AND 2014. THE MISAPPROPRIATED DATA INCLUDED PII, SUCH ASCUSTOMERS' FULL NAMES, PHONE NUMBERS, STREET ADDRESSES,ACCOUNT NUMBERS, ACCOUNT BALANCES AND SECURITIES HOLDINGS.BETWEEN APPROXIMATELY DECEMBER 15, 2014 AND FEBRUARY 3, 2015,PORTIONS OF THIS STOLEN DATA WERE POSTED TO AT LEAST THREEINTERNET SITES ALONG WITH AN OFFER TO SELL A LARGER QUANTITY OFSTOLEN DATA IN EXCHANGE FOR PAYMENT IN SPEEDCOINS, A DIGITALCURRENCY. MSSB DISCOVERED THE DATA BREACH THROUGH ONE OF ITSROUTINE INTERNET SWEEPS ON DECEMBER 27, 2014. AFTER COMPARINGCERTAIN DATA REPORTS GENERATED BY THE EMPLOYEE TO THEINFORMATION POSTED ON THE INTERNET, MSSB IDENTIFIED THEEMPLOYEE AS THE LIKELY SOURCE OF THE DATA BREACH. ON DECEMBER29 AND 30, 2014, MSSB INTERVIEWED THE EMPLOYEE, WHOACKNOWLEDGED THAT HE HAD ACCESSED AND DOWNLOADEDCONFIDENTIAL CUSTOMER DATA TO HIS OWN DATA STORAGE DEVICE(HEREAFTER, "PERSONAL SERVER"). THE EMPLOYEE DENIED POSTINGANY OF THE DATA ON THE INTERNET. SUBSEQUENT FORENSIC ANALYSISOF THE EMPLOYEE'S PERSONAL SERVER REVEALED THAT A THIRD PARTYLIKELY HACKED INTO THE PERSONAL SERVER AND COPIED THECONFIDENTIAL CUSTOMER DATA THAT THE EMPLOYEE HADDOWNLOADED FROM THE PORTALS.THE SAFEGUARDS RULE, WHICH THE COMMISSION ADOPTED IN 2000 ANDAMENDED IN 2005, REQUIRES, AMONG OTHERS, EVERY BROKER-DEALERAND INVESTMENT ADVISER REGISTERED WITH THE COMMISSION TOADOPT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNEDTO: (1) INSURE THE SECURITY AND CONFIDENTIALITY OF CUSTOMERRECORDS AND INFORMATION; (2) PROTECT AGAINST ANY ANTICIPATEDTHREATS OR HAZARDS TO THE SECURITY OR INTEGRITY OF CUSTOMERRECORDS AND INFORMATION; AND (3) PROTECT AGAINST UNAUTHORIZEDACCESS TO OR USE OF CUSTOMER RECORDS OR INFORMATION THATCOULD RESULT IN SUBSTANTIAL HARM OR INCONVENIENCE TO ANYCUSTOMER. MSSB VIOLATED THE SAFEGUARDS RULE BECAUSE ITSPOLICIES AND PROCEDURES WERE NOT REASONABLY DESIGNED TOMEET THESE OBJECTIVES BY FAILING TO INCLUDE, FOR EXAMPLE:REASONABLY DESIGNED AND OPERATING AUTHORIZATION MODULES FORTHE PORTALS THAT RESTRICTED EMPLOYEE ACCESS TO ONLY THECONFIDENTIAL CUSTOMER DATA AS TO WHICH SUCH EMPLOYEES HAD ALEGITIMATE BUSINESS NEED; AUDITING AND/OR TESTING OF THEEFFECTIVENESS OF SUCH AUTHORIZATION MODULES; AND MONITORINGAND ANALYSIS OF EMPLOYEE ACCESS TO AND USE OF THE PORTALS.MSSB WILLFULLY VIOLATED RULE 30(A) OF REGULATION S-P (17 C.F.R. §248.30(A)), WHICH REQUIRES EVERY BROKER-DEALER AND INVESTMENTADVISER REGISTERED WITH THE COMMISSION TO ADOPT WRITTENPOLICIES AND PROCEDURES THAT ARE REASONABLY DESIGNED TOSAFEGUARD CUSTOMER RECORDS AND INFORMATION.











SEC ADMIN RELEASE 34-78021, IA RELEASE 40-4415, JUNE 8, 2016:THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B) AND 21C OF THESECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"), ANDSECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940(THE "ADVISERS ACT"), AGAINST MORGAN STANLEY SMITH BARNEY LLC("MSSB" OR "RESPONDENT").THE PROCEEDING ARISES OUT OF MSSB'S FAILURE TO ADOPT WRITTENPOLICIES AND PROCEDURES REASONABLY DESIGNED TO PROTECTCUSTOMER RECORDS AND INFORMATION, IN VIOLATION OF RULE 30(A) OFREGULATION S-P (17 C.F.R. § 248.30(A)) (THE "SAFEGUARDS RULE"). FROMAT LEAST AUGUST 2001 THROUGH DECEMBER 2014, MSSB STOREDSENSITIVE PERSONALLY IDENTIFIABLE INFORMATION ("PII") OFINDIVIDUALS TO WHOM MSSB PROVIDED BROKERAGE AND INVESTMENTADVISORY SERVICES (REFERRED TO HEREIN AS "CUSTOMERS") ON TWOOF THE FIRM'S APPLICATIONS: THE BUSINESS INFORMATION SYSTEM("BIS") PORTAL AND THE FIXED INCOME DIVISION SELECT ("FID SELECT")PORTAL (COLLECTIVELY, "THE PORTALS"). AN MSSB EMPLOYEE,MISAPPROPRIATED DATA REGARDING APPROXIMATELY 730,000CUSTOMER ACCOUNTS, ASSOCIATED WITH APPROXIMATELY 330,000DIFFERENT HOUSEHOLDS, BY ACCESSING THE PORTALS BETWEEN 2011AND 2014. THE MISAPPROPRIATED DATA INCLUDED PII, SUCH ASCUSTOMERS' FULL NAMES, PHONE NUMBERS, STREET ADDRESSES,ACCOUNT NUMBERS, ACCOUNT BALANCES AND SECURITIES HOLDINGS.BETWEEN APPROXIMATELY DECEMBER 15, 2014 AND FEBRUARY 3, 2015,PORTIONS OF THIS STOLEN DATA WERE POSTED TO AT LEAST THREEINTERNET SITES ALONG WITH AN OFFER TO SELL A LARGER QUANTITY OFSTOLEN DATA IN EXCHANGE FOR PAYMENT IN SPEEDCOINS, A DIGITALCURRENCY. MSSB DISCOVERED THE DATA BREACH THROUGH ONE OF ITSROUTINE INTERNET SWEEPS ON DECEMBER 27, 2014. AFTER COMPARINGCERTAIN DATA REPORTS GENERATED BY THE EMPLOYEE TO THEINFORMATION POSTED ON THE INTERNET, MSSB IDENTIFIED THEEMPLOYEE AS THE LIKELY SOURCE OF THE DATA BREACH. ON DECEMBER29 AND 30, 2014, MSSB INTERVIEWED THE EMPLOYEE, WHOACKNOWLEDGED THAT HE HAD ACCESSED AND DOWNLOADEDCONFIDENTIAL CUSTOMER DATA TO HIS OWN DATA STORAGE DEVICE(HEREAFTER, "PERSONAL SERVER"). THE EMPLOYEE DENIED POSTINGANY OF THE DATA ON THE INTERNET. SUBSEQUENT FORENSIC ANALYSISOF THE EMPLOYEE'S PERSONAL SERVER REVEALED THAT A THIRD PARTYLIKELY HACKED INTO THE PERSONAL SERVER AND COPIED THECONFIDENTIAL CUSTOMER DATA THAT THE EMPLOYEE HADDOWNLOADED FROM THE PORTALS.THE SAFEGUARDS RULE, WHICH THE COMMISSION ADOPTED IN 2000 ANDAMENDED IN 2005, REQUIRES, AMONG OTHERS, EVERY BROKER-DEALERAND INVESTMENT ADVISER REGISTERED WITH THE COMMISSION TOADOPT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNEDTO: (1) INSURE THE SECURITY AND CONFIDENTIALITY OF CUSTOMERRECORDS AND INFORMATION; (2) PROTECT AGAINST ANY ANTICIPATEDTHREATS OR HAZARDS TO THE SECURITY OR INTEGRITY OF CUSTOMERRECORDS AND INFORMATION; AND (3) PROTECT AGAINST UNAUTHORIZEDACCESS TO OR USE OF CUSTOMER RECORDS OR INFORMATION THATCOULD RESULT IN SUBSTANTIAL HARM OR INCONVENIENCE TO ANYCUSTOMER. MSSB VIOLATED THE SAFEGUARDS RULE BECAUSE ITSPOLICIES AND PROCEDURES WERE NOT REASONABLY DESIGNED TOMEET THESE OBJECTIVES BY FAILING TO INCLUDE, FOR EXAMPLE:REASONABLY DESIGNED AND OPERATING AUTHORIZATION MODULES FORTHE PORTALS THAT RESTRICTED EMPLOYEE ACCESS TO ONLY THECONFIDENTIAL CUSTOMER DATA AS TO WHICH SUCH EMPLOYEES HAD ALEGITIMATE BUSINESS NEED; AUDITING AND/OR TESTING OF THEEFFECTIVENESS OF SUCH AUTHORIZATION MODULES; AND MONITORINGAND ANALYSIS OF EMPLOYEE ACCESS TO AND USE OF THE PORTALS.MSSB WILLFULLY VIOLATED RULE 30(A) OF REGULATION S-P (17 C.F.R. §248.30(A)), WHICH REQUIRES EVERY BROKER-DEALER AND INVESTMENTADVISER REGISTERED WITH THE COMMISSION TO ADOPT WRITTENPOLICIES AND PROCEDURES THAT ARE REASONABLY DESIGNED TOSAFEGUARD CUSTOMER RECORDS AND INFORMATION.







Cease and Desist




Resolution:


Sanction Details: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER"), WHICH THE COMMISSION HAS DETERMINED TO ACCEPT.MSSB WILLFULLY VIOLATED RULE 30(A) OF REGULATION S-P.IT IS ORDERED THAT MSSB CEASE AND DESIST FROM COMMITTING ORCAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF RULE 30(A)OF REGULATION S-P (17 C.F.R. § 248.30(A)).MSSB IS CENSURED AND SHALL PAY A CIVIL MONEY PENALTY IN THEAMOUNT OF $1,000,000.


No


Order


Allegations: THE SEC FOUND THAT MORGAN STANLEY SMITH BARNEY ("MSSB")WILLFULLY VIOLATED RULE 30(A) OF REGULATION S-P (17 C. F. R. § 248.30(A)) (THE "SAFEGUARDS RULE"). IN PARTICULAR, THE SEC FOUND THAT,PRIOR TO DECEMBER 2014, ALTHOUGH MSSB HAD ADOPTED WRITTENPOLICIES AND PROCEDURES RELATING TO THE PROTECTION OFCUSTOMER RECORDS AND INFORMATION, THOSE POLICIES ANDPROCEDURES WERE NOT REASONABLY DESIGNED TO SAFEGUARD ITSCUSTOMERS' PERSONALLY IDENTIFIABLE INFORMATION AS REQUIRED BYTHE SAFEGUARDS RULE AND THEREFORE FAILED TO PREVENT A MSSBEMPLOYEE, WHO WAS SUBSEQUENTLY TERMINATED, FROMMISAPPROPRIATING CUSTOMER ACCOUNT INFORMATION.







Initiated By: U.S. SECURITIES AND EXCHANGE COMMISSION


Cease and Desist


CENSURE, CIVIL PENALTY






Resolution:


Sanction Details: MSSB CONSENTED, WITHOUT ADMITTING OR DENYING THE FINDINGS, TOA CENSURE, TO CEASE AND DESIST FROM COMMITTING OR CAUSINGFUTURE VIOLATIONS, AND TO PAY A CIVIL PENALTY OF $1,000,000. THECIVIL PENALTY WAS PAID ON JUNE 16, 2016.

Firm Statement IN DETERMINING TO ACCEPT THE OFFER RESULTING IN THE ORDER, THESEC CONSIDERED THE REMEDIAL EFFORTS PROMPTLY UNDERTAKEN BYMSSB AND MSSB'S COOPERATION AFFORDED TO THE SEC STAFF.


Order

Disclosure 17 of 42

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Initiated By: FINRA



Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ACCEPTEDMARKET ORDERS TO PURCHASE SHARES IN NEW ISSUES PRIOR TO THECOMMENCEMENT OF TRADING IN THE SECONDARY MARKET FOR THOSENEW ISSUES.













Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $7,500.FINE PAID IN FULL ON MARCH 23, 2016.


No




Initiated By: FINRA




CENSURE




Other Product Type(s): INITIAL PUBLIC OFFERINGS OF EQUITY SECURITIES

Allegations: FINRA ALLEGED THAT THE FIRM ACCEPTED 30 MARKET ORDERS TOPURCHASE SHARES IN 22 NEW ISSUES PRIOR TO THE COMMENCEMENTOF TRADING IN THE SECONDARY MARKET FOR THOSE NEW ISSUES.








Resolution:


Sanction Details: THE FINE OF $7,500 WAS PAID ON MARCH 23, 2016.

Firm Statement ON FEBRUARY 27, 2016, FINRA AND MORGAN STANLEY SMITH BARNEY,LLC ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") TO SETTLE ALLEGATIONS THAT THE FIRM ACCEPTED 30 MARKETORDERS TO PURCHASE SHARES IN 22 NEW ISSUES PRIOR TO THECOMMENCEMENT OF TRADING IN THE SECONDARY MARKET FOR THOSENEW ISSUES. DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OR LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO THE ENTRY OF FINDINGS, THE IMPOSITION OF ACENSURE AND A FINE OF $7,500.



Disclosure 18 of 42

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Initiated By: FINRA



Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOEXECUTE ORDERS FULLY AND PROMPTLY AND FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS. THE FINDINGS STATED THATTHE FIRM, WHEN IT ACTED AS PRINCIPAL FOR ITS OWN ACCOUNT, FAILEDTO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMER THECORRECT REPORTED TRADE PRICE. THE FINDINGS ALSO STATED THATTHE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOCERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS, AND/ORFINRA RULES, CONCERNING THE HANDLING AND EXECUTION OFCUSTOMER MARKET ORDERS AND THE ACCURACY OF CERTAIN FORMLANGUAGE PRINTED ON THE BACK OF THE FIRM'S CUSTOMERCONFIRMATIONS.














Resolution:

Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES; INTEREST

Sanction Details: THE FIRM WAS CENSURED, FINED $125,000, ORDERED TO PAY $2,056.51,PLUS INTEREST, IN RESTITUTION TO INVESTORS AND REQUIRED TOREVISE ITS WRITTEN SUPERVISORY PROCEDURES.


No




Initiated By: FINRA



Allegations: FINRA ALLEGED THAT THE FIRM FAILED TO EXECUTE ORDERS FULLY ANDPROMPTLY FROM 2011 TO 2013, FAILED TO USE REASONABLE DILIGENCETO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY ORSELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITSCUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILINGMARKET CONDITIONS. FINRA ALSO ALLEGED THE FIRM FAILED TOPROVIDE WRITTEN NOTIFICATION IN ALL INSTANCES DISCLOSING TO ITSCUSTOMERS THE CORRECT TRADE PRICE.













Principal Product Type: Equity Listed (Common & Preferred Stock)



Resolution:


Sanction Details: THE FINE OF $125,000 WAS PAID ON MARCH 21, 2016. RESTITUTION TO BEPAID WITHIN 120 DAYS.

Firm Statement ON FEBRUARY 25, 2016, WITHOUT ADMITTING OR DENYING THE FINDINGS,THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS THAT IT FAILED TO EXECUTE ORDERS FULLY AND PROMPTLYAND FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BESTINTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKETSO THAT THE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLEAS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. THE FINDINGSSTATED THAT THE FIRM, WHEN IT ACTED AS PRINCIPAL FOR ITS OWNACCOUNT, FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TOITS CUSTOMER THE CORRECT REPORTED TRADE PRICE. THE FINDINGSALSO STATED THAT THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDEFOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCEWITH RESPECT TO CERTAIN APPLICABLE SECURITIES LAWS ANDREGULATIONS, AND/OR FINRA RULES, CONCERNING THE HANDLING ANDEXECUTION OF CUSTOMER MARKET ORDERS AND THE ACCURACY OFCERTAIN FORM LANGUAGE PRINTED ON THE BACK OF THE FIRM'SCUSTOMER CONFIRMATIONS. THE FIRM AGREED TO PAY A FINE OF$125,000, TO PAY RESTITUTION OF $2056.51 AND TO AMEND ITS WRITTENSUPERVISORY PROCEDURES.



Disclosure 19 of 42

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Initiated By: FINRA







Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOTRANSMIT 170,869 REPORTABLE ORDER EVENTS (ROES) TO THE ORDERAUDIT TRAIL SYSTEM (OATS) ON 377 BUSINESS DAYS. THE FINDINGSSTATED THAT THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FORSUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITHRESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS, ANDFINRA RULES, CONCERNING OATS REPORTING.


Resolution:

Other Sanctions Ordered: UNDERTAKING: REQUIRED TO REVISE THE FIRM'S WRITTENSUPERVISORY PROCEDURES

Sanction Details: THE FIRM WAS CENSURED, FINED $20,000 AND UNDERTAKES TO REVISEITS WRITTEN SUPERVISORY PROCEDURES. FINE PAID IN FULL JANUARY 6,2016.


No




Allegations: FINRA'S DEPARTMENT OF MARKET REGULATION (THE STAFF) ALLEGEDTHAT FOR THE PERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2014, THEFIRM FAILED TO TRANSMIT 170,869 REPORTABLE ORDER EVENTS TO OATSON 377 BUSINESS DAYS AND THAT THE FIRM'S SUPERVISORY SYSTEM DIDNOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS ANDREGULATIONS, AND FINRA RULES, CONCERNING OATS. THE STAFFALLEGED VIOLATIONS OF FINRA RULES 7450 AND 2010 AND NASD RULE3010.








Initiated By: FINRA




CENSURE




Other Product Type(s): AGENCY DEBT

Allegations: FINRA'S DEPARTMENT OF MARKET REGULATION (THE STAFF) ALLEGEDTHAT FOR THE PERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2014, THEFIRM FAILED TO TRANSMIT 170,869 REPORTABLE ORDER EVENTS TO OATSON 377 BUSINESS DAYS AND THAT THE FIRM'S SUPERVISORY SYSTEM DIDNOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS ANDREGULATIONS, AND FINRA RULES, CONCERNING OATS. THE STAFFALLEGED VIOLATIONS OF FINRA RULES 7450 AND 2010 AND NASD RULE3010.


Resolution:

Other Sanctions Ordered: UNDERTAKING TO REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES.

Sanction Details: THE FINE OF $20,000 WAS PAID ON OR ABOUT JANUARY 6, 2016.

Firm Statement ON DECEMBER 16, 2015, FINRA AND MORGAN STANLEY SMITH BARNEYLLC ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT(AWC) TO SETTLE ALLEGATIONS RELATED TO TRADE REPORTING.SPECIFICALLY, THE STAFF CONDUCTED A REVIEW OF THE FIRM'SCOMPLIANCE WITH OATS REPORTING REQUIREMENTS AND RELATEDSUPERVISION. AS A RESULT, THE STAFF ALLEGED THAT DURING THEPERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2014, THE FIRM FAILEDTO TRANSMIT 170,869 REPORTABLE ORDER EVENTS TO OATS ON 377BUSINESS DAYS. THE STAFF ALSO ALLEGED THAT THE FIRM'SSUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND FINRARULES, CONCERNING OATS. WITHOUT ADMITTING OR DENYING THEFINDINGS, THE FIRM ACCEPTED AND CONSENTED TO THE ENTRY OFFINDINGS THAT THE ABOVE VIOLATED FINRA RULES 7450 AND 2010 ANDNASD RULE 3010. THE FIRM ALSO AGREED TO (1) PAY A FINE IN THEAMOUNT OF $20,000 AND (2) REVISE ITS WRITTEN POLICIES ANDPROCEDURES REGARDING OATS.








ON DECEMBER 16, 2015, FINRA AND MORGAN STANLEY SMITH BARNEYLLC ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT(AWC) TO SETTLE ALLEGATIONS RELATED TO TRADE REPORTING.SPECIFICALLY, THE STAFF CONDUCTED A REVIEW OF THE FIRM'SCOMPLIANCE WITH OATS REPORTING REQUIREMENTS AND RELATEDSUPERVISION. AS A RESULT, THE STAFF ALLEGED THAT DURING THEPERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2014, THE FIRM FAILEDTO TRANSMIT 170,869 REPORTABLE ORDER EVENTS TO OATS ON 377BUSINESS DAYS. THE STAFF ALSO ALLEGED THAT THE FIRM'SSUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND FINRARULES, CONCERNING OATS. WITHOUT ADMITTING OR DENYING THEFINDINGS, THE FIRM ACCEPTED AND CONSENTED TO THE ENTRY OFFINDINGS THAT THE ABOVE VIOLATED FINRA RULES 7450 AND 2010 ANDNASD RULE 3010. THE FIRM ALSO AGREED TO (1) PAY A FINE IN THEAMOUNT OF $20,000 AND (2) REVISE ITS WRITTEN POLICIES ANDPROCEDURES REGARDING OATS.

Disclosure 20 of 42

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Initiated By: FINRA







Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT PERMITTEDSEVEN QUARTERLY STOCK DIVIDEND INCOME CHECKS TOTALING$2,716.60, RECEIVED FROM AN ISSUER AND PAYABLE TO A THIRD PARTY,TO BE DEPOSITED INTO THE PERSONAL BROKERAGE ACCOUNT OF AREGISTERED REPRESENTATIVE. THE FINDINGS STATED THAT THE FIRMAPPROVED THE DEPOSIT OF THESE CHECKS INTO THEREPRESENTATIVE'S ACCOUNT WITHOUT OBTAINING A LETTER OFAUTHORIZATION FROM THE THIRD PARTY PAYEE, WHICH WAS REQUIREDBY THE FIRM'S WRITTEN PROCEDURES.



Resolution:


No










Sanction Details: THE FIRM WAS CENSURED AND FINED $25,000. FINE PAID IN FULL ONSEPTEMBER 3, 2015.



Initiated By: FINRA




CENSURE





Allegations: BETWEEN JULY 3, 2009, AND JANUARY 4, 2011, MSSB APPROVED THEDEPOSIT OF THIRD-PARTY CHECKS TOTALING $2,716.60 INTO THEBROKERAGE ACCOUNT OF A FORMER REGISTERED REPRESENTATIVEWITHOUT OBTAINING A LETTER OF AUTHORIZATION FROM THE THIRD-PARTY PAYEE AS REQUIRED BY THE FIRM'S WRITTEN PROCEDURES,WHICH FINRA ALLEGED VIOLATED NASD RULE 3010(B) AND FINRA RULE2010.



Resolution:


Sanction Details: THE $25,000 FINE WAS PAID ON SEPTEMBER 2, 2015.

Firm Statement ON AUGUST 14, 2015, FINRA ACCEPTED MORGAN STANLEY SMITHBARNEY'S LETTER OF ACCEPTANCE, WAIVER AND CONSENT INCONNECTION WITH FINRA'S ALLEGATIONS THAT ALLOWING THE DEPOSITOF THIRD-PARTY CHECKS WITHOUT AUTHORIZATION FROM THE THIRD-PARTY VIOLATED NASD RULE 3010(B) AND FINRA RULE 2010. THE FIRMPAID THE $25,000 FINE ON SEPTEMBER 2, 2015 AND HAS BEEN CENSURED.








www.finra.org/brokercheck User GuidanceON AUGUST 14, 2015, FINRA ACCEPTED MORGAN STANLEY SMITHBARNEY'S LETTER OF ACCEPTANCE, WAIVER AND CONSENT INCONNECTION WITH FINRA'S ALLEGATIONS THAT ALLOWING THE DEPOSITOF THIRD-PARTY CHECKS WITHOUT AUTHORIZATION FROM THE THIRD-PARTY VIOLATED NASD RULE 3010(B) AND FINRA RULE 2010. THE FIRMPAID THE $25,000 FINE ON SEPTEMBER 2, 2015 AND HAS BEEN CENSURED.

Disclosure 21 of 42

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS AND BRANCH CHECK DISBURSEMENTSFROM CUSTOMER ACCOUNTS. THE FINDINGS STATED THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE SUPERVISORY SYSTEMSAND WRITTEN PROCEDURES THAT WERE REASONABLY DESIGNED TOREVIEW AND MONITOR THE TRANSMITTALS OF FUNDS FROM CUSTOMERACCOUNTS TO THIRD-PARTY ACCOUNTS AND OUTSIDE ENTITIES. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAINAND ENFORCE SUPERVISORY SYSTEMS AND WRITTEN PROCEDURESTHAT WERE REASONABLY DESIGNED TO REVIEW THE CODING ANDACCEPTANCE OF MONEY ORDERS RECEIVED FOR DEPOSIT INTOCUSTOMER ACCOUNTS. SPECIFICALLY, THE FIRM FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING AND ACCEPTANCE OF MONEY ORDERS WHICHWERE DEPOSITED INTO CUSTOMER ACCOUNTS. AS A RESULT, THREE OFTHE FIRM'S REGISTERED REPRESENTATIVES IN TWO DIFFERENT BRANCHOFFICES WERE ABLE TO CONVERT, COLLECTIVELY, $494,400 FROMTHIRTEEN CUSTOMERS OF THE FIRM THROUGH FRAUDULENT WIRETRANSFERS AND BRANCH CHECKS SENT FROM THE CUSTOMERS'ACCOUNTS TO THIRD-PARTY ACCOUNTS. DURING THIS PERIOD, THE FIRMHAD NO SUPERVISORY SYSTEMS OR WRITTEN PROCEDURES TO DETECTAND MONITOR THE DISBURSEMENT OF FUNDS FROM UNRELATEDCUSTOMERS' ACCOUNTS TO A COMMON THIRD-PARTY ACCOUNT. FOREXAMPLE, THE FIRM'S SYSTEMS DID NOT INCLUDE ANY EXCEPTIONREPORTS THAT WOULD HAVE IDENTIFIED MULTIPLE CUSTOMER WIRETRANSFERS GOING TO THE SAME THIRD-PARTY ACCOUNT. ALSO, THEFIRM'S SUPERVISORY SYSTEMS AND WRITTEN PROCEDURES DID NOTADDRESS THE COMPARING OF CUSTOMERS' SIGNATURES ON OUTGOINGWIRE TRANSFER REQUEST FORMS WITH SIGNATURES ON FILE.HOWEVER, THEREAFTER, THE FIRM IMPLEMENTED PROCEDURESREQUIRING SUPERVISORS TO COMPARE AND AUTHENTICATE CUSTOMERSIGNATURES ON CERTAIN OUTGOING WIRE TRANSFER REQUEST FORMSFOR WIRE TRANSFER REQUESTS GREATER THAN $100,000. AFTERDISCOVERING THE MISCONDUCT, THE FIRM REPAID THE AFFECTEDCUSTOMERS. ALSO, THE FIRM IMPLEMENTED A REPORT TO DETECT WIRETRANSFERS FROM UNRELATED CUSTOMER ACCOUNTS TO A COMMONTHIRD-PARTY ACCOUNT. THE FIRM TERMINATED THE REPRESENTATIVESAND THEY WERE BARRED BY FINRA.







Initiated By: FINRA







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS AND BRANCH CHECK DISBURSEMENTSFROM CUSTOMER ACCOUNTS. THE FINDINGS STATED THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE SUPERVISORY SYSTEMSAND WRITTEN PROCEDURES THAT WERE REASONABLY DESIGNED TOREVIEW AND MONITOR THE TRANSMITTALS OF FUNDS FROM CUSTOMERACCOUNTS TO THIRD-PARTY ACCOUNTS AND OUTSIDE ENTITIES. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAINAND ENFORCE SUPERVISORY SYSTEMS AND WRITTEN PROCEDURESTHAT WERE REASONABLY DESIGNED TO REVIEW THE CODING ANDACCEPTANCE OF MONEY ORDERS RECEIVED FOR DEPOSIT INTOCUSTOMER ACCOUNTS. SPECIFICALLY, THE FIRM FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING AND ACCEPTANCE OF MONEY ORDERS WHICHWERE DEPOSITED INTO CUSTOMER ACCOUNTS. AS A RESULT, THREE OFTHE FIRM'S REGISTERED REPRESENTATIVES IN TWO DIFFERENT BRANCHOFFICES WERE ABLE TO CONVERT, COLLECTIVELY, $494,400 FROMTHIRTEEN CUSTOMERS OF THE FIRM THROUGH FRAUDULENT WIRETRANSFERS AND BRANCH CHECKS SENT FROM THE CUSTOMERS'ACCOUNTS TO THIRD-PARTY ACCOUNTS. DURING THIS PERIOD, THE FIRMHAD NO SUPERVISORY SYSTEMS OR WRITTEN PROCEDURES TO DETECTAND MONITOR THE DISBURSEMENT OF FUNDS FROM UNRELATEDCUSTOMERS' ACCOUNTS TO A COMMON THIRD-PARTY ACCOUNT. FOREXAMPLE, THE FIRM'S SYSTEMS DID NOT INCLUDE ANY EXCEPTIONREPORTS THAT WOULD HAVE IDENTIFIED MULTIPLE CUSTOMER WIRETRANSFERS GOING TO THE SAME THIRD-PARTY ACCOUNT. ALSO, THEFIRM'S SUPERVISORY SYSTEMS AND WRITTEN PROCEDURES DID NOTADDRESS THE COMPARING OF CUSTOMERS' SIGNATURES ON OUTGOINGWIRE TRANSFER REQUEST FORMS WITH SIGNATURES ON FILE.HOWEVER, THEREAFTER, THE FIRM IMPLEMENTED PROCEDURESREQUIRING SUPERVISORS TO COMPARE AND AUTHENTICATE CUSTOMERSIGNATURES ON CERTAIN OUTGOING WIRE TRANSFER REQUEST FORMSFOR WIRE TRANSFER REQUESTS GREATER THAN $100,000. AFTERDISCOVERING THE MISCONDUCT, THE FIRM REPAID THE AFFECTEDCUSTOMERS. ALSO, THE FIRM IMPLEMENTED A REPORT TO DETECT WIRETRANSFERS FROM UNRELATED CUSTOMER ACCOUNTS TO A COMMONTHIRD-PARTY ACCOUNT. THE FIRM TERMINATED THE REPRESENTATIVESAND THEY WERE BARRED BY FINRA.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $650,000.FINED PAID IN FULL ON JUNE 23, 2015.


No




Allegations: FINRA ALLEGED THAT FROM AT LEAST JUNE 2009 - NOVEMBER 2014, MSSBFAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS AND BRANCH CHECK DISBURSEMENTSFROM CUSTOMER ACCOUNTS. FINRA ALSO ALLEGED THAT FROM ATLEAST JUNE 2009 - SEPTEMBER 2011, MSSB FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING OF MONEY ORDERS WHICH WERE DEPOSITED INTOCUSTOMER ACCOUNTS.








Initiated By: FINRA




CENSURE





FINRA ALLEGED THAT FROM AT LEAST JUNE 2009 - NOVEMBER 2014, MSSBFAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS AND BRANCH CHECK DISBURSEMENTSFROM CUSTOMER ACCOUNTS. FINRA ALSO ALLEGED THAT FROM ATLEAST JUNE 2009 - SEPTEMBER 2011, MSSB FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING OF MONEY ORDERS WHICH WERE DEPOSITED INTOCUSTOMER ACCOUNTS.


Resolution:


Sanction Details: THE FINE OF $650,000 WAS PAID ON JUNE 23, 2015.

Firm Statement ON JUNE 22, 2015, FINRA & MSSB ENTERED INTO A LETTER OFACCEPTANCE, WAIVER AND CONSENT (AWC) TO SETTLE ALLEGATIONSTHAT MSSB FAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS & BRANCH CHECK DISBURSEMENTS FROMCUSTOMER ACCOUNTS. THE FINDINGS STATE THAT MSSB'S SYSTEMS ANDWRITTEN PROCEDURES WERE NOT REASONABLY DESIGNED TO REVIEWAND MONITOR THE TRANSMITTALS OF FUNDS FROM CUSTOMERACCOUNTS TO THIRD-PARTY ACCOUNTS AND OUTSIDE ENTITIES. THEAWC ALSO SETTLED ALLEGATIONS THAT MSSB FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING AND ACCEPTANCE OF MONEY ORDERS WHICHWERE DEPOSITED INTO CUSTOMER ACCOUNTS. THE FINDINGS STATETHAT, AS A RESULT, THREE OF THE FIRM'S REGISTEREDREPRESENTATIVES IN TWO DIFFERENT BRANCH OFFICES WERE ABLE TOCONVERT, COLLECTIVELY, $494,000 FROM THIRTEEN CUSTOMERSTHROUGH FRAUDULENT WIRE TRANSFERS AND BRANCH CHECKS SENTFROM THE CUSTOMERS' ACCOUNTS TO THIRD-PARTY ACCOUNTS. AFTERDISCOVERING THE MISCONDUCT, MSSB REPAID THE AFFECTEDCUSTOMERS AND TERMINATED THE REPRESENTATIVES. THE FINDINGSNOTE THAT, THEREAFTER, MSSB IMPLEMENTED ADDITIONALPROCEDURES INCLUDING A REPORT TO DETECT WIRE TRANSFERS FROMUNRELATED CUSTOMER ACCOUNTS TO A COMMON THIRD-PARTYACCOUNT. WITHOUT ADMITTING OR DENYING THE FINDINGS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, MSSBACCEPTED AND CONSENTED TO THE ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND FINE OF $650,000.









ON JUNE 22, 2015, FINRA & MSSB ENTERED INTO A LETTER OFACCEPTANCE, WAIVER AND CONSENT (AWC) TO SETTLE ALLEGATIONSTHAT MSSB FAILED TO ESTABLISH, MAINTAIN AND ENFORCE REASONABLESUPERVISORY SYSTEMS AND WRITTEN PROCEDURES REGARDINGOUTGOING WIRE TRANSFERS & BRANCH CHECK DISBURSEMENTS FROMCUSTOMER ACCOUNTS. THE FINDINGS STATE THAT MSSB'S SYSTEMS ANDWRITTEN PROCEDURES WERE NOT REASONABLY DESIGNED TO REVIEWAND MONITOR THE TRANSMITTALS OF FUNDS FROM CUSTOMERACCOUNTS TO THIRD-PARTY ACCOUNTS AND OUTSIDE ENTITIES. THEAWC ALSO SETTLED ALLEGATIONS THAT MSSB FAILED TO ESTABLISH,MAINTAIN AND ENFORCE REASONABLE SUPERVISORY SYSTEMS ANDWRITTEN PROCEDURES REGARDING ITS THIRD-PARTY SERVICEPROVIDER'S CODING AND ACCEPTANCE OF MONEY ORDERS WHICHWERE DEPOSITED INTO CUSTOMER ACCOUNTS. THE FINDINGS STATETHAT, AS A RESULT, THREE OF THE FIRM'S REGISTEREDREPRESENTATIVES IN TWO DIFFERENT BRANCH OFFICES WERE ABLE TOCONVERT, COLLECTIVELY, $494,000 FROM THIRTEEN CUSTOMERSTHROUGH FRAUDULENT WIRE TRANSFERS AND BRANCH CHECKS SENTFROM THE CUSTOMERS' ACCOUNTS TO THIRD-PARTY ACCOUNTS. AFTERDISCOVERING THE MISCONDUCT, MSSB REPAID THE AFFECTEDCUSTOMERS AND TERMINATED THE REPRESENTATIVES. THE FINDINGSNOTE THAT, THEREAFTER, MSSB IMPLEMENTED ADDITIONALPROCEDURES INCLUDING A REPORT TO DETECT WIRE TRANSFERS FROMUNRELATED CUSTOMER ACCOUNTS TO A COMMON THIRD-PARTYACCOUNT. WITHOUT ADMITTING OR DENYING THE FINDINGS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, MSSBACCEPTED AND CONSENTED TO THE ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND FINE OF $650,000.

Disclosure 22 of 42

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Initiated By: FINRA







Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN SEVENPAIRS OF TRANSACTIONS, THE FIRM SOLD MUNICIPAL SECURITIES FORITS OWN ACCOUNT TO A CUSTOMER AT AN AGGREGATE PRICE(INCLUDING ANY MARKUP) THAT WAS NOT FAIR AND REASONABLE,TAKING INTO CONSIDERATION ALL RELEVANT FACTORS, INCLUDING THEBEST JUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIESDEALER AS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIMEOF THE TRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADEDIN CONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER,OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THETOTAL AMOUNT OF THE TRANSACTION.



Resolution:


No









Sanction Details: THE FIRM WAS CENSURED, FINED $12,500 AND ORDERED TO PAY$2,641.16, PLUS INTEREST, IN RESTITUTION TO INVESTORS.FINE PAID IN FULL ON JUNE 30, 2015.


No



Initiated By: FINRA




CENSURE, RESTITUTION





Allegations: FINRA ALLEGED THAT THE FIRM'S PRICING WITH RESPECT TO SEVENMUNICIPAL BOND TRANSACTIONS DURING THE SECOND QUARTER OF2012 WERE VIOLATIVE OF MSRB RULES G-17 AND G-30(A).



Resolution:

Other Sanctions Ordered: DISGORGEMENT/RESTITUTION: $2,641.16 PLUS INTEREST.

Sanction Details: THE FINE OF $12,500 WAS PAID ON JUNE 29, 2015. THE FIRM IS IN THEPROCESS OF COMPLETING ITS RESTITUTION AND INTEREST PAYMENTS.

Sanctions Ordered: Monetary/Fine $12,500.00Disgorgement/Restitution








Firm Statement ON JUNE 9, 2015, MORGAN STANLEY SMITH BARNEY AND FINRA ENTEREDINTO A LETTER OF ACCEPTANCE WAIVER AND CONSENT (AWC) TO SETTLEALLEGATIONS THAT THE FIRM'S PRICING WITH RESPECT TO SEVENMUNICIPAL BOND TRANSACTIONS DURING THE SECOND QUARTER OF2012 WERE VIOLATIVE OF MSRB RULES G-17 AND G-30(A). WITHOUTADMITTING OR DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSUREAND FINE OF $12,500 WITH RESTITUTION OF $2,642.16, PLUS INTEREST.

Disclosure 23 of 42

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMEXECUTED LONG SALE TRANSACTIONS IN NMS SECURITIES ANDREPORTED EACH OF THESE TRANSACTIONS TO FINRA WITH A SHORTEXEMPT MODIFIER IN RELIANCE UPON PROVISIONS SET FORTH IN SECREGULATION SHO RULE 201(D), WHEN SUCH PROVISIONS WERE NOTAPPLICABLE. THE FIRM EXECUTED SHORT SALE TRANSACTIONS IN OTCEQUITY SECURITIES AND INCORRECTLY REPORTED EACH OF THESETRANSACTIONS TO FINRA WITH A SHORT EXEMPT MODIFIER. THEFINDINGS STATED THAT THE FIRM EXECUTED SHORT SALE ORDERS ANDIMPROPERLY MARKED THE ORDERS AS SHORT EXEMPT. THE FINDINGSALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN ANDENFORCE WRITTEN SUPERVISORY PROCEDURES REASONABLYDESIGNED TO ENSURE THAT ORDERS MARKED AS SHORT EXEMPTCOMPLIED WITH THE PROVISIONS OF SEC RULE 201(C) OF REGULATIONSHO. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO REPORTTHE CORRECT TIME OF TRADE EXECUTION TO THE REAL-TIMETRANSACTION REPORTING SYSTEM (RTRS) IN REPORTS OFTRANSACTIONS IN MUNICIPAL SECURITIES AND FAILED TO SHOW THECORRECT TIME OF TRADE EXECUTION ON THE MEMORANDUM. THE FIRMALSO FAILED TO REPORT INFORMATION ABOUT SOME OF THESE SAMETRANSACTIONS WITHIN 15 MINUTES OF TIME OF TRADE TO AN RTRSPORTAL. FINRA FOUND THAT THE FIRM FAILED TO REPORT TO THE TRADEREPORTING AND COMPLIANCE ENGINE (TRACE) THE CORRECT TIME OFTRADE EXECUTION FOR TRANSACTIONS IN TRACE-ELIGIBLE SECURITIZEDPRODUCTS AND FAILED TO SHOW THE CORRECT TIME OF TRADEEXECUTION ON THE MEMORANDUM FOR THESE SAME BROKERAGEORDERS. IN ADDITION, FINRA DETERMINED THAT THE FIRM FAILED TOREPORT TO TRACE TRANSACTIONS IN TRACE-ELIGIBLE AGENCY BONDSWITHIN 15 MINUTES OF THE TIME OF EXECUTION. MOREOVER, FINRAFOUND THAT THE FIRM FAILED TO REPORT THE CORRECT MARKETIDENTIFIER FOR S1 AND P1 TRANSACTIONS INVOLVING AGENCY BONDS.FURTHERMORE, FINRA FOUND THAT THE FIRM FAILED TO REPORT TOTRACE LARGE BLOCK S1 TRANSACTIONS IN CORPORATE AND AGENCYBONDS WITHIN 15 MINUTES OF THE TIME OF EXECUTION. THE FINDINGSALSO STATED THAT THE FIRM FAILED TO REPORT TO TRACETRANSACTIONS IN TRACE-ELIGIBLE SECURITIZED PRODUCTS WITHIN THETIME REQUIRED BY FINRA RULE 6730.







Initiated By: FINRA







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMEXECUTED LONG SALE TRANSACTIONS IN NMS SECURITIES ANDREPORTED EACH OF THESE TRANSACTIONS TO FINRA WITH A SHORTEXEMPT MODIFIER IN RELIANCE UPON PROVISIONS SET FORTH IN SECREGULATION SHO RULE 201(D), WHEN SUCH PROVISIONS WERE NOTAPPLICABLE. THE FIRM EXECUTED SHORT SALE TRANSACTIONS IN OTCEQUITY SECURITIES AND INCORRECTLY REPORTED EACH OF THESETRANSACTIONS TO FINRA WITH A SHORT EXEMPT MODIFIER. THEFINDINGS STATED THAT THE FIRM EXECUTED SHORT SALE ORDERS ANDIMPROPERLY MARKED THE ORDERS AS SHORT EXEMPT. THE FINDINGSALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN ANDENFORCE WRITTEN SUPERVISORY PROCEDURES REASONABLYDESIGNED TO ENSURE THAT ORDERS MARKED AS SHORT EXEMPTCOMPLIED WITH THE PROVISIONS OF SEC RULE 201(C) OF REGULATIONSHO. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO REPORTTHE CORRECT TIME OF TRADE EXECUTION TO THE REAL-TIMETRANSACTION REPORTING SYSTEM (RTRS) IN REPORTS OFTRANSACTIONS IN MUNICIPAL SECURITIES AND FAILED TO SHOW THECORRECT TIME OF TRADE EXECUTION ON THE MEMORANDUM. THE FIRMALSO FAILED TO REPORT INFORMATION ABOUT SOME OF THESE SAMETRANSACTIONS WITHIN 15 MINUTES OF TIME OF TRADE TO AN RTRSPORTAL. FINRA FOUND THAT THE FIRM FAILED TO REPORT TO THE TRADEREPORTING AND COMPLIANCE ENGINE (TRACE) THE CORRECT TIME OFTRADE EXECUTION FOR TRANSACTIONS IN TRACE-ELIGIBLE SECURITIZEDPRODUCTS AND FAILED TO SHOW THE CORRECT TIME OF TRADEEXECUTION ON THE MEMORANDUM FOR THESE SAME BROKERAGEORDERS. IN ADDITION, FINRA DETERMINED THAT THE FIRM FAILED TOREPORT TO TRACE TRANSACTIONS IN TRACE-ELIGIBLE AGENCY BONDSWITHIN 15 MINUTES OF THE TIME OF EXECUTION. MOREOVER, FINRAFOUND THAT THE FIRM FAILED TO REPORT THE CORRECT MARKETIDENTIFIER FOR S1 AND P1 TRANSACTIONS INVOLVING AGENCY BONDS.FURTHERMORE, FINRA FOUND THAT THE FIRM FAILED TO REPORT TOTRACE LARGE BLOCK S1 TRANSACTIONS IN CORPORATE AND AGENCYBONDS WITHIN 15 MINUTES OF THE TIME OF EXECUTION. THE FINDINGSALSO STATED THAT THE FIRM FAILED TO REPORT TO TRACETRANSACTIONS IN TRACE-ELIGIBLE SECURITIZED PRODUCTS WITHIN THETIME REQUIRED BY FINRA RULE 6730.


Resolution:

Other Sanctions Ordered: UNDERTAKING

Sanction Details: THE FIRM WAS CENSURED, FINED $225,000, AND UNDERTAKES TO REVISEITS WSPS TO ADDRESS THE DEFICIENCIES DESCRIBED IN THE AWC. FINEPAID IN FULL IN 5/26/2015


No




Allegations: FINRA ALLEGED THAT THE FIRM SUBMITTED LATE, INCOMPLETE AND/ORINACCURATE TRADE REPORTS FOR CERTAIN TRACE-ELIGIBLESECURITIES FROM 1Q12 THROUGH 3Q2014 AND TO THE RTRS SYSTEMDURING 1Q13. FINRA ALSO ALLEGED THAT THE FIRM INCORRECTLYREPORTED CERTAIN SHORT SALE TRANSACTIONS WITH A SHORT EXEMPTMODIFIER FROM 1Q11 THROUGH 2Q12.








Initiated By: FINRA




CENSURE AND A MANDATORY REVISION OF THE FIRM'S WRITTENSUPERVISORY PROCEDURES TO ENSURE COMPLIANCE WITH SEC RULE201(C).




Other Product Type(s): DEBT (AGENCY, SECURITIZED PRODUCTS, CORPORATE), EQUITY LISTEDAND EQUITY OTC

FINRA ALLEGED THAT THE FIRM SUBMITTED LATE, INCOMPLETE AND/ORINACCURATE TRADE REPORTS FOR CERTAIN TRACE-ELIGIBLESECURITIES FROM 1Q12 THROUGH 3Q2014 AND TO THE RTRS SYSTEMDURING 1Q13. FINRA ALSO ALLEGED THAT THE FIRM INCORRECTLYREPORTED CERTAIN SHORT SALE TRANSACTIONS WITH A SHORT EXEMPTMODIFIER FROM 1Q11 THROUGH 2Q12.


Resolution:

Other Sanctions Ordered: MANDATORY REVISION OF THE FIRM'S WRITTEN SUPERVISORYPROCEDURES TO ENSURE COMPLIANCE WITH SEC RULE 201(C).

Sanction Details: FINE WAS PAID ON 05/21/2015.

Firm Statement ON MAY 13, 2015, FINRA AND MORGAN STANLEY SMITH BARNEY, LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") TO SETTLE ALLEGATIONS THAT THE FIRM: (1) VIOLATED FINRARULES 2010, 4511, 6730 AND SEC RULE 17A-3 BY SUBMITTING LATE,INCOMPLETE AND/OR INACCURATE REPORTS FOR CERTAIN TRACE-ELIGIBLE SECURITIES FROM 1Q12 THROUGH 3Q2014; (2) VIOLATED MSRBRULE G-14 AND G-8 BY SUBMITTING INACCURATE AND/OR LATE TRADEREPORTS TO THE RTRS SYSTEM FOR CERTAIN TRANSACTIONS DURING1Q13. DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OR LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO THE ENTRY OF FINDINGS, THE IMPOSITION OF ACENSURE AND A FINE OF $225,000, AND AGREED TO REVISE ITS WRITTENSUPERVISORY PROCEDURES ("WSPS") TO ENSURE COMPLIANCE WITHSEC RULE 201(C); AND (3) VIOLATED FINRA RULES 6182, 6624, SEC RULE200(G) BY INCORRECTLY REPORTING CERTAIN SHORT SALETRANSACTIONS WITH A SHORT EXEMPT MODIFIER AND, WITH RESPECTTO THE SHORT SALE TRANSACTIONS ONLY, FAILING TO MAINTAIN WSPSREASONABLY DESIGNED TO ENSURE THAT ORDERS MARKED AS SHORTEXEMPT COMPLIED WITH SEC RULE 201(C).








ON MAY 13, 2015, FINRA AND MORGAN STANLEY SMITH BARNEY, LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") TO SETTLE ALLEGATIONS THAT THE FIRM: (1) VIOLATED FINRARULES 2010, 4511, 6730 AND SEC RULE 17A-3 BY SUBMITTING LATE,INCOMPLETE AND/OR INACCURATE REPORTS FOR CERTAIN TRACE-ELIGIBLE SECURITIES FROM 1Q12 THROUGH 3Q2014; (2) VIOLATED MSRBRULE G-14 AND G-8 BY SUBMITTING INACCURATE AND/OR LATE TRADEREPORTS TO THE RTRS SYSTEM FOR CERTAIN TRANSACTIONS DURING1Q13. DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OR LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO THE ENTRY OF FINDINGS, THE IMPOSITION OF ACENSURE AND A FINE OF $225,000, AND AGREED TO REVISE ITS WRITTENSUPERVISORY PROCEDURES ("WSPS") TO ENSURE COMPLIANCE WITHSEC RULE 201(C); AND (3) VIOLATED FINRA RULES 6182, 6624, SEC RULE200(G) BY INCORRECTLY REPORTING CERTAIN SHORT SALETRANSACTIONS WITH A SHORT EXEMPT MODIFIER AND, WITH RESPECTTO THE SHORT SALE TRANSACTIONS ONLY, FAILING TO MAINTAIN WSPSREASONABLY DESIGNED TO ENSURE THAT ORDERS MARKED AS SHORTEXEMPT COMPLIED WITH SEC RULE 201(C).

Disclosure 24 of 42

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOHAVE ADEQUATE SUPERVISORY PROCEDURES TO ADDRESS SHORTPOSITIONS IN TAX-EXEMPT MUNICIPAL BONDS THAT RESULTED PRIMARILYFROM TRADING ERRORS AT THE FIRM'S RETAIL BRANCHES. AS A RESULTOF THESE SUPERVISORY FAILURES, THE FIRM INACCURATELYREPRESENTED TO AT LEAST 1,500 CUSTOMERS THAT AT LEAST $880,000IN INTEREST THAT THE FIRM PAID TO THOSE CUSTOMERS WAS EXEMPTFROM TAXATION. IN FACT, THE FIRM DID NOT HOLD THE BONDS ONBEHALF OF THE CUSTOMERS AND THE INTEREST THAT THE CUSTOMERSRECEIVED WAS PAID BY THE FIRM AND THUS TAXABLE AS ORDINARYINCOME. THIS RESULTED IN THE UNDERPAYMENT OF AT LEAST $358,000 INFEDERAL INCOME TAXES. AT ONE POINT, THE FIRM RECOGNIZED THATSHORT POSITIONS WERE NOT BEING COVERED IN A TIMELY FASHION.HOWEVER, THE FIRM DID NOT PROVIDE ADEQUATE GUIDANCE OROVERSIGHT ON HOW AND WHEN THE MUNICIPAL SHORT POSITIONSSHOULD BE COVERED. THIS DEFICIENCY WAS MAGNIFIED BECAUSE OFTHE DIFFICULTY OF COVERING THESE POSITIONS IN LIGHT OF THEMARKET STRUCTURE AND ILLIQUIDITY OF MUNICIPAL BONDS. THUS, THEFIRM OFTEN DID NOT COVER MUNICIPAL SHORT POSITIONS FOR A MONTHOR MORE, AND SOME OF THE SHORT POSITIONS WERE NOT COVEREDFOR YEARS. THE FINDINGS STATED THAT THE FIRM FAILED TOREASONABLY SUPERVISE, IMPLEMENT ADEQUATE WRITTENPROCEDURES, OR MAINTAIN A SUPERVISORY SYSTEM THAT WASREASONABLY DESIGNED TO ENSURE COMPLIANCE WITH MSRB RULESWHEN THE FIRM MAINTAINED SHORT POSITIONS IN MUNICIPALSECURITIES AND PAID TAXABLE SUBSTITUTE INTEREST TO ITSCUSTOMERS. AS A RESULT, THE FIRM MISCHARACTERIZED AT LEAST$880,000 IN INTEREST THAT THE FIRM HAD PAID TO ITS CUSTOMERS ASEXEMPT FROM TAXATION. THE FINDINGS ALSO STATED THAT THE FIRMMISSTATED TO AT LEAST 1,500 CUSTOMERS THAT THE INTEREST THECUSTOMERS WERE RECEIVING WAS TAX EXEMPT, AND ALSO FAILED TODISCLOSE THAT THE INTEREST THEY WERE RECEIVING WAS NOTENTITLED TO TAX EXEMPT STATUS. THE FINDINGS ALSO INCLUDED THATTHE FIRM SENT ACCOUNT STATEMENTS TO APPROXIMATELY 1,500CUSTOMERS THAT INACCURATELY STATED THAT THE CUSTOMERS WERERECEIVING TAX-EXEMPT INCOME AND THEREBY FAILED AS A MUNICIPALDEALER TO MAKE AND KEEP CURRENT CERTAIN BOOKS AND RECORDS,INCLUDING ACCOUNT STATEMENTS THAT THEY CHOOSE TO SEND TOTHEIR CUSTOMERS.







Initiated By: FINRA







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOHAVE ADEQUATE SUPERVISORY PROCEDURES TO ADDRESS SHORTPOSITIONS IN TAX-EXEMPT MUNICIPAL BONDS THAT RESULTED PRIMARILYFROM TRADING ERRORS AT THE FIRM'S RETAIL BRANCHES. AS A RESULTOF THESE SUPERVISORY FAILURES, THE FIRM INACCURATELYREPRESENTED TO AT LEAST 1,500 CUSTOMERS THAT AT LEAST $880,000IN INTEREST THAT THE FIRM PAID TO THOSE CUSTOMERS WAS EXEMPTFROM TAXATION. IN FACT, THE FIRM DID NOT HOLD THE BONDS ONBEHALF OF THE CUSTOMERS AND THE INTEREST THAT THE CUSTOMERSRECEIVED WAS PAID BY THE FIRM AND THUS TAXABLE AS ORDINARYINCOME. THIS RESULTED IN THE UNDERPAYMENT OF AT LEAST $358,000 INFEDERAL INCOME TAXES. AT ONE POINT, THE FIRM RECOGNIZED THATSHORT POSITIONS WERE NOT BEING COVERED IN A TIMELY FASHION.HOWEVER, THE FIRM DID NOT PROVIDE ADEQUATE GUIDANCE OROVERSIGHT ON HOW AND WHEN THE MUNICIPAL SHORT POSITIONSSHOULD BE COVERED. THIS DEFICIENCY WAS MAGNIFIED BECAUSE OFTHE DIFFICULTY OF COVERING THESE POSITIONS IN LIGHT OF THEMARKET STRUCTURE AND ILLIQUIDITY OF MUNICIPAL BONDS. THUS, THEFIRM OFTEN DID NOT COVER MUNICIPAL SHORT POSITIONS FOR A MONTHOR MORE, AND SOME OF THE SHORT POSITIONS WERE NOT COVEREDFOR YEARS. THE FINDINGS STATED THAT THE FIRM FAILED TOREASONABLY SUPERVISE, IMPLEMENT ADEQUATE WRITTENPROCEDURES, OR MAINTAIN A SUPERVISORY SYSTEM THAT WASREASONABLY DESIGNED TO ENSURE COMPLIANCE WITH MSRB RULESWHEN THE FIRM MAINTAINED SHORT POSITIONS IN MUNICIPALSECURITIES AND PAID TAXABLE SUBSTITUTE INTEREST TO ITSCUSTOMERS. AS A RESULT, THE FIRM MISCHARACTERIZED AT LEAST$880,000 IN INTEREST THAT THE FIRM HAD PAID TO ITS CUSTOMERS ASEXEMPT FROM TAXATION. THE FINDINGS ALSO STATED THAT THE FIRMMISSTATED TO AT LEAST 1,500 CUSTOMERS THAT THE INTEREST THECUSTOMERS WERE RECEIVING WAS TAX EXEMPT, AND ALSO FAILED TODISCLOSE THAT THE INTEREST THEY WERE RECEIVING WAS NOTENTITLED TO TAX EXEMPT STATUS. THE FINDINGS ALSO INCLUDED THATTHE FIRM SENT ACCOUNT STATEMENTS TO APPROXIMATELY 1,500CUSTOMERS THAT INACCURATELY STATED THAT THE CUSTOMERS WERERECEIVING TAX-EXEMPT INCOME AND THEREBY FAILED AS A MUNICIPALDEALER TO MAKE AND KEEP CURRENT CERTAIN BOOKS AND RECORDS,INCLUDING ACCOUNT STATEMENTS THAT THEY CHOOSE TO SEND TOTHEIR CUSTOMERS.


Resolution:


Sanction Details: THE FIRM WAS CENSURED, AND FINED $675,000, OF WHICH $124,406.93WAS IMPOSED JOINTLY AND SEVERALLY. FINE PAID IN FULL ON 5/7/2015.


No




Initiated By: FINRA


Allegations: FINRA ALLEGED THAT BETWEEN JULY 2009 THROUGH DECEMBER 2013MSSB AND MS&CO. FAILED TO HAVE ADEQUATE SUPERVISORYPROCEDURES TO ADDRESS SHORT POSITIONS IN TAX-EXEMPT MUNICIPALBONDS IN VIOLATION OF MSRB RULES G-8, G-17 AND G-27.











CENSURE





Resolution:


Sanction Details: THE FINE OF $675,000, OF WHICH $124,406.93 WAS IMPOSED JOINTLY ANDSEVERALLY WITH MS&CO., WAS PAID ON APRIL 17, 2015.

Firm Statement ON APRIL 1, 2015, FINRA, MORGAN STANLEY SMITH BARNEY, LLC (MSSB)AND MORGAN STANLEY & CO, LLC (MS&CO.) ENTERED INTO A LETTER OFACCEPTANCE, WAIVER AND CONSENT (AWC) TO SETTLE ALLEGATIONSTHAT MSSB AND MS&CO. FAILED TO HAVE ADEQUATE SUPERVISORYPROCEDURES TO ADDRESS SHORT POSITIONS IN TAX-EXEMPT MUNICIPALBONDS THAT RESULTED PRIMARILY FROM TRADING ERRORS AT THEFIRM'S RETAIL BRANCHES IN VIOLATION OF MSRB RULES G-8, G-17 AND G-27. THERE WERE FINDINGS IN THE AWC THAT THE FIRM INACCURATELYREPRESENTED TO AT LEAST 1,500 CUSTOMERS THAT AT LEAST $880,000IN INTEREST THAT THE FIRM PAID TO THOSE CUSTOMERS WAS EXEMPTFROM TAXATION. SINCE THE FIRM DID NOT HOLD THE BONDS ON BEHALFOF THE CUSTOMERS, THE INTEREST THAT THE CUSTOMERS RECEIVEDWAS PAID BY MORGAN STANLEY AND, THUS, TAXABLE AS ORDINARYINCOME. WITHOUT ADMITTING OR DENYING THE FINDINGS, AND WITHOUTADJUDICATION OF ANY ISSUES OF LAW OR FACT, THE FIRM ACCEPTEDAND CONSENTED TO THE ENTRY OF FINDINGS AND THE IMPOSITION OF ACENSURE AND A FINE OF $675,000, OF WHICH $124,406.93 WAS IMPOSEDJOINTLY AND SEVERALLY WITH MS&CO.



Disclosure 25 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRM,DURING TWO CALENDAR QUARTERS, DID NOT ISSUE GLOBAL STOCKPLAN SERVICES GROUP (GSPS) QUARTERLY STATEMENTS TO NUMEROUSGSPS PLAN PARTICIPANTS WHO HAD ENGAGED IN SECURITIESTRANSACTIONS, AND, THE FIRM FAILED TO ISSUE CONFIRMATIONS FORCERTAIN GSPS TRANSACTIONS. THE FINDINGS STATED THAT WHEN THEFIRM DID ISSUE GSPS ACCOUNT STATEMENTS AND CONFIRMATIONS,THEY FAILED TO DISCLOSE REQUIRED INFORMATION INCLUDINGWHETHER THE FIRM ACTED IN AN AGENCY OR PRINCIPAL CAPACITY, ANDTHE MARKET VALUE OF THE SECURITIES SO AS TO PROVIDE THE DOLLARAMOUNT OF THE OPENING AND CLOSING ACCOUNT BALANCES. THEFINDINGS ALSO STATED THAT THE FIRM ISSUED DEFICIENT OPTIONCONFIRMATIONS, WHICH WERE ISSUED THROUGH THE FIRM'SPORTFOLIO MANAGEMENT (PM) PROGRAM AND TWO OF THE FIRM'SEXCEPTION TRADE PROCESSING SYSTEMS, THAT LACKED INFORMATIONABOUT WHETHER TRANSACTIONS WERE OPENING OR CLOSINGTRANSACTIONS. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILEDTO ESTABLISH, MAINTAIN AND ENFORCE A SUPERVISORY SYSTEM ANDWRITTEN PROCEDURES TO ACHIEVE COMPLIANCE WITH APPLICABLECUSTOMER ACCOUNT STATEMENT AND TRANSACTION CONFIRMATIONRULE REQUIREMENTS. THOSE SUPERVISORY FAILURES ALLOWED THEFIRM'S VIOLATIONS TO CONTINUE UNCHECKED THROUGHOUT THERELEVANT PERIOD AND THESE DEFICIENCIES AFFECTED MILLIONS OFCUSTOMERS AND TRANSACTIONS.








Initiated By: FINRA


Other


N/A




Other Product Type(s): STOCK PLAN

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRM,DURING TWO CALENDAR QUARTERS, DID NOT ISSUE GLOBAL STOCKPLAN SERVICES GROUP (GSPS) QUARTERLY STATEMENTS TO NUMEROUSGSPS PLAN PARTICIPANTS WHO HAD ENGAGED IN SECURITIESTRANSACTIONS, AND, THE FIRM FAILED TO ISSUE CONFIRMATIONS FORCERTAIN GSPS TRANSACTIONS. THE FINDINGS STATED THAT WHEN THEFIRM DID ISSUE GSPS ACCOUNT STATEMENTS AND CONFIRMATIONS,THEY FAILED TO DISCLOSE REQUIRED INFORMATION INCLUDINGWHETHER THE FIRM ACTED IN AN AGENCY OR PRINCIPAL CAPACITY, ANDTHE MARKET VALUE OF THE SECURITIES SO AS TO PROVIDE THE DOLLARAMOUNT OF THE OPENING AND CLOSING ACCOUNT BALANCES. THEFINDINGS ALSO STATED THAT THE FIRM ISSUED DEFICIENT OPTIONCONFIRMATIONS, WHICH WERE ISSUED THROUGH THE FIRM'SPORTFOLIO MANAGEMENT (PM) PROGRAM AND TWO OF THE FIRM'SEXCEPTION TRADE PROCESSING SYSTEMS, THAT LACKED INFORMATIONABOUT WHETHER TRANSACTIONS WERE OPENING OR CLOSINGTRANSACTIONS. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILEDTO ESTABLISH, MAINTAIN AND ENFORCE A SUPERVISORY SYSTEM ANDWRITTEN PROCEDURES TO ACHIEVE COMPLIANCE WITH APPLICABLECUSTOMER ACCOUNT STATEMENT AND TRANSACTION CONFIRMATIONRULE REQUIREMENTS. THOSE SUPERVISORY FAILURES ALLOWED THEFIRM'S VIOLATIONS TO CONTINUE UNCHECKED THROUGHOUT THERELEVANT PERIOD AND THESE DEFICIENCIES AFFECTED MILLIONS OFCUSTOMERS AND TRANSACTIONS.


Resolution:


No









Sanction Details: THE FIRM WAS CENSURED AND FINED $800,000.FINE PAID IN FULL ON NOVEMBER 3, 2014.


No



Initiated By: FINRA




CENSURE





Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED SEC RULE 10B-10, NASDCONDUCT RULES 2230 AND 2340(A), FINRA RULE 2232 ANDINCORPORATED NYSE RULE 409 BY FAILING TO: A) ISSUE ACCOUNTSTATEMENTS AND CONFIRMATIONS FOR CERTAIN CUSTOMER ACCOUNTSAND TRANSACTIONS, B) APPROPRIATELY DISCLOSE CERTAIN REQUIREDINFORMATION ON ACCOUNT STATEMENTS AND CONFIRMATIONS FORCERTAIN CUSTOMER ACCOUNTS AND TRANSACTIONS, AND C) ESTABLISH,MAINTAIN AND ENFORCE A REASONABLE SUPERVISORY SYSTEM ANDWRITTEN PROCEDURES TO ACHIEVE COMPLIANCE WITH APPLICABLECUSTOMER ACCOUNT STATEMENT AND TRANSACTION CONFIRMATIONRULE REQUIREMENTS.



Resolution:










Sanction Details: THE FINE OF $800,000 TO BE PAID FORTH WITH.

Firm Statement ON OCTOBER 16, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLC(FIRM) ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT(AWC) TO SETTLE ALLEGATIONS THAT THE FIRM VIOLATED SEC RULE 10B-10, NASD CONDUCT RULES 2230 AND 2340(A), FINRA RULE 2232 ANDINCORPORATED NYSE RULE 409 BY FAILING TO: A) ISSUE ACCOUNTSTATEMENTS AND CONFIRMATIONS FOR CERTAIN CUSTOMER ACCOUNTSAND TRANSACTIONS, B) APPROPRIATELY DISCLOSE CERTAIN REQUIREDINFORMATION ON ACCOUNT STATEMENTS AND CONFIRMATIONS FORCERTAIN CUSTOMER ACCOUNTS AND TRANSACTIONS, AND C) ESTABLISH,MAINTAIN AND ENFORCE A REASONABLE SUPERVISORY SYSTEM ANDWRITTEN PROCEDURES TO ACHIEVE COMPLIANCE WITH APPLICABLECUSTOMER ACCOUNT STATEMENT AND TRANSACTION CONFIRMATIONRULE REQUIREMENTS. WITHOUT ADMITTING OR DENYING THEUNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUEOF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTED TO ENTRY OFFINDINGS AND THE IMPOSITION OF A CENSURE AND A FINE OF $800,000.


Disclosure 26 of 42

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Allegations: THE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTERESTTHAT A PUBLIC ADMINISTRATIVE PROCEEDING BE, AND HEREBY IS,INSTITUTED TO DETERMINE WHETHER THE FIRM ENGAGED IN THEVIOLATIONS SET FORTH HEREIN AND TO DETERMINE WHETHER ANYORDER SHOULD BE ISSUED IMPOSING REMEDIAL SANCTIONS. BETWEENAPRIL AND NOVEMBER 2010, THE FIRM FAILED TO DILIGENTLY SUPERVISEITS OFFICERS', EMPLOYEES', AND AGENTS' OPENING AND HANDLING OFACCOUNTS HELD AT THE FIRM IN THE NAME OF A FAMILY OF COMPANIES,IN VIOLATION OF REGULATION 166.3. IN PARTICULAR, THE FIRM'SOFFICERS, EMPLOYEES, AND AGENTS FAILED TO DILIGENTLY SUPERVISEBY FAILING TO SUFFICIENTLY "KNOW ITS CUSTOMER" PRIOR TO OPENINGACCOUNTS, WHICH IT WAS LATER REVEALED WERE USED BY THE OWNEROF THE COMPANIES IN A MULTIMILLION DOLLAR PONZI SCHEME, AND BYFAILING TO ADEQUATELY MONITOR AND ENFORCE TRADING LIMITSAPPLICABLE TO THOSE ACCOUNTS. DURING THE RELEVANT PERIOD, THECOMPANIES' ACCOUNTS GENERATED $16,351.86 FOR THE FIRM IN GROSSCOMMISSIONS AND FEES. FURTHER, THE FIRM FAILED TO RESPONDTIMELY AND ACCURATELY TO A DIVISION OF ENFORCEMENT REQUESTFOR PRODUCTION OF ACCOUNT RECORDS. IN ADDITION, THE FIRMFAILED TO MAINTAIN ADEQUATE RECORDS REGARDING THE DAILYTRADING LIMIT APPLICABLE TO ONE OF THE COMPANIES' ACCOUNTS.TOGETHER THESE INCIDENTS CONSTITUTE VIOLATIONS OF SECTION4G(A) OF THE COMMODITY EXCHANGE ACT AND REGULATIONS 1.31 (A)AND 1.35(A).







Initiated By: COMMODITY FUTURES TRADING COMMISSION







THE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTERESTTHAT A PUBLIC ADMINISTRATIVE PROCEEDING BE, AND HEREBY IS,INSTITUTED TO DETERMINE WHETHER THE FIRM ENGAGED IN THEVIOLATIONS SET FORTH HEREIN AND TO DETERMINE WHETHER ANYORDER SHOULD BE ISSUED IMPOSING REMEDIAL SANCTIONS. BETWEENAPRIL AND NOVEMBER 2010, THE FIRM FAILED TO DILIGENTLY SUPERVISEITS OFFICERS', EMPLOYEES', AND AGENTS' OPENING AND HANDLING OFACCOUNTS HELD AT THE FIRM IN THE NAME OF A FAMILY OF COMPANIES,IN VIOLATION OF REGULATION 166.3. IN PARTICULAR, THE FIRM'SOFFICERS, EMPLOYEES, AND AGENTS FAILED TO DILIGENTLY SUPERVISEBY FAILING TO SUFFICIENTLY "KNOW ITS CUSTOMER" PRIOR TO OPENINGACCOUNTS, WHICH IT WAS LATER REVEALED WERE USED BY THE OWNEROF THE COMPANIES IN A MULTIMILLION DOLLAR PONZI SCHEME, AND BYFAILING TO ADEQUATELY MONITOR AND ENFORCE TRADING LIMITSAPPLICABLE TO THOSE ACCOUNTS. DURING THE RELEVANT PERIOD, THECOMPANIES' ACCOUNTS GENERATED $16,351.86 FOR THE FIRM IN GROSSCOMMISSIONS AND FEES. FURTHER, THE FIRM FAILED TO RESPONDTIMELY AND ACCURATELY TO A DIVISION OF ENFORCEMENT REQUESTFOR PRODUCTION OF ACCOUNT RECORDS. IN ADDITION, THE FIRMFAILED TO MAINTAIN ADEQUATE RECORDS REGARDING THE DAILYTRADING LIMIT APPLICABLE TO ONE OF THE COMPANIES' ACCOUNTS.TOGETHER THESE INCIDENTS CONSTITUTE VIOLATIONS OF SECTION4G(A) OF THE COMMODITY EXCHANGE ACT AND REGULATIONS 1.31 (A)AND 1.35(A).


Resolution:


Sanction Details: IN ANTICIPATION OF THE INSTITUTION OF AN ADMINISTRATIVEPROCEEDING, THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENTWHICH THE COMMISSION HAS DETERMINED TO ACCEPT. WITHOUTADMITTING OR DENYING ANY OF THE FINDINGS AND CONCLUSIONSHEREIN, THE FIRM ACKNOWLEDGES SERVICE OF THIS ORDERINSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 6(C) AND 6(D) OFTHE COMMODITY EXCHANGE ACT, MAKING FINDINGS AND IMPOSINGREMEDIAL SANCTIONS. ACCORDINGLY, IT IS HEREBY ORDERED THAT: THEFIRM SHALL CEASE AND DESIST FROM VIOLATING REGULATION 166.3,SECTION 4G(A) OF THE COMMODITY EXCHANGE ACT, AND REGULATIONS1.31(A) AND 1.35(A) AND SHALL PAY A CIVIL MONETARY PENALTY OF$280,000. THE FIRM AND ITS SUCCESSORS AND ASSIGNS SHALL COMPLYWITH THE FOLLOWING CONDITIONS AND UNDERTAKINGS SET FORTH INTHE OFFER: THE FIRM SHALL PAY DISGORGEMENT IN THE AMOUNT OF$16,351.86 AND THE FIRM AGREES THAT NEITHER IT NOR ANY OF ITSAGENTS OR EMPLOYEES UNDER ITS AUTHORITY OR CONTROL SHALLTAKE ANY ACTION OR MAKE ANY PUBLIC STATEMENT DENYING, DIRECTLYOR INDIRECTLY, ANY FINDINGS OR CONCLUSIONS IN THE ORDER, ORCREATING, OR TENDING TO CREATE, THE IMPRESSION THAT THE ORDERIS WITHOUT A FACTUAL BASIS; PROVIDED, HOWEVER, THAT NOTHING INTHIS PROVISION SHALL AFFECT THE FIRM'S: (1) TESTIMONIALOBLIGATIONS; OR (2) RIGHT TO TAKE LEGAL POSITIONS IN OTHERPROCEEDINGS TO WHICH THE COMMISSION IS NOT A PARTY. THE FIRMSHALL UNDERTAKE ALL STEPS NECESSARY TO ENSURE THAT ALL OF ITSAGENTS AND EMPLOYEES UNDER ITS AUTHORITY AND/ OR CONTROLUNDERSTAND AND COMPLY WITH THIS AGREEMENT.


No


Order






IN ANTICIPATION OF THE INSTITUTION OF AN ADMINISTRATIVEPROCEEDING, THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENTWHICH THE COMMISSION HAS DETERMINED TO ACCEPT. WITHOUTADMITTING OR DENYING ANY OF THE FINDINGS AND CONCLUSIONSHEREIN, THE FIRM ACKNOWLEDGES SERVICE OF THIS ORDERINSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 6(C) AND 6(D) OFTHE COMMODITY EXCHANGE ACT, MAKING FINDINGS AND IMPOSINGREMEDIAL SANCTIONS. ACCORDINGLY, IT IS HEREBY ORDERED THAT: THEFIRM SHALL CEASE AND DESIST FROM VIOLATING REGULATION 166.3,SECTION 4G(A) OF THE COMMODITY EXCHANGE ACT, AND REGULATIONS1.31(A) AND 1.35(A) AND SHALL PAY A CIVIL MONETARY PENALTY OF$280,000. THE FIRM AND ITS SUCCESSORS AND ASSIGNS SHALL COMPLYWITH THE FOLLOWING CONDITIONS AND UNDERTAKINGS SET FORTH INTHE OFFER: THE FIRM SHALL PAY DISGORGEMENT IN THE AMOUNT OF$16,351.86 AND THE FIRM AGREES THAT NEITHER IT NOR ANY OF ITSAGENTS OR EMPLOYEES UNDER ITS AUTHORITY OR CONTROL SHALLTAKE ANY ACTION OR MAKE ANY PUBLIC STATEMENT DENYING, DIRECTLYOR INDIRECTLY, ANY FINDINGS OR CONCLUSIONS IN THE ORDER, ORCREATING, OR TENDING TO CREATE, THE IMPRESSION THAT THE ORDERIS WITHOUT A FACTUAL BASIS; PROVIDED, HOWEVER, THAT NOTHING INTHIS PROVISION SHALL AFFECT THE FIRM'S: (1) TESTIMONIALOBLIGATIONS; OR (2) RIGHT TO TAKE LEGAL POSITIONS IN OTHERPROCEEDINGS TO WHICH THE COMMISSION IS NOT A PARTY. THE FIRMSHALL UNDERTAKE ALL STEPS NECESSARY TO ENSURE THAT ALL OF ITSAGENTS AND EMPLOYEES UNDER ITS AUTHORITY AND/ OR CONTROLUNDERSTAND AND COMPLY WITH THIS AGREEMENT.


Initiated By: COMMODITY FUTURES TRADING COMMISSIION




DISGORGEMENT OF COMMISSIONS; CEASE & DESIST ORDER;UNDERTAKINGS





Allegations: THE COMMODITY FUTURES TRADING COMMISSION (CFTC) ALLEGED THATTHE FIRM FAILED TO: (1) DILIGENTLY SUPERVISE ITS EMPLOYEES IN THEHANDLING OF ACCOUNTS IN THE NAME OF A FAMILY OF COMPANIES BYFAILING TO FOLLOW ITS OWN DUE DILIGENCE PROCEDURES INONBOARDING THE ACCOUNTS FROM A HIGH RISK JURISDICTION; (2)FAILED TO PROPERLY ENFORCE ITS OWN TRADING LIMITS ASSIGNED TOTHE SUBJECT ACCOUNTS, WHICH RESULTED IN INITIAL MARGINREQUIREMENTS THAT FAR EXCEEDED THE APPLICABLE CREDIT TRADINGLIMIT, (3) FAILED TO RESPOND TIMELY AND ACCURATELY TO A CFTCREQUEST FOR PRODUCTION OF ACCOUNT RECORDS, AND (4) FAILED TOMAINTAIN ADEQUATE RECORDS REGARDING THE CREDIT TRADING LIMITAPPLICABLE TO THE SUBJECT ACCOUNTS.








DISGORGEMENT OF COMMISSIONS; CEASE & DESIST ORDER;UNDERTAKINGS


Resolution:


Sanction Details: THE CIVIL MONETARY PENALTY AND DISGORGEMENT TOTALING$296,351.86 WAS PAID ON SEPTEMBER 24, 2014. THE FIRM ALSO AGREEDTO UNDERTAKINGS RELATED TO REVIEW AND EVALUATION OF THE FIRM'SRECORD KEEPING PROCESSES, AND PUBLIC STATEMENTS.

Firm Statement ON SEPTEMBER 15, 2014, THE U.S. COMMODITY FUTURES TRADINGCOMMISSION (CFTC) ISSUED AN ORDER FILING AND SETTLING CHARGESIN CONNECTION WITH ALLEGATIONS THAT MORGAN STANLEY SMITHBARNEY, LLC (FIRM) FAILED TO (1) DILIGENTLY SUPERVISE ITSEMPLOYEES IN THE HANDLING OF ACCOUNTS IN THE NAME OF A FAMILYOF COMPANIES BY FAILING TO FOLLOW ITS OWN DUE DILIGENCEPROCEDURES IN ONBOARDING THE ACCOUNTS FROM A HIGH RISKJURISDICTION; (2) FAILED TO PROPERLY ENFORCE ITS OWN TRADINGLIMITS ASSIGNED TO THE SUBJECT ACCOUNTS, WHICH RESULTED ININITIAL MARGIN REQUIREMENTS THAT FAR EXCEEDED THE APPLICABLECREDIT TRADING LIMIT, (3) FAILED TO RESPOND TIMELY AND ACCURATELYTO A CFTC REQUEST FOR PRODUCTION OF ACCOUNT RECORDS, AND (4)FAILED TO MAINTAIN ADEQUATE RECORDS REGARDING THE CREDITTRADING LIMIT APPLICABLE TO THE SUBJECT ACCOUNTS. WITHOUTADMITTING OR DENYING THE FINDINGS OR CONCLUSIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO THE ENTRY OF FINDINGS, THE IMPOSITION OF A CEASEAND DESIST ORDER, A CIVIL MONETARY PENALTY OF $280,000,DISGORGEMENT OF COMMISSIONS OF $16,351.86 AND UNDERTAKINGSRELATED TO REVIEW AND EVALUATION OF THE FIRM'S RECORD KEEPINGPROCESSES, AND PUBLIC STATEMENTS.


Order

Disclosure 27 of 42

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMFAILED TO ENFORCE ITS WRITTEN PROCEDURES, RESULTING IN AWIDESPREAD FAILURE TO CREATE OR MAINTAIN CERTAIN REQUIREDDOCUMENTS (I.E., CERTIFICATIONS FROM RETIRED REPRESENTATIVES,INITIAL AND ANNUAL LETTERS TO CLIENTS). THE FINDINGS STATED THATTHE FIRM PAID, UNDER ITS FORMER FINANCIAL ADVISOR PROGRAM(FFAP) AND PREDECESSOR PROGRAMS, MORE THAN $100 MILLION INCOMMISSIONS TO FORMER REGISTERED REPRESENTATIVES WHO HADRETIRED. AT THE TIME OF THESE PAYMENTS, MANY OF THE INDIVIDUALSWERE NOT REGISTERED OR ASSOCIATED WITH A REGISTERED FIRM. THEPAYMENTS WERE MADE UNDER A PROGRAM THAT ALLOWED PAYMENTSTO UNREGISTERED, RETIRED REPRESENTATIVES IN COMPLIANCE WITH ANO-ACTION LETTER ISSUED BY THE SECURITIES AND EXCHANGECOMMISSION IN NOVEMBER 2008. THE LETTER INDICATED THAT THE SECWOULD NOT RECOMMEND AN ENFORCEMENT ACTION UNDER SECTION15(A) OF THE EXCHANGE ACT AGAINST A FIRM OR A RETIREDREPRESENTATIVE RELATING TO CONTINUING THE PAYMENT OFCOMMISSIONS TO A RETIRED REPRESENTATIVE SO LONG AS THE FIRM,THE RETIRED REPRESENTATIVE, AND THE RECEIVING REPRESENTATIVE(I.E., THE INDIVIDUAL WHO WOULD CONTINUE TO SERVICE THEACCOUNTS AFTER THE RETIRED REPRESENTATIVE LEFT THE FIRM) METCERTAIN CONDITIONS BEFORE AND DURING THE PAYMENT OFCONTINUING COMMISSIONS TO THE RETIRED REPRESENTATIVE. THEFIRM'S FAILURE TO ENFORCE ITS OWN PROCEDURES - AND ITS FAILURETO DETECT PROMPTLY ITS NON-COMPLIANCE - LED TO THE WIDESPREADFAILURE TO COMPLY WITH IMPORTANT REQUIREMENTS SET FORTH INTHE SEC'S ISSUED 2008 NO-ACTION LETTER. THE FINDINGS ALSO STATEDTHAT THE FIRM FAILED TO CREATE OR MAINTAIN THE REQUIRED RETIREDREPRESENTATIVE CERTIFICATIONS OR CUSTOMER LETTERS FOR ASIGNIFICANT PROPORTION OF THE RETIRED REPRESENTATIVES TOWHOM IT PAID CONTINUING COMMISSIONS. THE CERTIFICATIONS ANDLETTERS THAT THE FIRM FAILED TO CREATE OR MAINTAIN WERENECESSARY TO COMPLY WITH THE TERMS OF THE 2008 NO-ACTIONLETTER. THEY ALSO WERE NECESSARY TO PERMIT THE FIRM TO DETECTWHETHER THE RETIRED REPRESENTATIVES WERE ACTING ASUNREGISTERED BROKERS IN VIOLATION OF, AMONG OTHER THINGS,SECTION 15(A)(1) OF THE EXCHANGE ACT. AS A RESULT OF THE FIRM'SFAILURE TO ENFORCE ITS PROCEDURES, IT PAID THE COMMISSIONS TOTHE RETIRED REPRESENTATIVES, MANY OF WHOM WERE NOTREGISTERED, WITHOUT ADHERING TO THE TERMS OF THE NO-ACTIONLETTER. THE FIRM DID NOT HAVE AN EFFECTIVE MECHANISM TODETERMINE WHETHER THOSE PAYMENTS WERE BEING MADE INCOMPLIANCE WITH SECTION 15(A) OF THE EXCHANGE ACT AND NASDRULE 2420.







Initiated By: FINRA



WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRMFAILED TO ENFORCE ITS WRITTEN PROCEDURES, RESULTING IN AWIDESPREAD FAILURE TO CREATE OR MAINTAIN CERTAIN REQUIREDDOCUMENTS (I.E., CERTIFICATIONS FROM RETIRED REPRESENTATIVES,INITIAL AND ANNUAL LETTERS TO CLIENTS). THE FINDINGS STATED THATTHE FIRM PAID, UNDER ITS FORMER FINANCIAL ADVISOR PROGRAM(FFAP) AND PREDECESSOR PROGRAMS, MORE THAN $100 MILLION INCOMMISSIONS TO FORMER REGISTERED REPRESENTATIVES WHO HADRETIRED. AT THE TIME OF THESE PAYMENTS, MANY OF THE INDIVIDUALSWERE NOT REGISTERED OR ASSOCIATED WITH A REGISTERED FIRM. THEPAYMENTS WERE MADE UNDER A PROGRAM THAT ALLOWED PAYMENTSTO UNREGISTERED, RETIRED REPRESENTATIVES IN COMPLIANCE WITH ANO-ACTION LETTER ISSUED BY THE SECURITIES AND EXCHANGECOMMISSION IN NOVEMBER 2008. THE LETTER INDICATED THAT THE SECWOULD NOT RECOMMEND AN ENFORCEMENT ACTION UNDER SECTION15(A) OF THE EXCHANGE ACT AGAINST A FIRM OR A RETIREDREPRESENTATIVE RELATING TO CONTINUING THE PAYMENT OFCOMMISSIONS TO A RETIRED REPRESENTATIVE SO LONG AS THE FIRM,THE RETIRED REPRESENTATIVE, AND THE RECEIVING REPRESENTATIVE(I.E., THE INDIVIDUAL WHO WOULD CONTINUE TO SERVICE THEACCOUNTS AFTER THE RETIRED REPRESENTATIVE LEFT THE FIRM) METCERTAIN CONDITIONS BEFORE AND DURING THE PAYMENT OFCONTINUING COMMISSIONS TO THE RETIRED REPRESENTATIVE. THEFIRM'S FAILURE TO ENFORCE ITS OWN PROCEDURES - AND ITS FAILURETO DETECT PROMPTLY ITS NON-COMPLIANCE - LED TO THE WIDESPREADFAILURE TO COMPLY WITH IMPORTANT REQUIREMENTS SET FORTH INTHE SEC'S ISSUED 2008 NO-ACTION LETTER. THE FINDINGS ALSO STATEDTHAT THE FIRM FAILED TO CREATE OR MAINTAIN THE REQUIRED RETIREDREPRESENTATIVE CERTIFICATIONS OR CUSTOMER LETTERS FOR ASIGNIFICANT PROPORTION OF THE RETIRED REPRESENTATIVES TOWHOM IT PAID CONTINUING COMMISSIONS. THE CERTIFICATIONS ANDLETTERS THAT THE FIRM FAILED TO CREATE OR MAINTAIN WERENECESSARY TO COMPLY WITH THE TERMS OF THE 2008 NO-ACTIONLETTER. THEY ALSO WERE NECESSARY TO PERMIT THE FIRM TO DETECTWHETHER THE RETIRED REPRESENTATIVES WERE ACTING ASUNREGISTERED BROKERS IN VIOLATION OF, AMONG OTHER THINGS,SECTION 15(A)(1) OF THE EXCHANGE ACT. AS A RESULT OF THE FIRM'SFAILURE TO ENFORCE ITS PROCEDURES, IT PAID THE COMMISSIONS TOTHE RETIRED REPRESENTATIVES, MANY OF WHOM WERE NOTREGISTERED, WITHOUT ADHERING TO THE TERMS OF THE NO-ACTIONLETTER. THE FIRM DID NOT HAVE AN EFFECTIVE MECHANISM TODETERMINE WHETHER THOSE PAYMENTS WERE BEING MADE INCOMPLIANCE WITH SECTION 15(A) OF THE EXCHANGE ACT AND NASDRULE 2420.








Other


N/A





Resolution:

Other Sanctions Ordered: UNDERTAKINGS: REQUIRED TO REVIEW AND REVISED ITS SYSTEMS ANDWRITTEN PROCEDURES USED TO SUPERVISE ITS FORMER FINANCIALADVISOR PROGRAM (FFAP) OR SIMILAR PROGRAM INVOLVING THEPAYMENT OF COMMISSIONS TO RETIRED REPRESENTATIVES.

ALSO, REQUIRED TO, WITHIN 120 DAYS AFTER THE ISSUANCE OF THEAWC, CERTIFY THAT THE FIRM HAS CONDUCTED THE REVIEW.

Sanction Details: SEE ABOVE

Regulator Statement FINE PAID IN FULL ON JULY 21, 2014.


No




Allegations: FINRA ALLEGED THAT, BETWEEN JUNE 1, 2009 AND DECEMBER 31, 2011,THE FIRM PAID MORE THAN $100 MILLION IN COMMISSIONS TO ABOUT 780RETIRED REGISTERED REPRESENTATIVES UNDER ITS FORMERFINANCIAL ADVISOR PROGRAM (FFAP) AND PREDECESSOR PROGRAMSTHAT ALLOWED PAYMENTS TO UNREGISTERED, RETIREDREPRESENTATIVES IN COMPLIANCE WITH THE REQUIREMENTS OF A NO-ACTION LETTER ISSUED BY THE SECURITIES AND EXCHANGECOMMISSION IN NOVEMBER 2008 AND THAT THE FIRM FAILED TO CREATEOR MAINTAIN CERTAIN DOCUMENTATION REQUIRED BY THE 2008 NO-ACTION LETTER FOR A SIGNIFICANT PROPORTION OF THE RETIREDREPRESENTATIVES TO WHOM IT PAID CONTINUING COMMISSIONS. FINRAFURTHER ALLEGED THAT BY FAILING TO ESTABLISH, MAINTAIN, ANDENFORCE WRITTEN PROCEDURES TO SUPERVISE THE PAYMENT OFCONTINUING COMMISSIONS TO RETIRED REPRESENTATIVES THAT WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECTION 15(A)OF THE EXCHANGE ACT AND NASD RULE 2420, AND BY FAILING TODETECT WIDESPREAD NON-COMPLIANCE WITH ITS EXISTINGPROCEDURES FOR THE CREATION AND MAINTENANCE OF CERTAINDOCUMENTATION REQUIRED BY THE 2008 NO-ACTION LETTER, MSSBVIOLATED NASD RULE 3010 AND FINRA RULE 2010.








Initiated By: FINRA




CENSURE





FINRA ALLEGED THAT, BETWEEN JUNE 1, 2009 AND DECEMBER 31, 2011,THE FIRM PAID MORE THAN $100 MILLION IN COMMISSIONS TO ABOUT 780RETIRED REGISTERED REPRESENTATIVES UNDER ITS FORMERFINANCIAL ADVISOR PROGRAM (FFAP) AND PREDECESSOR PROGRAMSTHAT ALLOWED PAYMENTS TO UNREGISTERED, RETIREDREPRESENTATIVES IN COMPLIANCE WITH THE REQUIREMENTS OF A NO-ACTION LETTER ISSUED BY THE SECURITIES AND EXCHANGECOMMISSION IN NOVEMBER 2008 AND THAT THE FIRM FAILED TO CREATEOR MAINTAIN CERTAIN DOCUMENTATION REQUIRED BY THE 2008 NO-ACTION LETTER FOR A SIGNIFICANT PROPORTION OF THE RETIREDREPRESENTATIVES TO WHOM IT PAID CONTINUING COMMISSIONS. FINRAFURTHER ALLEGED THAT BY FAILING TO ESTABLISH, MAINTAIN, ANDENFORCE WRITTEN PROCEDURES TO SUPERVISE THE PAYMENT OFCONTINUING COMMISSIONS TO RETIRED REPRESENTATIVES THAT WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECTION 15(A)OF THE EXCHANGE ACT AND NASD RULE 2420, AND BY FAILING TODETECT WIDESPREAD NON-COMPLIANCE WITH ITS EXISTINGPROCEDURES FOR THE CREATION AND MAINTENANCE OF CERTAINDOCUMENTATION REQUIRED BY THE 2008 NO-ACTION LETTER, MSSBVIOLATED NASD RULE 3010 AND FINRA RULE 2010.


Resolution:


Sanction Details: THE FINE OF $1,000,000 WILL BE PAID ON OR BEFORE AUGUST 15, 2014.

Firm Statement ON JULY 3, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER & CONSENT (AWC) TOSETTLE FINRA'S ALLEGATIONS THAT, BY FAILING TO ESTABLISH, MAINTAINAND ENFORCE WRITTEN PROCEDURES TO SUPERVISE THE PAYMENT OFCONTINUING COMMISSIONS TO RETIRED REPRESENTATIVES THAT WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECTION 15(A)OF THE EXCHANGE ACT AND NASD RULE 2420, AND BY FAILING TODETECT WIDESPREAD NON-COMPLIANCE WITH ITS EXISTINGPROCEDURES FOR THE CREATION AND MAINTENANCE OF CERTAINDOCUMENTATION REQUIRED BY THE SEC'S 2008 NO-ACTION LETTER, THEFIRM VIOLATED NASD RULE 3010 AND FINRA RULE 2010. WITHOUTADMITTING OR DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM AGREED TOENTER INTO THE AWC AND PAY A FINE OF $1,000,000.









ON JULY 3, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER & CONSENT (AWC) TOSETTLE FINRA'S ALLEGATIONS THAT, BY FAILING TO ESTABLISH, MAINTAINAND ENFORCE WRITTEN PROCEDURES TO SUPERVISE THE PAYMENT OFCONTINUING COMMISSIONS TO RETIRED REPRESENTATIVES THAT WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECTION 15(A)OF THE EXCHANGE ACT AND NASD RULE 2420, AND BY FAILING TODETECT WIDESPREAD NON-COMPLIANCE WITH ITS EXISTINGPROCEDURES FOR THE CREATION AND MAINTENANCE OF CERTAINDOCUMENTATION REQUIRED BY THE SEC'S 2008 NO-ACTION LETTER, THEFIRM VIOLATED NASD RULE 3010 AND FINRA RULE 2010. WITHOUTADMITTING OR DENYING THE UNDERLYING ALLEGATIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM AGREED TOENTER INTO THE AWC AND PAY A FINE OF $1,000,000.

Disclosure 28 of 42

i


Initiated By: CONNECTICUT





Docket/Case Number: CO-14-8023-S

URL for Regulatory Action:



Allegations: ON JUNE 9, 2014, THE BANKING COMMISSIONER ENTERED A CONSENTORDER (DOCKET NO. CO-14-8023-S) WITH RESPECT TO MORGAN STANLEYSMITH BARNEY LLC, A CONNECTICUT-REGISTERED BROKER-DEALER. THECONSENT ORDER ALLEGED THAT THE FIRM FAILED TO ESTABLISH,ENFORCE AND MAINTAIN AN ADEQUATE SUPERVISORY SYSTEM,PARTICULARLY WITH RESPECT TO SUPERVISOR ACCESS TO EMPLOYEE E-MAIL, THE OUTSOURCING OF EXTERNAL E-MAIL SURVEILLANCE TO THIRDPARTY CONTRACTORS, INCLUDING A THIRD PARTY CONTRACTOR INCHENNAI INDIA; AND ENSURING THAT INDIVIDUALS WHO SUPERVISED THEINDIA THIRD PARTY CONTRACTOR PERSONNEL PERFORMING THEOUTSOURCED WORK HELD LICENSES REQUIRED BY FINRA. IN ADDITION,THE CONSENT ORDER ALLEGED THAT THE FIRM 1) FAILED TO MAINTAINITS RECORDS IN A FORM READILY ACCESSIBLE TO THE COMMISSIONERAND FAILED TO MAKE THOSE RECORDS READILY AVAILABLE TO AGENCYSTAFF DURING AN EXAMINATION IN CONTRAVENTION OF SECTIONS 36B-14(A)(3) AND 36B-14(D) OF THE CONNECTICUT UNIFORM SECURITIES ACTAND SECTION 36B-31-14F OF THE REGULATIONS THEREUNDER; AND 2)FAILED TO KEEP CERTAIN COMPLIANCE RECORDS TRUE, ACCURATE ANDCURRENT IN CONTRAVENTION OF SECTION 36B-31-14A(A) OF THEREGULATIONS.



Resolution: Consent







Other Sanctions Ordered: THE CONSENT ORDER FINED MORGAN STANLEY SMITH BARNEY LLC $5MILLION AND DIRECTED THE FIRM TO CEASE AND DESIST FROMREGULATORY VIOLATIONS. IN ADDITION, THE CONSENT ORDERREQUIRED THAT THE FIRM 1) COMPLETE A TARGETED SUPERVISORY ANDQUALITY CONTROL REVIEW WITHIN SIX MONTHS AND ENSURE THATSUPERVISORY PERSONNEL INVOLVED IN E-MAIL SURVEILLANCE MAINTAINALL SECURITIES LICENSES REQUIRED BY FINRA; 2) WITHIN TWELVEMONTHS, IMPLEMENT A SYSTEM TO ENSURE THAT BRANCHSUPERVISORY PERSONNEL HAVE DIRECT ACCESS TO E-MAILEDCOMMUNICATIONS SENT OR RECEIVED BY SPECIFIED EMPLOYEESDURING THE PREVIOUS 120 DAYS; 3) WITHIN TWELVE MONTHS,IMPLEMENT PROCEDURES TO ENSURE THAT REQUIRED BOOKS ANDRECORDS WOULD BE OPEN TO INSPECTION BY, AND READILYACCESSIBLE TO, AGENCY STAFF; 4) WITHIN TWELVE MONTHS CONDUCTTRAINING WITHIN THE FIRM'S LEGAL DEPARTMENT TO MORE EFFICIENTLYADDRESS THE TREATMENT OF LEGALLY PRIVILEGED DOCUMENTS; AND 5)WITHIN TWELVE MONTHS, IMPLEMENT A SEPARATE QUARTERLY QUALITYCONTROL PROCEDURE MEASURING THE EFFECTIVENESS OF SELECTINGEXTERNAL E-MAILS FOR REVIEW.

Sanction Details: SEE RESPONSE TO ITEM 13.B.


No

Sanctions Ordered: Monetary/Fine $5,000,000.00Cease and Desist/Injunction


Allegations: THE CONNECTICUT BANKING COMMISSIONER ALLEGED THAT FROMJANUARY 1, 2012 - JUNE 9, 2014, MSSB VIOLATED SECTIONS 36B-14(A)(3)AND 36B-14(D) OF THE ACT AND SECTION 36B-31-14F OF THEREGULATIONS RELATING TO THE ACCESSIBILITY AND AVAILABILITY OFRECORDS DURING ITS EXAMINATION OF MSSB. THE COMMISSIONERALSO ALLEGED THAT MSSB VIOLATED SECTION 36B-31-14A(A) OF THEREGULATIONS BY FAILING TO KEEP CERTAIN MANUALS PRODUCED TOTHE DIVISION DURING THE EXAMINATION, TRUE, ACCURATE ANDCURRENT, SECTION 36B-31-6F BY FAILING TO ESTABLISH, ENFORCE ANDMAINTAIN A SUPERVISORY SYSTEM RELATED TO ITS EMAIL SUPERVISIONAND SECTION 36B-31-7E OF THE REGULATIONS BY FAILING TO ENSUREAGENTS PROVIDED NOTIFICATION OF TRADE OR ASSUMED NAMES.







Initiated By: STATE OF CONNECTICUT DEPARTMENT OF BANKING, SECURITIES &BUSINESS INVESTMENTS DIVISION




CEASE AND DESIST


Docket/Case Number: CO-14-8023-S



THE CONNECTICUT BANKING COMMISSIONER ALLEGED THAT FROMJANUARY 1, 2012 - JUNE 9, 2014, MSSB VIOLATED SECTIONS 36B-14(A)(3)AND 36B-14(D) OF THE ACT AND SECTION 36B-31-14F OF THEREGULATIONS RELATING TO THE ACCESSIBILITY AND AVAILABILITY OFRECORDS DURING ITS EXAMINATION OF MSSB. THE COMMISSIONERALSO ALLEGED THAT MSSB VIOLATED SECTION 36B-31-14A(A) OF THEREGULATIONS BY FAILING TO KEEP CERTAIN MANUALS PRODUCED TOTHE DIVISION DURING THE EXAMINATION, TRUE, ACCURATE ANDCURRENT, SECTION 36B-31-6F BY FAILING TO ESTABLISH, ENFORCE ANDMAINTAIN A SUPERVISORY SYSTEM RELATED TO ITS EMAIL SUPERVISIONAND SECTION 36B-31-7E OF THE REGULATIONS BY FAILING TO ENSUREAGENTS PROVIDED NOTIFICATION OF TRADE OR ASSUMED NAMES.


Resolution:

Other Sanctions Ordered: MSSB AGREED TO VARIOUS UNDERTAKINGS IN CONNECTION WITH THESETTLEMENT OF THIS MATTER.

Sanction Details: MSSB AGREED TO VARIOUS UNDERTAKINGS IN CONNECTION WITH THESETTLEMENT OF THIS MATTER.

Firm Statement ON JUNE 9, 2014, MORGAN STANLEY SMITH BARNEY LLC ("MSSB")ENTERED INTO A CONSENT ORDER WITH THE CONNECTICUT BANKINGCOMMISSIONER TO SETTLE ALLEGATIONS THAT MSSB VIOLATEDSECTIONS 36B-14(A)(3) AND 36B-14(D) OF THE ACT AND SECTION 36B-31-14F OF THE REGULATIONS RELATING TO THE ACCESSIBILITY ANDAVAILABILITY OF RECORDS DURING ITS EXAMINATION OF MSSB. THECOMMISSIONER ALSO ALLEGED THAT MSSB VIOLATED SECTION 36B-31-14A(A) OF THE REGULATIONS BY FAILING TO KEEP CERTAIN MANUALSPRODUCED TO THE DIVISION DURING THE EXAMINATION, TRUE,ACCURATE AND CURRENT, SECTION 36B-31-6F BY FAILING TO ESTABLISH,ENFORCE AND MAINTAIN A SUPERVISORY SYSTEM RELATED TO ITS EMAILSUPERVISION AND SECTION 36B-31-7E OF THE REGULATIONS BY FAILINGTO ENSURE AGENTS PROVIDED NOTIFICATION OF TRADE OR ASSUMEDNAMES. WITHOUT ADMITTING OR DENYING THE ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMAGREED TO THE ENTRY OF A CONSENT ORDER AND THE IMPOSITION OF ACEASE AND DESIST ORDER, A FINE OF $5,000,000, AND UNDERTAKINGS.

Sanctions Ordered: Monetary/Fine $5,000,000.00Cease and Desist/Injunction

Consent






Disclosure 29 of 42

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE IT BEGANOPERATIONS THROUGH A MERGER AND, FOR OVER TWO YEARS AND AHALF, WITH REGARD TO INITIAL PUBLIC OFFERINGS (IPOS), CERTAINOFFICES OF THE FIRM OPERATED UNDER LEGACY POLICIES OF ANENTITY FROM THE MERGER, WHILE OTHERS OPERATED UNDER LEGACYPROCEDURES OF THE OTHER ENTITY FROM THE MERGER. THE FINDINGSSTATED THAT THE TWO LEGACY POLICIES OFFERED DIFFERENTGUIDANCE REGARDING THE SOLICITATION OF OFFERS IN IPOS. ONELEGACY POLICY DIRECTED FINANCIAL ADVISORS TO OBTAIN ANDRECONFIRM INDICATIONS OF INTEREST FROM CUSTOMERS, WHILE THEOTHER LEGACY POLICY DIRECTED FINANCIAL ADVISORS TO SOLICITCONDITIONAL OFFERS TO BUY SECURITIES FROM INVESTORS. BOTHLEGACY POLICIES PROHIBITED UNAUTHORIZED TRADING.SUBSEQUENTLY, THE FIRM ISSUED A COMPLIANCE NOTICE TO RECONCILETHESE POLICIES. THE NEW POLICY, WHICH USED THE TERMS "CONDITIONAL OFFER" AND "INDICATION OF INTEREST"INTERCHANGEABLY, DIRECTED FINANCIAL ADVISORS TO ASCERTAIN THECUSTOMERS' INTEREST IN IPO SHARES AT A SPECIFIED PRICE RANGE.CUSTOMERS WERE TO BE INFORMED THAT SHARES IN THE IPO WOULDNOT BE GUARANTEED. NO RECONFIRMATION WOULD TAKE PLACEUNLESS THE FINAL PRICE FELL OUTSIDE OF THE INDICATED RANGE. THEPOLICY DID NOT EXPLICITLY STATE THAT INVESTORS WOULD BE GIVEN ANOPPORTUNITY TO WITHDRAW AFTER REGISTRATION BECAME EFFECTIVEBUT BEFORE ACCEPTANCE. OFFERS WERE NOT PLACED IN WRITING, BUTWERE RECORDED AS "INDICATIONS OF INTEREST" IN THE FIRM'S ORDERSYSTEM. THE FIRM DID NOT RECORD THE TERMS OF THE OFFER OTHERTHAN TO TRACK THE NUMBER OF SHARES REQUESTED IN THE FIRM'SORDER SYSTEM. HOWEVER, THE POLICY INITIATED WAS SUSPENDED,AFTER A LITTLE OVER ONE YEAR, AND THEREAFTER THE FIRM HAS HADTHE PRACTICE OF RECONFIRMING ALL CUSTOMER ORDERS AFTER THEFINAL PRICING TERMS WERE AVAILABLE. THE FINDINGS ALSO STATEDTHAT THE FIRM POLICIES AND PROCEDURES GOVERNING THESOLICITATION OF OFFERS IN IPOS IN EFFECT DURING THE RELEVANTPERIOD WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCEWITH THE SECURITIES LAWS OR FINRA RULES: THE FIRM'S POLICIES ANDPROCEDURES FAILED TO ADEQUATELY DISTINGUISH CONDITIONALOFFERS FROM INDICATIONS OF INTEREST; THE FIRM FAILED TO PROVIDESUFFICIENT GUIDANCE AND TRAINING TO ITS SALE STAFF REGARDINGTHE SOLICITATION OF CONDITIONAL OFFERS; AND THE FIRM FAILED TOADEQUATELY MONITOR THE SOLICITATION OF CONDITIONAL OFFERS TOASSESS COMPLIANCE WITH ITS OWN POLICIES, OR THE SECURITIESLAWS AND REGULATIONS AND FINRA RULES. THE FIRM'S POLICIES ANDPROCEDURES CONFLATED INDICATIONS OF INTEREST AND CONDITIONALOFFERS. THE FIRM FAILED TO MAKE ANY DISTINCTION BETWEEN THESETWO TERMS IN ITS HARMONIZED POLICIES AND OFFERED NO TRAININGOR OTHER MATERIALS TO ITS FINANCIAL ADVISORS TO CLARIFY THEPOLICY. AS A RESULT, SALES STAFF AND CUSTOMERS MAY NOT HAVEPROPERLY UNDERSTOOD WHAT TYPE OF INTEREST WAS BEINGSOLICITED. THE FIRM ALSO FAILED TO ADEQUATELY MONITORCOMPLIANCE WITH ITS OWN POLICIES AND FAILED TO HAVEPROCEDURES DESIGNED TO ENSURE THAT CONDITIONAL OFFERS WEREBEING SOLICITED, WHICH GENERALLY AROSE FROM ORALCONVERSATIONS BETWEEN REGISTERED REPRESENTATIVES ANDPOTENTIAL INVESTORS. AS A RESULT, THE FIRM WAS UNABLE TO ENSURETHAT ITS SALES STAFF HAD PROPERLY COMPLIED WITH REQUIREMENTSUNDER THE FEDERAL SECURITIES LAWS AND FINRA RULES. THISRESULTED IN THE FIRM FAILING TO IMPLEMENT ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SOLICITATION OF RETAIL INTEREST INEQUITY IPOS.







Initiated By: FINRA


Other


N/A




Other Product Type(s): INITIAL PUBLIC OFFERINGS

WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE IT BEGANOPERATIONS THROUGH A MERGER AND, FOR OVER TWO YEARS AND AHALF, WITH REGARD TO INITIAL PUBLIC OFFERINGS (IPOS), CERTAINOFFICES OF THE FIRM OPERATED UNDER LEGACY POLICIES OF ANENTITY FROM THE MERGER, WHILE OTHERS OPERATED UNDER LEGACYPROCEDURES OF THE OTHER ENTITY FROM THE MERGER. THE FINDINGSSTATED THAT THE TWO LEGACY POLICIES OFFERED DIFFERENTGUIDANCE REGARDING THE SOLICITATION OF OFFERS IN IPOS. ONELEGACY POLICY DIRECTED FINANCIAL ADVISORS TO OBTAIN ANDRECONFIRM INDICATIONS OF INTEREST FROM CUSTOMERS, WHILE THEOTHER LEGACY POLICY DIRECTED FINANCIAL ADVISORS TO SOLICITCONDITIONAL OFFERS TO BUY SECURITIES FROM INVESTORS. BOTHLEGACY POLICIES PROHIBITED UNAUTHORIZED TRADING.SUBSEQUENTLY, THE FIRM ISSUED A COMPLIANCE NOTICE TO RECONCILETHESE POLICIES. THE NEW POLICY, WHICH USED THE TERMS "CONDITIONAL OFFER" AND "INDICATION OF INTEREST"INTERCHANGEABLY, DIRECTED FINANCIAL ADVISORS TO ASCERTAIN THECUSTOMERS' INTEREST IN IPO SHARES AT A SPECIFIED PRICE RANGE.CUSTOMERS WERE TO BE INFORMED THAT SHARES IN THE IPO WOULDNOT BE GUARANTEED. NO RECONFIRMATION WOULD TAKE PLACEUNLESS THE FINAL PRICE FELL OUTSIDE OF THE INDICATED RANGE. THEPOLICY DID NOT EXPLICITLY STATE THAT INVESTORS WOULD BE GIVEN ANOPPORTUNITY TO WITHDRAW AFTER REGISTRATION BECAME EFFECTIVEBUT BEFORE ACCEPTANCE. OFFERS WERE NOT PLACED IN WRITING, BUTWERE RECORDED AS "INDICATIONS OF INTEREST" IN THE FIRM'S ORDERSYSTEM. THE FIRM DID NOT RECORD THE TERMS OF THE OFFER OTHERTHAN TO TRACK THE NUMBER OF SHARES REQUESTED IN THE FIRM'SORDER SYSTEM. HOWEVER, THE POLICY INITIATED WAS SUSPENDED,AFTER A LITTLE OVER ONE YEAR, AND THEREAFTER THE FIRM HAS HADTHE PRACTICE OF RECONFIRMING ALL CUSTOMER ORDERS AFTER THEFINAL PRICING TERMS WERE AVAILABLE. THE FINDINGS ALSO STATEDTHAT THE FIRM POLICIES AND PROCEDURES GOVERNING THESOLICITATION OF OFFERS IN IPOS IN EFFECT DURING THE RELEVANTPERIOD WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCEWITH THE SECURITIES LAWS OR FINRA RULES: THE FIRM'S POLICIES ANDPROCEDURES FAILED TO ADEQUATELY DISTINGUISH CONDITIONALOFFERS FROM INDICATIONS OF INTEREST; THE FIRM FAILED TO PROVIDESUFFICIENT GUIDANCE AND TRAINING TO ITS SALE STAFF REGARDINGTHE SOLICITATION OF CONDITIONAL OFFERS; AND THE FIRM FAILED TOADEQUATELY MONITOR THE SOLICITATION OF CONDITIONAL OFFERS TOASSESS COMPLIANCE WITH ITS OWN POLICIES, OR THE SECURITIESLAWS AND REGULATIONS AND FINRA RULES. THE FIRM'S POLICIES ANDPROCEDURES CONFLATED INDICATIONS OF INTEREST AND CONDITIONALOFFERS. THE FIRM FAILED TO MAKE ANY DISTINCTION BETWEEN THESETWO TERMS IN ITS HARMONIZED POLICIES AND OFFERED NO TRAININGOR OTHER MATERIALS TO ITS FINANCIAL ADVISORS TO CLARIFY THEPOLICY. AS A RESULT, SALES STAFF AND CUSTOMERS MAY NOT HAVEPROPERLY UNDERSTOOD WHAT TYPE OF INTEREST WAS BEINGSOLICITED. THE FIRM ALSO FAILED TO ADEQUATELY MONITORCOMPLIANCE WITH ITS OWN POLICIES AND FAILED TO HAVEPROCEDURES DESIGNED TO ENSURE THAT CONDITIONAL OFFERS WEREBEING SOLICITED, WHICH GENERALLY AROSE FROM ORALCONVERSATIONS BETWEEN REGISTERED REPRESENTATIVES ANDPOTENTIAL INVESTORS. AS A RESULT, THE FIRM WAS UNABLE TO ENSURETHAT ITS SALES STAFF HAD PROPERLY COMPLIED WITH REQUIREMENTSUNDER THE FEDERAL SECURITIES LAWS AND FINRA RULES. THISRESULTED IN THE FIRM FAILING TO IMPLEMENT ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SOLICITATION OF RETAIL INTEREST INEQUITY IPOS.


Resolution:


No










Sanction Details: SEE ABOVE

FINE PAID IN FULL ON MAY 27, 2014.



Initiated By: FINRA




CENSURE




Other Product Type(s): INITIAL PUBLIC OFFERINGS

Allegations: FINRA ALLEGED THAT BETWEEN FEBRUARY 16, 2012 - MAY 1, 2013, MSSBFAILED TO IMPLEMENT ADEQUATE SYSTEMS AND PROCEDURES TOSUPERVISE THE SOLICITATION OF RETAIL INTEREST IN EQUITY IPOS INVIOLATION OF NASD RULE 3010 AND FINRA RULE 2010.



Resolution:


Sanction Details: THE FINE OF $5,000,000 WAS PAID ON MAY 27, 2014.

Firm Statement ON MAY 6, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLC (MSSB)ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT (AWC)TO SETTLE ALLEGATIONS THAT BETWEEN FEBRUARY 16, 2012 - MAY 1,2013, MSSB FAILED TO IMPLEMENT ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SOLICITATION OF RETAIL INTEREST INEQUITY IPOS IN VIOLATION OF NASD RULE 3010 AND FINRA RULE 2010.SPECIFICALLY, THERE WERE FINDINGS IN THE AWC THAT MSSB FAILED TOIMPLEMENT ADEQUATE POLICIES AND PROCEDURES THAT PROVIDEDSUFFICIENT GUIDANCE AND TRAINING TO ITS SALES STAFF INCONNECTION WITH THE SOLICITATION OF CONDITIONAL OFFERS FOR IPOTRANSACTIONS. WITHOUT ADMITTING OR DENYING THE FINDINGS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO THE ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND A FINE OF $5,000,000.









ON MAY 6, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLC (MSSB)ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT (AWC)TO SETTLE ALLEGATIONS THAT BETWEEN FEBRUARY 16, 2012 - MAY 1,2013, MSSB FAILED TO IMPLEMENT ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SOLICITATION OF RETAIL INTEREST INEQUITY IPOS IN VIOLATION OF NASD RULE 3010 AND FINRA RULE 2010.SPECIFICALLY, THERE WERE FINDINGS IN THE AWC THAT MSSB FAILED TOIMPLEMENT ADEQUATE POLICIES AND PROCEDURES THAT PROVIDEDSUFFICIENT GUIDANCE AND TRAINING TO ITS SALES STAFF INCONNECTION WITH THE SOLICITATION OF CONDITIONAL OFFERS FOR IPOTRANSACTIONS. WITHOUT ADMITTING OR DENYING THE FINDINGS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO THE ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND A FINE OF $5,000,000.

Disclosure 30 of 42

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Allegations: CFTC RELEASE: PR6894-14/MARCH 27, 2014: THE U.S. COMMODITYFUTURES TRADING COMMISSION (COMMISSION OR CFTC) DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT A PUBLICADMINISTRATIVE PROCEEDING BE, AND HEREBY IS, INSTITUTED TODETERMINE WHETHER THE FIRM ENGAGED IN THE VIOLATIONS AS SETFORTH HEREIN AND TO DETERMINE WHETHER ANY ORDER SHALL BEISSUED IMPOSING REMEDIAL SANCTIONS. THE CFTC ANNOUNCED THEFILING AND SIMULTANEOUS SETTLEMENT OF CHARGES AGAINSTMORGAN STANLEY SMITH BARNEY LLC, A REGISTERED FUTURESCOMMISSION MERCHANT (FCM), FOR VIOLATING CFTC RULESGOVERNING SECURED FUNDS OF FOREIGN FUTURES AND OPTIONCUSTOMERS, COMMINGLING CUSTOMER AND FIRM FUNDS, FAILING TOPREPARE ACCURATE DAILY COMPUTATIONS OF ITS SEGREGATED ANDSECURED FUNDS, FAILING TO PROPERLY TITLE ACCOUNT STATEMENTSFOR FOUR CUSTOMER SEGREGATED ACCOUNTS, AND FAILING TODILIGENTLY SUPERVISE ITS EMPLOYEES HANDLING OF MATTERSRELATED TO ITS BUSINESS AS A CFTC REGISTRANT. NONE OF THEVIOLATIONS RESULTED IN ANY CUSTOMER LOSSES, ACCORDING TO THECFTC'S ORDER. THE CFTC'S ORDER FINDS THAT ON THE FIRMERRONEOUSLY TRANSFERRED APPROXIMATELY $16 MILLION FROM ACUSTOMER SECURED FUNDS BANK ACCOUNT RESULTING IN ADEFICIENCY IN THE FIRM'S SECURED FUNDS OF APPROXIMATELY $9.27MILLION. THE FIRM DISCOVERED THE ERROR THE NEXT DAY AND CUREDTHE DEFICIENCY. AFTER ITS SECURED DEFICIENCY, THE FIRMINDEPENDENTLY ENGAGED A COMPANY TO REVIEW ITS POLICIES ANDPROCEDURES WITH RESPECT TO SEGREGATED AND SECUREDACCOUNTS. THE COMPANY SUBSEQUENTLY ISSUED A REPORTRECOMMENDING CHANGES TO THE FIRM'S POLICIES AND PROCEDURES,WHICH THE FIRM HAS SUBSTANTIALLY IMPLEMENTED. THE CFTC'S ORDERALSO FINDS THAT FOR APPROXIMATELY A SIX-MONTH PERIOD, THE FIRMCOMMINGLED CUSTOMER SEGREGATED AND FIRM FUNDS IN ACUSTOMER SEGREGATED BANK ACCOUNT. IN ADDITION, FORAPPROXIMATELY AN EIGHT-MONTH PERIOD, THE FIRM FAILED TOPREPARE ACCURATE DAILY COMPUTATIONS OF ITS SEGREGATED ANDSECURED FUNDS. NONE OF THE ERRORS CAUSED THE FIRM TO FALLBELOW ITS REQUIRED SEGREGATED OR SECURED FUNDS; HOWEVER,THE FIRM WAS REQUIRED TO REFILE 120 DAILY STATEMENTS AS A RESULTOF THE ERRORS. FINALLY, THE CFTC'S ORDER FINDS THAT OVERSEVERAL MONTHS, ACCOUNT STATEMENTS FOR FOUR FIRMSEGREGATED ACCOUNTS WERE IMPROPERLY TITLED AS CUSTOMERSECURED ACCOUNTS.









Other


N/A





CFTC RELEASE: PR6894-14/MARCH 27, 2014: THE U.S. COMMODITYFUTURES TRADING COMMISSION (COMMISSION OR CFTC) DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT A PUBLICADMINISTRATIVE PROCEEDING BE, AND HEREBY IS, INSTITUTED TODETERMINE WHETHER THE FIRM ENGAGED IN THE VIOLATIONS AS SETFORTH HEREIN AND TO DETERMINE WHETHER ANY ORDER SHALL BEISSUED IMPOSING REMEDIAL SANCTIONS. THE CFTC ANNOUNCED THEFILING AND SIMULTANEOUS SETTLEMENT OF CHARGES AGAINSTMORGAN STANLEY SMITH BARNEY LLC, A REGISTERED FUTURESCOMMISSION MERCHANT (FCM), FOR VIOLATING CFTC RULESGOVERNING SECURED FUNDS OF FOREIGN FUTURES AND OPTIONCUSTOMERS, COMMINGLING CUSTOMER AND FIRM FUNDS, FAILING TOPREPARE ACCURATE DAILY COMPUTATIONS OF ITS SEGREGATED ANDSECURED FUNDS, FAILING TO PROPERLY TITLE ACCOUNT STATEMENTSFOR FOUR CUSTOMER SEGREGATED ACCOUNTS, AND FAILING TODILIGENTLY SUPERVISE ITS EMPLOYEES HANDLING OF MATTERSRELATED TO ITS BUSINESS AS A CFTC REGISTRANT. NONE OF THEVIOLATIONS RESULTED IN ANY CUSTOMER LOSSES, ACCORDING TO THECFTC'S ORDER. THE CFTC'S ORDER FINDS THAT ON THE FIRMERRONEOUSLY TRANSFERRED APPROXIMATELY $16 MILLION FROM ACUSTOMER SECURED FUNDS BANK ACCOUNT RESULTING IN ADEFICIENCY IN THE FIRM'S SECURED FUNDS OF APPROXIMATELY $9.27MILLION. THE FIRM DISCOVERED THE ERROR THE NEXT DAY AND CUREDTHE DEFICIENCY. AFTER ITS SECURED DEFICIENCY, THE FIRMINDEPENDENTLY ENGAGED A COMPANY TO REVIEW ITS POLICIES ANDPROCEDURES WITH RESPECT TO SEGREGATED AND SECUREDACCOUNTS. THE COMPANY SUBSEQUENTLY ISSUED A REPORTRECOMMENDING CHANGES TO THE FIRM'S POLICIES AND PROCEDURES,WHICH THE FIRM HAS SUBSTANTIALLY IMPLEMENTED. THE CFTC'S ORDERALSO FINDS THAT FOR APPROXIMATELY A SIX-MONTH PERIOD, THE FIRMCOMMINGLED CUSTOMER SEGREGATED AND FIRM FUNDS IN ACUSTOMER SEGREGATED BANK ACCOUNT. IN ADDITION, FORAPPROXIMATELY AN EIGHT-MONTH PERIOD, THE FIRM FAILED TOPREPARE ACCURATE DAILY COMPUTATIONS OF ITS SEGREGATED ANDSECURED FUNDS. NONE OF THE ERRORS CAUSED THE FIRM TO FALLBELOW ITS REQUIRED SEGREGATED OR SECURED FUNDS; HOWEVER,THE FIRM WAS REQUIRED TO REFILE 120 DAILY STATEMENTS AS A RESULTOF THE ERRORS. FINALLY, THE CFTC'S ORDER FINDS THAT OVERSEVERAL MONTHS, ACCOUNT STATEMENTS FOR FOUR FIRMSEGREGATED ACCOUNTS WERE IMPROPERLY TITLED AS CUSTOMERSECURED ACCOUNTS.


Resolution:


Sanction Details: IN ANTICIPATION OF THE INSTITUTION OF THIS ADMINISTRATIVEPROCEEDING, THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENT,WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. WITHOUTADMITTING OR DENYING ANY OF THE FINDINGS OR CONCLUSIONSHEREIN, THE FIRM CONSENTS TO THE ENTRY OF AND ACKNOWLEDGESSERVICE OF THIS ORDER INSTITUTING PROCEEDINGS PURSUANT TOSECTIONS 6(C) AND 6(D) OF THE COMMODITY EXCHANGE ACT (THE ACT)AND MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS ANDACKNOWLEDGES SERVICE OF THIS ORDER. THE COMMISSION FINDSTHAT THE FIRM VIOLATED SECTION 4D(A)(2) OF THE ACT, ANDCOMMISSION REGULATIONS 1.20(A), (C); 1.32(A); 1.33; 30.7(A), (F); AND166.3. THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENT, WITHOUTADMITTING OR DENYING THE FINDINGS AND CONCLUSIONS HEREIN.ACCORDINGLY, IT IS HEREBY ORDERED THAT: THE FIRM SHALL CEASEAND DESIST FROM VIOLATING SECTION 4D(A)(2) OF THE ACT, ANDREGULATIONS 1.20(A), (C); 1.32(A); 1.33; 30.7(A), (F); AND 166.3; SHALL PAY ACIVIL MONETARY PENALTY IN THE AMOUNT OF $490,000; AND THE FIRMAND ITS SUCCESSORS AND ASSIGNS SHALL COMPLY WITH THEUNDERTAKINGS SET FORTH IN ITS OFFER.


No

Sanctions Ordered: Monetary/Fine $490,000.00Cease and Desist/Injunction

Order






IN ANTICIPATION OF THE INSTITUTION OF THIS ADMINISTRATIVEPROCEEDING, THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENT,WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. WITHOUTADMITTING OR DENYING ANY OF THE FINDINGS OR CONCLUSIONSHEREIN, THE FIRM CONSENTS TO THE ENTRY OF AND ACKNOWLEDGESSERVICE OF THIS ORDER INSTITUTING PROCEEDINGS PURSUANT TOSECTIONS 6(C) AND 6(D) OF THE COMMODITY EXCHANGE ACT (THE ACT)AND MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS ANDACKNOWLEDGES SERVICE OF THIS ORDER. THE COMMISSION FINDSTHAT THE FIRM VIOLATED SECTION 4D(A)(2) OF THE ACT, ANDCOMMISSION REGULATIONS 1.20(A), (C); 1.32(A); 1.33; 30.7(A), (F); AND166.3. THE FIRM HAS SUBMITTED AN OFFER OF SETTLEMENT, WITHOUTADMITTING OR DENYING THE FINDINGS AND CONCLUSIONS HEREIN.ACCORDINGLY, IT IS HEREBY ORDERED THAT: THE FIRM SHALL CEASEAND DESIST FROM VIOLATING SECTION 4D(A)(2) OF THE ACT, ANDREGULATIONS 1.20(A), (C); 1.32(A); 1.33; 30.7(A), (F); AND 166.3; SHALL PAY ACIVIL MONETARY PENALTY IN THE AMOUNT OF $490,000; AND THE FIRMAND ITS SUCCESSORS AND ASSIGNS SHALL COMPLY WITH THEUNDERTAKINGS SET FORTH IN ITS OFFER.









Allegations: THE COMMODITY FUTURES TRADING COMMISSION (CFTC) ALLEGED THATMORGAN STANLEY SMITH BARNEY LLC (FIRM) VIOLATED CFTC RULE 30.7(A) BY ERRONEOUSLY TRANSFERRING FUNDS FROM A SECURED FUNDSBANK ACCOUNT TO A SEGREGATED FUNDS BROKERAGE ACCOUNT ANDCONSEQUENTLY FAILING TO MAINTAIN IN A SEPARATE ACCOUNT MONEYIN AN AMOUNT SUFFICIENT TO COVER ITS OBLIGATIONS TO FOREIGNFUTURES AND OPTIONS CUSTOMERS, SECTION 4D(A)(2) OF THECOMMODITY EXCHANGE ACT AND CFTC RULE 1.20(C) BY COMINGLINGEMPLOYEE-OWNED NON-CUSTOMER SECURITIES WITH CUSTOMERSECURITIES IN A CUSTOMER SEGREGATED ACCOUNT, CFTC RULE 1.20(A)BECAUSE ACCOUNT STATEMENTS FOR FOUR SEGREGATED ACCOUNTSWERE IMPROPERLY TITLED AS CUSTOMER SECURED ACCOUNTS, CFTCRULE 30.7(F) BY FAILING TO PREPARE ACCURATE DAILY COMPUTATIONSOF ITS SECURED AMOUNTS, CFTC RULE 1.32(A) BY FAILING TO PREPAREACCURATE DAILY COMPUTATIONS OF SEGREGATED FUNDS, CFTC RULE1.33 BY PROVIDING CERTAIN CUSTOMERS WITH INACCURATE ACCOUNTSTATEMENTS AND CFTC RULE 166.3 BY FAILING TO SUPERVISE THEHANDLING OF SEGREGATED AND SECURED ACCOUNTS AND FAILING TOHAVE ADEQUATE POLICIES AND PROCEDURES DESIGNED TO DETECT ANDDETER THE VIOLATIONS OF THE COMMODITY EXCHANGE ACT AND CFTCRULES










CEASE AND DESIST; UNDERTAKINGS


Resolution:


Sanction Details: THE CIVIL MONETARY PENALTY OF $490,000 WAS PAID ON MARCH 31, 2014.THE FIRM ALSO AGREED TO UNDERTAKINGS RELATED TO PUBLICSTATEMENTS AND PAYMENT OF THE MONETARY PENALTY.

Firm Statement ON MARCH 27, 2014, THE CFTC ISSUED AN ORDER FILING AND SETTLINGCHARGES THAT MORGAN STANLEY SMITH BARNEY LLC (FIRM) VIOLATEDCFTC RULE 30.7(A) BY ERRONEOUSLY TRANSFERRING FUNDS FROM ASECURED FUNDS BANK ACCOUNT TO A SEGREGATED FUNDSBROKERAGE ACCOUNT AND CONSEQUENTLY FAILING TO MAINTAIN IN ASEPARATE ACCOUNT MONEY IN AN AMOUNT SUFFICIENT TO COVER ITSOBLIGATIONS TO FOREIGN FUTURES AND OPTIONS CUSTOMERS,SECTION 4D(A)(2) OF THE COMMODITY EXCHANGE ACT AND CFTC RULE1.20(C) BY COMINGLING EMPLOYEE-OWNED NON-CUSTOMER SECURITIESWITH CUSTOMER SECURITIES IN A CUSTOMER SEGREGATED ACCOUNT,CFTC RULE 1.20(A) BECAUSE ACCOUNT STATEMENTS FOR FOURSEGREGATED ACCOUNTS WERE IMPROPERLY TITLED AS CUSTOMERSECURED ACCOUNTS, CFTC RULE 30.7(F) BY FAILING TO PREPAREACCURATE DAILY COMPUTATIONS OF ITS SECURED AMOUNTS, CFTCRULE 1.32(A) BY FAILING TO PREPARE ACCURATE DAILY COMPUTATIONSOF SEGREGATED FUNDS, CFTC RULE 1.33 BY PROVIDING CERTAINCUSTOMERS WITH INACCURATE ACCOUNT STATEMENTS AND CFTC RULE166.3 BY FAILING TO SUPERVISE THE HANDLING OF SEGREGATED ANDSECURED ACCOUNTS AND FAILING TO HAVE ADEQUATE POLICIES ANDPROCEDURES DESIGNED TO DETECT AND DETER THE VIOLATIONS OFTHE COMMODITY EXCHANGE ACT AND CFTC RULES. WITHOUT ADMITTINGOR DENYING THE FINDINGS OR CONCLUSIONS AND WITHOUTADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRM ACCEPTED ANDCONSENTED TO THE ENTRY OF FINDINGS, THE IMPOSITION OF A CEASEAND DESIST ORDER, A CIVIL MONETARY PENALTY OF $490,000, ANDUNDERTAKINGS RELATED TO PUBLIC STATEMENTS AND PAYMENT OF THEMONETARY PENALTY.


Order

Disclosure 31 of 42

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Initiated By: FLORIDA OFFICE OF FINANCIAL REGULATION





Docket/Case Number: 0297-SR-01/14




Allegations: ENGAGED IN INVESTMENT ADVISORY BUSINESS THROUGH TWELVE (12)UNREGISTERED ASSOCIATED PERSONS.



Resolution:


Sanction Details: $125,000 ADMINISTRATIVE FINE PAID IN FULL

Regulator Statement ON 2/6/2014, THE OFFICE OF FINANCIAL REGULATION ENTERED A FINALORDER ADOPTING THE STIPULATION AND CONSENT AGREEMENT IN THEMATTER MORGAN STANLEY SMITH BARNEY LLC. MORGAN STANLEYSMITH BARNEY LLC NEITHER ADMITTED NOR DENIED THE FINDINGS BUTCONSENTED TO THE ENTRY OF FINDINGS BY THE OFFICE. THE OFFICEFOUND THAT MORGAN STANLEY SMITH BARNEY LLC ENGAGED ININVESTMENT ADVISORY BUSINESS THROUGH TWELVE (12) ASSOCIATEDPERSONS, FROM LOCATIONS WITHIN THIS STATE, WITHOUT THE BENEFITOF THEIR LAWFUL ASSOCIATED PERSON REGISTRATION IN THE STATE OFFLORIDA PURSUANT TO SECTION 517.12(4), F. S. MORGAN STANLEY SMITHBARNEY LLC AGREED TO PAY A $125,000 ADMINISTRATIVE FINE.


No

Sanctions Ordered: Monetary/Fine $125,000.00

Order







Initiated By: FLORIDA OFFICE OF FINANCIAL REGULATION




CEASE AND DESIST


Docket/Case Number: 0297-SR-01/14



Allegations: FLORIDA ALLEGED THAT THE FIRM CONDUCTED INVESTMENT ADVISORYBUSINESS THROUGH TWELVE INDIVIDUALS WITHOUT THE BENEFIT OFTHEIR LAWFUL ASSOCIATED PERSON REGISTRATION IN FLORIDA.



Resolution:


Sanction Details: THE FINE OF $125,000 WAS PAID ON FEBRUARY 3, 2014.

Firm Statement ON FEBRUARY 6, 2014, MORGAN STANLEY SMITH BARNEY LLC (MSSB)BECAME SUBJECT TO A FINAL ORDER BY THE FLORIDA OFFICE OFFINANCIAL REGULATION (OFR) IN CONNECTION WITH A STIPULATION ANDCONSENT AGREEMENT (CONSENT AGREEMENT) BETWEEN MSSB ANDOFR TO SETTLE ALLEGATIONS RELATED TO REGISTRATION OFASSOCIATED PERSONS IN FLORIDA. SPECIFICALLY, THERE WEREFINDINGS IN THE CONSENT AGREEMENT THAT THE FIRM VIOLATEDSECTION 517.12(4) BY CONDUCTING INVESTMENT ADVISORY BUSINESSTHROUGH TWELVE INDIVIDUALS FROM LOCATIONS IN FLORIDA WITHOUTTHE BENEFIT OF THEIR LAWFUL ASSOCIATED PERSON REGISTRATION.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMCONSENTED TO ENTRY OF FINDINGS AND THE IMPOSITION OF A CEASEAND DESIST ORDER AND A FINE OF $125,000.


Order






Disclosure 32 of 42

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Initiated By: FINRA







Allegations: FINRA RULES 2010, 6730(A), 6730(C)(8), 7450: THE FIRM TRANSMITTED TOTHE ORDER AUDIT TRAIL SYSTEM (OATS) EXECUTION OR COMBINEDORDER/EXECUTION REPORTS THAT OATS WAS UNABLE TO LINK TO THERELATED TRADE REPORTS IN A FINRA TRANSACTION REPORTING SYSTEMBECAUSE THEY CONTAINED INACCURATE, INCOMPLETE, OR IMPROPERLYFORMATTED DATA AND SUBMITTED EXECUTION REPORTS IN WHICH THEFIRM FAILED TO APPEND THE REQUIRED REPORTING EXCEPTION CODE.THE FIRM FAILED TO REPORT TO THE TRADE REPORTING ANDCOMPLIANCE ENGINE (TRACE) SP TRANSACTIONS WITHIN THE TIMEREQUIRED BY FINRA RULE 6730. THE FIRM FAILED TO REPORT TO TRACELARGE BLOCK S1 TRANSACTIONS IN CORPORATE SECURITIES WITHIN 15MINUTES OF THE TIME OF EXECUTION AND, WITH RESPECT TO SOME OFTHESE TRANSACTIONS, THE FIRM FAILED TO REPORT TO TRACE THECORRECT TIME OF EXECUTION. THE FIRM FAILED TO REPORT TO TRACELARGE BLOCK S1 TRANSACTIONS IN AGENCY SECURITIES WITHIN 15MINUTES OF THE TIME OF EXECUTION.



Resolution:


No










Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE IT IS CENSURED AND FINED $41,000.



Initiated By: FINRA




CENSURE





Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULES 7450, 2010 AND6730 BY SUBMITTING INACCURATE, INCOMPLETE, IMPROPERLYFORMATTED AND/OR LATE TRADE REPORTS FOR CERTAIN FIXED INCOMEAND EQUITY SECURITY TRADES.



Resolution:


Sanction Details: THE FINE OF $41,000 TO BE PAID FORTH WITH.

Firm Statement ON FEBRUARY 5, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT (AWC)TO SETTLE CERTAIN ALLEGATIONS. SPECIFICALLY, THERE WEREFINDINGS IN THE AWC THAT THE FIRM VIOLATED FINRA RULES 7450, 2010AND 6730 BY SUBMITTING CERTAIN INACCURATE, INCOMPLETE,IMPROPERLY FORMATTED AND/OR LATE TRADE REPORTS FOR CERTAINFIXED INCOME AND EQUITY SECURITY TRADES. WITHOUT ADMITTING ORDENYING THE UNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATIONOF ANY ISSUES OF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTEDTO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSURE AND A FINEOF $41,000.








ON FEBRUARY 5, 2014, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT (AWC)TO SETTLE CERTAIN ALLEGATIONS. SPECIFICALLY, THERE WEREFINDINGS IN THE AWC THAT THE FIRM VIOLATED FINRA RULES 7450, 2010AND 6730 BY SUBMITTING CERTAIN INACCURATE, INCOMPLETE,IMPROPERLY FORMATTED AND/OR LATE TRADE REPORTS FOR CERTAINFIXED INCOME AND EQUITY SECURITY TRADES. WITHOUT ADMITTING ORDENYING THE UNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATIONOF ANY ISSUES OF LAW OR FACT, THE FIRM ACCEPTED AND CONSENTEDTO ENTRY OF FINDINGS AND THE IMPOSITION OF A CENSURE AND A FINEOF $41,000.

Disclosure 33 of 42

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Initiated By: FINRA






Other Product Type(s): CORPORATE BONDS

Allegations: FINRA RULE 2010, NASD RULE 2320, MSRB RULES G-17, G-30(A) - MORGANSTANLEY SMITH BARNEY LLC, IN MUNICIPAL BOND TRANSACTIONS,PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROMCUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES FOR ITS OWNACCOUNT TO CUSTOMERS AT AN AGGREGATE PRICE (INCLUDING ANYMARKDOWN OR MARKUP) THAT WAS NOT FAIR AND REASONABLE, TAKINGINTO CONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BESTJUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALERAS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THETRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED INCONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER ORMUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THETOTAL DOLLAR AMOUNT OF THE TRANSACTION. IN CORPORATE BONDTRANSACTIONS FOR OR WITH CUSTOMERS, THE FIRM FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMERS WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS.












Sanction Details: IN FEBRUARY 2012, THE FIRM IMPLEMENTED REVISIONS TO ITS WRITTENSUPERVISORY PROCEDURES (WSPS) AND SUPERVISORY SYSTEM INRESPONSE TO AN UNDERTAKING. THESE AND OTHER REVISIONSIMPLEMENTED BY THE FIRM ENHANCED THE FIRM'S SUPERVISION NOTONLY OF MARKUPS AND MARKDOWNS, BUT ALSO OF EXECUTION PRICESCHARGED IN CONNECTION WITH BOND TRANSACTIONS. FINRACONSIDERED THE FOREGOING FACTS, AMONG OTHERS, IN DECIDING NOTTO PURSUE FORMAL CHARGES AGAINST THE FIRM FOR SUPERVISION OFTHE ACTIVITY SUMMARIZED IN THIS AWC. WITHOUT ADMITTING ORDENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBEDSANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM ISCENSURED, FINED $1,000,000, JOINTLY AND SEVERALLY; $560,000 OFWHICH WAS FOR MSRB RULE VIOLATIONS; AND ORDERED TO PAY$187,518.32, PLUS INTEREST, IN RESTITUTION, JOINTLY AND SEVERALLY.$136,206.85 IS ALLOCATED TO THE MSRB. THE TOTAL AMOUNT OFRESTITUTION ARISING FROM THE VIOLATIONS IS $452,280.90, OF WHICH$255,829.12 ARISES FROM MSRB RULE VIOLATIONS; BUT THE FIRM HASALREADY PAID RESTITUTION TO ADDRESS A NUMBER OF VIOLATIONS. AREGISTERED FIRM PRINCIPAL SHALL SUBMIT SATISFACTORY PROOF OFPAYMENT OF THE RESTITUTION, OR OF REASONABLE AND DOCUMENTEDEFFORTS UNDERTAKEN TO EFFECT RESTITUTION TO FINRA NO LATERTHAN 120 DAYS AFTER ACCEPTANCE OF THIS AWC. ANY UNDISTRIBUTEDRESTITUTION AND INTEREST SHALL BE FORWARDED TO THEAPPROPRIATE ESCHEAT, UNCLAIMED PROPERTY OR ABANDONEDPROPERTY FUND FOR THE STATE IN WHICH THE CUSTOMER LASTRESIDED. FINE PAID ON SEPTEMBER 19, 2013.


No



Allegations: FINRA ALLEGED THAT, BETWEEN 2008 AND 2011, MORGAN STANELY & CO.LLC AND MORGAN STANLEY SMITH BARNEY LLC (COLLECTIVELY, THE "FIRM")PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNTFROM CUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES TOCUSTOMERS AT AGGREGATE PRICES THAT WERE NOT FAIR ANDREASONABLE IN VIOLATION OF MSRB RULES G-17 AND G-30(A) WITHRESPECT TO 165 MUNICIPAL BOND TRANSACTIONS; AND THAT THE FIRMFAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THATTHE RESULTANT PRICE TO ITS CUSTOMERS WAS AS FAVORABLE ASPOSSIBLE UNDER PREVAILING MARKET CONDITIONS IN VIOLATION OFFINRA RULE 2010 AND NASD RULE 2320 WITH RESPECT TO 116CORPORATE AND AGENCY BOND TRANSACTIONS.







Initiated By: FINRA




RESTITUTION;CENSURE




Other Product Type(s): DEBT-CORPORATE; DEBT-GOVERNMENT

Allegations: FINRA ALLEGED THAT, BETWEEN 2008 AND 2011, MORGAN STANELY & CO.LLC AND MORGAN STANLEY SMITH BARNEY LLC (COLLECTIVELY, THE "FIRM")PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNTFROM CUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES TOCUSTOMERS AT AGGREGATE PRICES THAT WERE NOT FAIR ANDREASONABLE IN VIOLATION OF MSRB RULES G-17 AND G-30(A) WITHRESPECT TO 165 MUNICIPAL BOND TRANSACTIONS; AND THAT THE FIRMFAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THATTHE RESULTANT PRICE TO ITS CUSTOMERS WAS AS FAVORABLE ASPOSSIBLE UNDER PREVAILING MARKET CONDITIONS IN VIOLATION OFFINRA RULE 2010 AND NASD RULE 2320 WITH RESPECT TO 116CORPORATE AND AGENCY BOND TRANSACTIONS.


Resolution:

Other Sanctions Ordered: RESTITUTION IN THE AMOUNT OF $187,518, PLUS INTEREST.

Sanction Details: THE FINE OF $1,000,000 WILL BE PAID ON OR BEFORE SEPTEMBER 30,2013. RESTITUTION IN THE AMOUNT OF $187,518, PLUS INTEREST, WILL BEPAID WITHIN 120 DAYS OF THE DATE OF THE AWC.

Firm Statement ON AUGUST 22, 2013, FINRA AND MORGAN STANLEY MORGAN STANLEYSMITH BARNEY LLC ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER &CONSENT (AWC) TO SETTLE FINRA'S ALLEGATIONS THAT THE FIRMPURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROMCUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES TO CUSTOMERS ATAGGREGATE PRICES THAT WERE NOT FAIR AND REASONABLE INVIOLATION OF MSRB RULES G-17 AND G-30(A) WITH RESPECT TO165MUNICIPAL BOND TRANSACTIONS; AND THAT THE FIRM FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMERS WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS IN VIOLATION OF FINRA RULE2010 AND NASD RULE 2320 WITH RESPECT TO 116 CORPORATE ANDAGENCY BOND TRANSACTIONS. WITHOUT ADMITTING OR DENYING THEUNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUEOF LAW OR FACT, THE FIRM AGREED TO ENTER INTO THE AWC AND PAY AFINE OF $1,000,000 AS WELL AS RESTITUTION OF 187,518 PLUS INTERESTTO AFFECTED CUSTOMERS.








ON AUGUST 22, 2013, FINRA AND MORGAN STANLEY MORGAN STANLEYSMITH BARNEY LLC ENTERED INTO A LETTER OF ACCEPTANCE, WAIVER &CONSENT (AWC) TO SETTLE FINRA'S ALLEGATIONS THAT THE FIRMPURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROMCUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES TO CUSTOMERS ATAGGREGATE PRICES THAT WERE NOT FAIR AND REASONABLE INVIOLATION OF MSRB RULES G-17 AND G-30(A) WITH RESPECT TO165MUNICIPAL BOND TRANSACTIONS; AND THAT THE FIRM FAILED TO USEREASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALERMARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THERESULTANT PRICE TO ITS CUSTOMERS WAS AS FAVORABLE AS POSSIBLEUNDER PREVAILING MARKET CONDITIONS IN VIOLATION OF FINRA RULE2010 AND NASD RULE 2320 WITH RESPECT TO 116 CORPORATE ANDAGENCY BOND TRANSACTIONS. WITHOUT ADMITTING OR DENYING THEUNDERLYING ALLEGATIONS AND WITHOUT ADJUDICATION OF ANY ISSUEOF LAW OR FACT, THE FIRM AGREED TO ENTER INTO THE AWC AND PAY AFINE OF $1,000,000 AS WELL AS RESTITUTION OF 187,518 PLUS INTERESTTO AFFECTED CUSTOMERS.

Disclosure 34 of 42

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Initiated By: MASSACHUSETTS


Cease and Desist


CENSURE AND ADMINISTRATIVE FINE






Allegations: THROUGHOUT A SEVENTEEN (17) MONTH PERIOD OF TIME BETWEENAUGUST 2005 AND DECEMBER 2006, MORGAN STANLEY FAILED TOADEQUATELY MONITOR ITS BOSTON HIGH STREET BRANCH FASTELEPHONE PROSPECTING ACTIVITIES, COMMONLY KNOWN AS COLD-CALLING, WHICH RESULTED IN SEVERAL HUNDRED VIOLATIONS OFNATIONAL AND STATE DNC STATUTES AND REGULATIONS.



Resolution:


No

Consent







Sanction Details: RESPONDENT MORGAN STANLEY & CO., INC. SHALL CEASE AND DESISTFROM FURTHER VIOLATIONS OF THE ACT AND REGULATIONS;RESPONDENT MORGAN STANLEY & CO., INC. SHALL BE CENSURED;RESPONDENT MORGAN STANLEY & CO., INC. SHALL PAY ANADMINISTRATIVE FINE IN THE AMOUNT OF FIVE HUNDRED THOUSANDDOLLARS ($500,000.00 USD) PAYABLE TO THE COMMONWEALTH OFMASSACHUSETTS VIA A CERTIFIED BANK CHECK, OR EQUIVALENTINSTRUMENT, IDENTIFYING THE DOCKET NUMBER E-2006-0094 WITHINTHIRTY (30) CALENDAR DAYS FOLLOWING THE DATE THE ORDER ISENTERED INTO THE DOCKET.

Regulator Statement MORGAN STANLEY HAS INFORMED MASSACHUSETTS THAT THIS DRP WASFILED ON THE WRONG MORGAN STANLEY ENTITY. SHOULD BE PROPERLYFILED ON CRD 8209.


No

Sanctions Ordered: CensureMonetary/Fine $500,000.00Cease and Desist/Injunction

Disclosure 35 of 42

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Initiated By: FINRA

Allegations: FINRA RULES 6730(A), 6730(C)(8), MSRB RULE G-14 - MORGAN STANLEYSMITH BARNEY LLC IMPROPERLY REPORTED INFORMATION TO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) THAT IT SHOULD NOTHAVE. THE FIRM IMPROPERLY REPORTED PURCHASE AND SALETRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO THE RTRSWHEN THE INTER-DEALER DELIVERIES WERE STEP OUTS AND THUS,WERE NOT INTER-DEALER TRANSACTIONS REPORTABLE TO THE RTRS.THE FIRM FAILED TO REPORT TO THE TRADE REPORTING ANDCOMPLIANCE ENGINE (TRACE) LARGE BLOCK S1 TRANSACTIONS INTRACE-ELIGIBLE CORPORATE DEBT SECURITIES WITHIN 15 MINUTES OFTHE EXECUTION TIME. THE FIRM FAILED TO REPORT TO TRACE THECORRECT TRADE EXECUTION TIME FOR SOME LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE CORPORATE DEBT SECURITIES.







Initiated By: FINRA






Other Product Type(s): TRACE-ELIGIBLE CORPORATE DEBT SECURITIES


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $47,500, OF WHICH$17,500 WAS FOR MSRB RULE VIOLATIONS. FINE PAID ON JUNE 5, 2013.


No




Allegations: ALLEGATIONS: FINRA ALLEGED THAT THE FIRM VIOLATED MSRB RULE G-14 BY IMPROPERLY REPORTING INFORMATION TO THE REAL-TIMETRANSACTION REPORTING SYSTEM (RTRS) THAT IT SHOULD NOT HAVE INTHAT THE FIRM IMPROPERLY REPORTED PURCHASE AND SALETRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO RTRS WHENTHE INTER-DEALER DELIVERIES WERE STEP OUTS AND THUS, WERE NOTINTER-DEALER TRANSACTIONS REPORTABLE TO RTRS. FINRA FURTHERALLEGED THAT THE FIRM VIOLATED FINRA RULES 6730(A) AND 6730(C)(8)BY FAILING TO REPORT TO THE TRADE REPORTING AND COMPLIANCEENGINE (TRACE) LARGE BLOCK S1 TRANSACTIONS IN TRACE-ELIGIBLECORPORATE DEBT SECURITIES AND TRACE-ELIGIBLE AGENCY DEBTSECURITIES WITHIN 15 MINUTES OF THE TIME OF EXECUTION AND BYFAILING TO REPORT TO TRACE THE CORRECT TRADE EXECUTION TIMEFOR SOME LARGE BLOCK S1 TRANSACTIONS IN TRACE-ELIGIBLECORPORATE DEBT SECURITIES.








Initiated By: FINRA




CENSURE




Other Product Type(s): TRACE-ELIGIBLE SECURITIES

ALLEGATIONS: FINRA ALLEGED THAT THE FIRM VIOLATED MSRB RULE G-14 BY IMPROPERLY REPORTING INFORMATION TO THE REAL-TIMETRANSACTION REPORTING SYSTEM (RTRS) THAT IT SHOULD NOT HAVE INTHAT THE FIRM IMPROPERLY REPORTED PURCHASE AND SALETRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO RTRS WHENTHE INTER-DEALER DELIVERIES WERE STEP OUTS AND THUS, WERE NOTINTER-DEALER TRANSACTIONS REPORTABLE TO RTRS. FINRA FURTHERALLEGED THAT THE FIRM VIOLATED FINRA RULES 6730(A) AND 6730(C)(8)BY FAILING TO REPORT TO THE TRADE REPORTING AND COMPLIANCEENGINE (TRACE) LARGE BLOCK S1 TRANSACTIONS IN TRACE-ELIGIBLECORPORATE DEBT SECURITIES AND TRACE-ELIGIBLE AGENCY DEBTSECURITIES WITHIN 15 MINUTES OF THE TIME OF EXECUTION AND BYFAILING TO REPORT TO TRACE THE CORRECT TRADE EXECUTION TIMEFOR SOME LARGE BLOCK S1 TRANSACTIONS IN TRACE-ELIGIBLECORPORATE DEBT SECURITIES.


Resolution:


Sanction Details: THE FINE OF $47,500 WILL BE PAID FORTHWITH.

Firm Statement ON APRIL 25, 2013, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)TO SETTLE ALLEGATIONS RELATED TO TRADE REPORTING.SPECIFICALLY, THERE WERE FINDINGS IN THE AWC THAT THE FIRMVIOLATED MSRB RULE G-14 BY IMPROPERLY REPORTING INFORMATIONTO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) THAT ITSHOULD NOT HAVE IN THAT THE FIRM IMPROPERLY REPORTEDPURCHASE AND SALE TRANSACTIONS EFFECTED IN MUNICIPALSECURITIES TO RTRS WHEN THE INTER-DEALER DELIVERIES WERE STEPOUTS AND THUS, WERE NOT INTER-DEALER TRANSACTIONS REPORTABLETO RTRS. THERE WERE FURTHER FINDINGS THAT THE FIRM VIOLATEDFINRA RULES 6730(A) AND 6730(C)(8) BY FAILING TO REPORT TO THETRADE REPORTING AND COMPLIANCE ENGINE (TRACE) LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE CORPORATE DEBT SECURITIES ANDTRACE-ELIGIBLE AGENCY DEBT SECURITIES WITHIN 15 MINUTES OF THETIME OF EXECUTION AND BY FAILING TO REPORT TO TRACE THECORRECT TRADE EXECUTION TIME FOR SOME LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE CORPORATE DEBT SECURITIES.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND A FINE OF $47,500.








ON APRIL 25, 2013, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)TO SETTLE ALLEGATIONS RELATED TO TRADE REPORTING.SPECIFICALLY, THERE WERE FINDINGS IN THE AWC THAT THE FIRMVIOLATED MSRB RULE G-14 BY IMPROPERLY REPORTING INFORMATIONTO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) THAT ITSHOULD NOT HAVE IN THAT THE FIRM IMPROPERLY REPORTEDPURCHASE AND SALE TRANSACTIONS EFFECTED IN MUNICIPALSECURITIES TO RTRS WHEN THE INTER-DEALER DELIVERIES WERE STEPOUTS AND THUS, WERE NOT INTER-DEALER TRANSACTIONS REPORTABLETO RTRS. THERE WERE FURTHER FINDINGS THAT THE FIRM VIOLATEDFINRA RULES 6730(A) AND 6730(C)(8) BY FAILING TO REPORT TO THETRADE REPORTING AND COMPLIANCE ENGINE (TRACE) LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE CORPORATE DEBT SECURITIES ANDTRACE-ELIGIBLE AGENCY DEBT SECURITIES WITHIN 15 MINUTES OF THETIME OF EXECUTION AND BY FAILING TO REPORT TO TRACE THECORRECT TRADE EXECUTION TIME FOR SOME LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE CORPORATE DEBT SECURITIES.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND A FINE OF $47,500.

Disclosure 36 of 42

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Allegations: CFTC PRESS RELEASE 6395-12, OCTOBER 22, 2012: THE COMMODITYFUTURES TRADING COMMISSION ("COMMISSION") HAS REASON TOBELIEVE THAT FROM IN OR ABOUT 2006 TO AT LEAST MAY 2010, (THE "RELEVANT PERIOD"), MORGAN STANLEY SMITH BARNEY LLC("RESPONDENT") VIOLATED COMMISSION REGULATION ("'REGULATION")166.3, 17 C.F.R. § 166.3 (2012). THEREFORE, THE COMMISSION DEEMED ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE PROCEEDINGS BE INSTITUTED TO DETERMINEWHETHER RESPONDENT HAS ENGAGED IN THE VIOLATIONS AS SETFORTH AND TO DETERMINE WHETHER ANY ORDER SHOULD BE ISSUEDIMPOSING REMEDIAL SANCTIONS.

THE COMMISSION FOUND THAT RESPONDENT'S "CUSTOMER A"PROVIDED TRUST SERVICES FOR ITS CLIENTS, AND IN THE COURSE OFPROVIDING SUCH SERVICES TO ONE OF ITS CLIENTS, CUSTOMER AACCEPTED ORDERS TO TRADE COMMODITY FUTURES CONTRACTS ONBEHALF OF ITS OWN THIRD PARTY CLIENT, ACCEPTED THE THIRD PARTYCLIENT'S MONEY TO PLACE THOSE TRADES, AND EFFECTED THE TRADESVIA A CONTRACT MARKET ON THE THIRD PARTY CLIENT'S BEHALF. THESECONTRACTS WERE TRADED IN A PROPRIETARY FUTURES ACCOUNT INCUSTOMER A'S NAME CARRIED INITIALLY AT ANOTHER REGISTEREDFUTURES COMMISSION MERCHANT ("FCM") AND LATER IN AN ACCOUNTCARRIED BY RESPONDENT. RESPONDENT WAS CREATED AS A JOINTVENTURE INCLUDING ASSETS CONTRIBUTED BY THE OTHER FCM IN 2009.BY ACCEPTING THE ORDERS TO PURCHASE A COMMODITY FOR FUTUREDELIVERY ON BEHALF OF THE THIRD PARTY CLIENT SUBJECT TO THERULES OF A CONTRACT MARKET, AND ACCEPTING THE THIRD PARTYCLIENT'S MONEY TO SECURE THOSE TRADES, CUSTOMER A ACTED AS ANFCM WITHOUT BEING REGISTERED AS SUCH, IN VIOLATION OF THE ACT.

FROM 2006 TO 2008, CUSTOMER A CONDUCTED FIVE TRANSFERS OFFUNDS FROM ITS PROPRIETARY COMMODITY FUTURES TRADINGACCOUNT. THESE TRANSACTIONS CLEARLY SHOWED FUNDS MOVINGFROM CUSTOMER A'S PROPRIETARY FUTURES TRADING ACCOUNT TO ATHIRD PARTY CLIENT'S BANK ACCOUNT. THE FACT THAT FUNDS WEREMOVING FROM A PROPRIETARY TRADING ACCOUNT TO A THIRD PARTYBANK ACCOUNT SHOULD HAVE LED RESPONDENT'S EMPLOYEESEXECUTING THE TRANSACTIONS TO QUESTION CUSTOMER A'S ACTIONSAND TO INVESTIGATE TO DETERMINE WHETHER THE ACCOUNT WASBEING CARRIED PROPERLY. HOWEVER, RESPONDENT'S EMPLOYEESFAILED TO DILIGENTLY INVESTIGATE THE SUSPICIOUS TRANSACTIONS.

NO LATER THAN JANUARY 15, 2010, RESPONDENT REALIZED THAT THECUSTOMER A'S PROPRIETARY FUTURES TRADING ACCOUNT HAD BEENCARRIED IMPROPERLY SINCE 2006. RESPONDENT'S NEW YORK OFFICEBEGAN ISSUING EMAILS TO RESPONDENT'S OKLAHOMA BRANCH ONJANUARY 15, 2010, INDICATING THAT CUSTOMER A'S ACCOUNT WOULDHAVE TO BE CLOSED AND A NEW ACCOUNT IN THE UNDERLYING THIRDPARTY CLIENT'S NAME OPENED. NONETHELESS, RESPONDENT'SOKLAHOMA BRANCH CONTINUED TO ALLOW TRADING ON BEHALF OF THETHIRD PARTY CLIENT TO TAKE PLACE IN CUSTOMER A'S ACCOUNT INJANUARY 2010, MARCH 2010, AND MAY 2010. THE THIRD PARTY CLIENT'SFUNDS WERE ULTIMATELY MOVED FROM CUSTOMER A'S PROPRIETARYACCOUNT TO AN ACCOUNT IN THE THIRD PARTY CLIENT'S NAME ON ORABOUT MAY 27, 2010.

AT THE TIME OF THE EVENTS, RESPONDENT MAINTAINED AN INADEQUATESYSTEM OF SUPERVISION AND INTERNAL CONTROLS TO DETECT ANDDETER VIOLATIONS OF THE ACT AND REGULATIONS INCLUDING: (1) ANUNREGISTERED FCM TRADING THROUGH A PROPRIETARY ACCOUNTCARRIED BY RESPONDENT; AND (2) NOT CARRYING AN ACCOUNT IN THETRUE NAME OF THE CLIENT. CONSEQUENTLY, RESPONDENT FAILED TODILIGENTLY SUPERVISE THE HANDLING BY ITS PARTNERS, OFFICERS,EMPLOYEES AND AGENTS (OR PERSONS OCCUPYING A SIMILAR STATUSOR PERFORMING A SIMILAR FUNCTION) OF ALL COMMODITY INTERESTACCOUNTS CARRIED, OPERATED, ADVISED OR INTRODUCED BY THEREGISTRANT AND ALL OTHER ACTIVITIES OF ITS PARTNERS, OFFICERS,EMPLOYEES AND AGENTS (OR PERSONS OCCUPYING A SIMILAR STATUSOR PERFORMING A SIMILAR FUNCTION) RELATING TO ITS BUSINESS AS ACOMMISSION REGISTRANT IN VIOLATION OF REGULATION 166.3, 17 C.F.R.§166.3 (2012).













CFTC PRESS RELEASE 6395-12, OCTOBER 22, 2012: THE COMMODITYFUTURES TRADING COMMISSION ("COMMISSION") HAS REASON TOBELIEVE THAT FROM IN OR ABOUT 2006 TO AT LEAST MAY 2010, (THE "RELEVANT PERIOD"), MORGAN STANLEY SMITH BARNEY LLC("RESPONDENT") VIOLATED COMMISSION REGULATION ("'REGULATION")166.3, 17 C.F.R. § 166.3 (2012). THEREFORE, THE COMMISSION DEEMED ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE PROCEEDINGS BE INSTITUTED TO DETERMINEWHETHER RESPONDENT HAS ENGAGED IN THE VIOLATIONS AS SETFORTH AND TO DETERMINE WHETHER ANY ORDER SHOULD BE ISSUEDIMPOSING REMEDIAL SANCTIONS.

THE COMMISSION FOUND THAT RESPONDENT'S "CUSTOMER A"PROVIDED TRUST SERVICES FOR ITS CLIENTS, AND IN THE COURSE OFPROVIDING SUCH SERVICES TO ONE OF ITS CLIENTS, CUSTOMER AACCEPTED ORDERS TO TRADE COMMODITY FUTURES CONTRACTS ONBEHALF OF ITS OWN THIRD PARTY CLIENT, ACCEPTED THE THIRD PARTYCLIENT'S MONEY TO PLACE THOSE TRADES, AND EFFECTED THE TRADESVIA A CONTRACT MARKET ON THE THIRD PARTY CLIENT'S BEHALF. THESECONTRACTS WERE TRADED IN A PROPRIETARY FUTURES ACCOUNT INCUSTOMER A'S NAME CARRIED INITIALLY AT ANOTHER REGISTEREDFUTURES COMMISSION MERCHANT ("FCM") AND LATER IN AN ACCOUNTCARRIED BY RESPONDENT. RESPONDENT WAS CREATED AS A JOINTVENTURE INCLUDING ASSETS CONTRIBUTED BY THE OTHER FCM IN 2009.BY ACCEPTING THE ORDERS TO PURCHASE A COMMODITY FOR FUTUREDELIVERY ON BEHALF OF THE THIRD PARTY CLIENT SUBJECT TO THERULES OF A CONTRACT MARKET, AND ACCEPTING THE THIRD PARTYCLIENT'S MONEY TO SECURE THOSE TRADES, CUSTOMER A ACTED AS ANFCM WITHOUT BEING REGISTERED AS SUCH, IN VIOLATION OF THE ACT.

FROM 2006 TO 2008, CUSTOMER A CONDUCTED FIVE TRANSFERS OFFUNDS FROM ITS PROPRIETARY COMMODITY FUTURES TRADINGACCOUNT. THESE TRANSACTIONS CLEARLY SHOWED FUNDS MOVINGFROM CUSTOMER A'S PROPRIETARY FUTURES TRADING ACCOUNT TO ATHIRD PARTY CLIENT'S BANK ACCOUNT. THE FACT THAT FUNDS WEREMOVING FROM A PROPRIETARY TRADING ACCOUNT TO A THIRD PARTYBANK ACCOUNT SHOULD HAVE LED RESPONDENT'S EMPLOYEESEXECUTING THE TRANSACTIONS TO QUESTION CUSTOMER A'S ACTIONSAND TO INVESTIGATE TO DETERMINE WHETHER THE ACCOUNT WASBEING CARRIED PROPERLY. HOWEVER, RESPONDENT'S EMPLOYEESFAILED TO DILIGENTLY INVESTIGATE THE SUSPICIOUS TRANSACTIONS.

NO LATER THAN JANUARY 15, 2010, RESPONDENT REALIZED THAT THECUSTOMER A'S PROPRIETARY FUTURES TRADING ACCOUNT HAD BEENCARRIED IMPROPERLY SINCE 2006. RESPONDENT'S NEW YORK OFFICEBEGAN ISSUING EMAILS TO RESPONDENT'S OKLAHOMA BRANCH ONJANUARY 15, 2010, INDICATING THAT CUSTOMER A'S ACCOUNT WOULDHAVE TO BE CLOSED AND A NEW ACCOUNT IN THE UNDERLYING THIRDPARTY CLIENT'S NAME OPENED. NONETHELESS, RESPONDENT'SOKLAHOMA BRANCH CONTINUED TO ALLOW TRADING ON BEHALF OF THETHIRD PARTY CLIENT TO TAKE PLACE IN CUSTOMER A'S ACCOUNT INJANUARY 2010, MARCH 2010, AND MAY 2010. THE THIRD PARTY CLIENT'SFUNDS WERE ULTIMATELY MOVED FROM CUSTOMER A'S PROPRIETARYACCOUNT TO AN ACCOUNT IN THE THIRD PARTY CLIENT'S NAME ON ORABOUT MAY 27, 2010.

AT THE TIME OF THE EVENTS, RESPONDENT MAINTAINED AN INADEQUATESYSTEM OF SUPERVISION AND INTERNAL CONTROLS TO DETECT ANDDETER VIOLATIONS OF THE ACT AND REGULATIONS INCLUDING: (1) ANUNREGISTERED FCM TRADING THROUGH A PROPRIETARY ACCOUNTCARRIED BY RESPONDENT; AND (2) NOT CARRYING AN ACCOUNT IN THETRUE NAME OF THE CLIENT. CONSEQUENTLY, RESPONDENT FAILED TODILIGENTLY SUPERVISE THE HANDLING BY ITS PARTNERS, OFFICERS,EMPLOYEES AND AGENTS (OR PERSONS OCCUPYING A SIMILAR STATUSOR PERFORMING A SIMILAR FUNCTION) OF ALL COMMODITY INTERESTACCOUNTS CARRIED, OPERATED, ADVISED OR INTRODUCED BY THEREGISTRANT AND ALL OTHER ACTIVITIES OF ITS PARTNERS, OFFICERS,EMPLOYEES AND AGENTS (OR PERSONS OCCUPYING A SIMILAR STATUSOR PERFORMING A SIMILAR FUNCTION) RELATING TO ITS BUSINESS AS ACOMMISSION REGISTRANT IN VIOLATION OF REGULATION 166.3, 17 C.F.R.§166.3 (2012).









Resolution:


Sanction Details: IT IS ORDERED THAT RESPONDENT SHALL CEASE AND DESIST FROMVIOLATING REGULATION 166.3, 17 C.F.R. § 166.3 (2012). RESPONDENTSHALL PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF TWOHUNDRED THOUSAND DOLLARS ($200,000), WITHIN THIRTY (30) DAYS OFTHE DATE OF THE ENTRY OF THE ORDER.

RESPONDENT AND ITS SUCCESSORS AND ASSIGNS SHALL COMPLY WITHTHE FOLLOWING CONDITIONS AND UNDERTAKINGS SET FORTH IN THEOFFER: 1. RESPONDENT SHALL REVIEW AND EVALUATE ITS SUPERVISORYPROCEDURES WITH RESPECT TO PROPRIETARY FUTURES TRADINGACCOUNTS. RESPONDENT WILL HAVE IN PLACE, WITHIN THIRTY (30) DAYSOF THE DATE OF THE ORDER, PROCEDURES DESIGNED TO ENSURE THATPROPRIETARY FUTURES ACCOUNTS ARE CARRIED AS REQUIRED BY THEACT AND TO PREVENT CUSTOMERS FROM USING THESE ACCOUNTS TOACT AS UNREGISTERED FUTURES COMMISSION MERCHANTS INVIOLATION OF THE ACT. RESPONDENT SHALL PROVIDE A SWORNSTATEMENT SIGNED BY AN OFFICER OR DIRECTOR OF RESPONDENT TOTHE DIVISION OF ENFORCEMENT WITHIN 45 DAYS OF THE DATE OF ENTRYOF THE ORDER CERTIFYING COMPLIANCE WITH THIS PROVISION ANDDETAILING THE SUPERVISORY PROCEDURES REQUIRED BY THE ORDER.

2. RESPONDENT AGREES THAT NEITHER IT NOR ANY OF ITS SUCCESSORSAND ASSIGNS, AGENTS OR EMPLOYEES UNDER ITS AUTHORITY ORCONTROL SHALL TAKE ANY ACTION OR MAKE ANY PUBLIC STATEMENTDENYING, DIRECTLY OR INDIRECTLY, ANY FINDINGS OR CONCLUSIONS INTHE ORDER OR CREATING, OR TENDING TO CREATE, THE IMPRESSIONTHAT THE ORDER IS WITHOUT A FACTUAL BASIS; PROVIDED, HOWEVER,THAT NOTHING IN THIS PROVISION SHALL AFFECT RESPONDENT'S: (I)TESTIMONIAL OBLIGATIONS; OR (II) RIGHT TO TAKE LEGAL POSITIONS INOTHER PROCEEDINGS TO WHICH THE COMMISSION IS NOT A PARTY.RESPONDENT AND ITS SUCCESSORS AND ASSIGNS SHALL UNDERTAKEALL STEPS NECESSARY TO ENSURE THAT ALL OF ITS AGENTS AND/OREMPLOYEES UNDER ITS AUTHORITY OR CONTROL UNDERSTAND ANDCOMPLY WITH THIS AGREEMENT.


No


Order






IT IS ORDERED THAT RESPONDENT SHALL CEASE AND DESIST FROMVIOLATING REGULATION 166.3, 17 C.F.R. § 166.3 (2012). RESPONDENTSHALL PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF TWOHUNDRED THOUSAND DOLLARS ($200,000), WITHIN THIRTY (30) DAYS OFTHE DATE OF THE ENTRY OF THE ORDER.

RESPONDENT AND ITS SUCCESSORS AND ASSIGNS SHALL COMPLY WITHTHE FOLLOWING CONDITIONS AND UNDERTAKINGS SET FORTH IN THEOFFER: 1. RESPONDENT SHALL REVIEW AND EVALUATE ITS SUPERVISORYPROCEDURES WITH RESPECT TO PROPRIETARY FUTURES TRADINGACCOUNTS. RESPONDENT WILL HAVE IN PLACE, WITHIN THIRTY (30) DAYSOF THE DATE OF THE ORDER, PROCEDURES DESIGNED TO ENSURE THATPROPRIETARY FUTURES ACCOUNTS ARE CARRIED AS REQUIRED BY THEACT AND TO PREVENT CUSTOMERS FROM USING THESE ACCOUNTS TOACT AS UNREGISTERED FUTURES COMMISSION MERCHANTS INVIOLATION OF THE ACT. RESPONDENT SHALL PROVIDE A SWORNSTATEMENT SIGNED BY AN OFFICER OR DIRECTOR OF RESPONDENT TOTHE DIVISION OF ENFORCEMENT WITHIN 45 DAYS OF THE DATE OF ENTRYOF THE ORDER CERTIFYING COMPLIANCE WITH THIS PROVISION ANDDETAILING THE SUPERVISORY PROCEDURES REQUIRED BY THE ORDER.

2. RESPONDENT AGREES THAT NEITHER IT NOR ANY OF ITS SUCCESSORSAND ASSIGNS, AGENTS OR EMPLOYEES UNDER ITS AUTHORITY ORCONTROL SHALL TAKE ANY ACTION OR MAKE ANY PUBLIC STATEMENTDENYING, DIRECTLY OR INDIRECTLY, ANY FINDINGS OR CONCLUSIONS INTHE ORDER OR CREATING, OR TENDING TO CREATE, THE IMPRESSIONTHAT THE ORDER IS WITHOUT A FACTUAL BASIS; PROVIDED, HOWEVER,THAT NOTHING IN THIS PROVISION SHALL AFFECT RESPONDENT'S: (I)TESTIMONIAL OBLIGATIONS; OR (II) RIGHT TO TAKE LEGAL POSITIONS INOTHER PROCEEDINGS TO WHICH THE COMMISSION IS NOT A PARTY.RESPONDENT AND ITS SUCCESSORS AND ASSIGNS SHALL UNDERTAKEALL STEPS NECESSARY TO ENSURE THAT ALL OF ITS AGENTS AND/OREMPLOYEES UNDER ITS AUTHORITY OR CONTROL UNDERSTAND ANDCOMPLY WITH THIS AGREEMENT.

Regulator Statement IN ANTICIPATION OF THE INSTITUTION OF THE ADMINISTRATIVEPROCEEDING, RESPONDENT SUBMITTED THE OFFER OF SETTLEMENT OFRESPONDENT MORGAN STANLEY SMITH BARNEY LLC ("OFFER"), WHICHTHE COMMISSION DETERMINED TO ACCEPT. WITHOUT ADMITTING ORDENYING ANY OF THE FINDINGS OR CONCLUSIONS, RESPONDENTCONSENTED TO THE ENTRY OF THE ORDER INSTITUTING PROCEEDINGSPURSUANT TO SECTIONS 6(C) AND 6(D) OF THE COMMODITY EXCHANGEACT, AS AMENDED, MAKING FINDINGS AND IMPOSING REMEDIALSANCTIONS ("ORDER") AND ACKNOWLEDGES SERVICE OF THE ORDER.THE COMMISSION HAS DETERMINED TO ACCEPT THE OFFER.


Initiated By: CFTC





Principal Product Type: Futures - Commodity


Allegations: THE CFTC ALLEGED THAT THE FIRM VIOLATED REGULATION 166.3 FROMABOUT 2006 TO MAY 2010; THAT A CUSTOMER OPENED A SINGLECOMMODITY FUTURES ACCOUNT IN ITS NAME ("NOMINAL CLIENT"), BUTACTUALLY TRADED WITH FUNDS THAT BELONGED TO ANOTHER PARTY("REAL CLIENT"), FOR THE REAL CLIENT'S BENEFIT AND RISK; THAT THENOMINAL CLIENT THEREBY ACTED AS AN UNREGISTERED FCM; THAT THEFIRM THEREBY DID BUSINESS WITH AN UNREGISTERED FCM; THAT BYALLOWING THESE EVENTS TO OCCUR, THE FIRM MAINTAINED ANINADEQUATE SYSTEM OF SUPERVISION AND CONTROLS TO DETECT ANDDETER VIOLATIONS OF THE COMMODITY EXCHANGE ACT.. THE FIRM,MORGAN STANLEY SMITH BARNEY LLC, WAS NOT FORMED UNTIL JUNE 1,2009, AND CERTAIN CONDUCT WAS ALLEGED TO HAVE OCCURRED AT APREDECESSOR FIRM (CITIGROUP GLOBAL MARKETS INC.).










CEASE AND DESIST FROM VIOLATING REGULATION 166.3


Resolution:


Sanction Details: THE FINE MUST BE PAID WITHIN 30 DAYS OF THE DATE OF THE ORDER;FIRM IS REQUIRED TO REVIEW AND EVALUATE ITS PROCEDURES AND TOHAVE APPROPRIATE PROCEDURES IN PLACE, WITHIN 30 DAYS OF THEDATE OF THE ORDER; AND THE FIRM SHALL CEASE AND DESIST FROMVIOLATING REGULATION 166.3.

Firm Statement THE FINE MUST BE PAID WITHIN 30 DAYS OF THE DATE OF THE ORDER;FIRM IS REQUIRED TO REVIEW AND EVALUATE ITS PROCEDURES AND TOHAVE APPROPRIATE PROCEDURES IN PLACE, WITHIN 30 DAYS OF THEDATE OF THE ORDER; AND THE FIRM SHALL CEASE AND DESIST FROMVIOLATING REGULATION 166.3.


Settled

Disclosure 37 of 42

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Allegations: FINRA RULE 2010, NASD RULE 3010 - A JUNIOR TRADER AT MORGANSTANLEY SMITH BARNEY LLC ASSUMED RESPONSIBILITY FOR TRADINGFEDERAL AGENCY PRODUCTS (FANNIE MAE AND FREDDIE MAC) IN A CASHBOOK AND FUTURES CONTRACTS (EURODOLLAR AND TREASURIES) IN AFUTURES BOOK. THE JUNIOR TRADER WAS PERMITTED TO TRADEREMOTELY SO HE COULD TRADE AFTER HOURS AND REACT TO EVENTSOCCURRING GLOBALLY. AT THE END OF ONE TRADING DAY, THE TRADERHAD ACCUMULATED A FUTURES POSITION OF APPROXIMATELY $744MILLION, OVER DOUBLE THE AGENCY DESK'S LIMIT OF $350 MILLION ANDSEVERAL MULTIPLES OVER HIS POSITION LIMIT OF $116 MILLION. THATEVENING HE TRADED AT HOME AND OVERNIGHT SO THAT BY THEFOLLOWING MORNING HE HAD FURTHER EXCEEDED HIS POSITION LIMITWITH HOLDINGS IN EURODOLLAR AND TREASURY FUTURES OF $1.33BILLION. THE MARKET TURNED AGAINST HIM AND HE ATTEMPTEDUNSUCCESSFULLY TO REDUCE HIS EXPOSURE AND SUFFERED LOSSES.THAT MORNING THE FIRM IDENTIFIED ON A T+1 BASIS A RISK ANOMALYWHICH WAS TRACED TO THE TRADER AND CUT OFF HIS ACCESS TO THETRADING SYSTEM. THE TRADER HAD REDUCED THE CUMULATIVEPOSITION TO $740 MILLION BUT THE FIVE-YEAR AGENCY BOOKSUSTAINED A REALIZED LOSS OF $4.7 MILLION. THE FIRM LIQUIDATED 75%OF THE REMAINING CONTRACTS AND LIQUIDATED THE REST THEFOLLOWING DAY, THEREBY REALIZING ADDITIONAL LOSSES. BASED ONTHE TRADER'S TRADING OVER TWO DAYS, THE FIRM'S ACCOUNTSUSTAINED REALIZED LOSSES TOTALING APPROXIMATELY $14.9 MILLION.SINCE THESE WERE PROPRIETARY POSITIONS, THERE WAS NOCUSTOMER LOSS. THE FIRM DID NOT HAVE ADEQUATE SAFEGUARDS ORCONTROLS IN PLACE TO DETECT THAT THE TRADER HAD EXCEEDED HISPOSITION LIMIT BY THE END OF THE TRADING DAY OR TO PREVENT HIMFROM EXCEEDING HIS POSITION LIMIT WHILE TRADING REMOTELYOVERNIGHT. THE TRADING DESK DID NOT HAVE A CONSOLIDATED VIEWTO CAPTURE AND MONITOR TRADING ACTIVITY ACROSS PRODUCTS ANDSYSTEMS WHICH CONTRIBUTED TO THE FIRM'S FAILURE TO DETECT THATTHE TRADER HAD EXCEEDED THE AGENCY'S DESK AND HIS OWNPOSITION LIMIT. THE FIRM ALSO DID NOT HAVE SUFFICIENT CONTROLS TOPREVENT THE TRADER FROM EXCEEDING HIS POSITION LIMIT WHILETRADING REMOTELY OVERNIGHT.







Initiated By: FINRA





Principal Product Type: Futures - Financial


FINRA RULE 2010, NASD RULE 3010 - A JUNIOR TRADER AT MORGANSTANLEY SMITH BARNEY LLC ASSUMED RESPONSIBILITY FOR TRADINGFEDERAL AGENCY PRODUCTS (FANNIE MAE AND FREDDIE MAC) IN A CASHBOOK AND FUTURES CONTRACTS (EURODOLLAR AND TREASURIES) IN AFUTURES BOOK. THE JUNIOR TRADER WAS PERMITTED TO TRADEREMOTELY SO HE COULD TRADE AFTER HOURS AND REACT TO EVENTSOCCURRING GLOBALLY. AT THE END OF ONE TRADING DAY, THE TRADERHAD ACCUMULATED A FUTURES POSITION OF APPROXIMATELY $744MILLION, OVER DOUBLE THE AGENCY DESK'S LIMIT OF $350 MILLION ANDSEVERAL MULTIPLES OVER HIS POSITION LIMIT OF $116 MILLION. THATEVENING HE TRADED AT HOME AND OVERNIGHT SO THAT BY THEFOLLOWING MORNING HE HAD FURTHER EXCEEDED HIS POSITION LIMITWITH HOLDINGS IN EURODOLLAR AND TREASURY FUTURES OF $1.33BILLION. THE MARKET TURNED AGAINST HIM AND HE ATTEMPTEDUNSUCCESSFULLY TO REDUCE HIS EXPOSURE AND SUFFERED LOSSES.THAT MORNING THE FIRM IDENTIFIED ON A T+1 BASIS A RISK ANOMALYWHICH WAS TRACED TO THE TRADER AND CUT OFF HIS ACCESS TO THETRADING SYSTEM. THE TRADER HAD REDUCED THE CUMULATIVEPOSITION TO $740 MILLION BUT THE FIVE-YEAR AGENCY BOOKSUSTAINED A REALIZED LOSS OF $4.7 MILLION. THE FIRM LIQUIDATED 75%OF THE REMAINING CONTRACTS AND LIQUIDATED THE REST THEFOLLOWING DAY, THEREBY REALIZING ADDITIONAL LOSSES. BASED ONTHE TRADER'S TRADING OVER TWO DAYS, THE FIRM'S ACCOUNTSUSTAINED REALIZED LOSSES TOTALING APPROXIMATELY $14.9 MILLION.SINCE THESE WERE PROPRIETARY POSITIONS, THERE WAS NOCUSTOMER LOSS. THE FIRM DID NOT HAVE ADEQUATE SAFEGUARDS ORCONTROLS IN PLACE TO DETECT THAT THE TRADER HAD EXCEEDED HISPOSITION LIMIT BY THE END OF THE TRADING DAY OR TO PREVENT HIMFROM EXCEEDING HIS POSITION LIMIT WHILE TRADING REMOTELYOVERNIGHT. THE TRADING DESK DID NOT HAVE A CONSOLIDATED VIEWTO CAPTURE AND MONITOR TRADING ACTIVITY ACROSS PRODUCTS ANDSYSTEMS WHICH CONTRIBUTED TO THE FIRM'S FAILURE TO DETECT THATTHE TRADER HAD EXCEEDED THE AGENCY'S DESK AND HIS OWNPOSITION LIMIT. THE FIRM ALSO DID NOT HAVE SUFFICIENT CONTROLS TOPREVENT THE TRADER FROM EXCEEDING HIS POSITION LIMIT WHILETRADING REMOTELY OVERNIGHT.


Resolution:



No










Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $450,000. FINE PAID INFULL ON JUNE 28, 2012.


Initiated By: FINRA




CENSURE



Principal Product Type: Futures - Financial


Allegations: FINRA FOUND THAT MSSB VIOLATED NASD RULE 3010 AND FINRA RULE2010 BY NOT HAVING ADEQUATE SAFEGUARDS OR CONTROLS IN PLACETO DETERMINE THAT A JUNIOR TRADER HAD EXCEEDED HIS POSITIONLIMIT OR TO PREVENT THAT TRADER FROM EXCEEDING HIS POSITIONLIMIT WHILE TRADING OVERNIGHT. IN SETTLING THE MATTER, MSSB DIDNOT ADMIT OR DENY FINRA'S FINDINGS.



Resolution:


Sanction Details: MSSB PAID THE FINE ASSOCIATED WITH THE AWC VIA WIRE TRANSFER ON06/28/2012.

Firm Statement ON MAY 31, 2012, MSSB SIGNED AN ACCEPTANCE, WAIVER & CONSENT("AWC") WITH FINRA REGARDING THIS MATTER WITHOUT ADMITTING ORDENYING FINRA'S FINDINGS. MSSB PAID THE FINE ASSOCIATED WITH THEAWC VIA WIRE TRANSFER ON 6/28/2012.









Disclosure 38 of 42

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Allegations: SECURITIES EXCHANGE ACT OF 1934 SECTION 10(B) AND RULE 10B-10THEREUNDER, FINRA RULE 2010: AS A RESULT OF THE INCORRECT SET UPOF THE SECURITY IN ITS PARENT COMPANY'S MASTER SECURITYDATABASE (MSD) IN JANUARY 2004, THE FIRM NEGLIGENTLY PROVIDEDINACCURATE INFORMATION CONCERNING THE CALL PRICE AND YIELD OFUNITS TO INVESTORS. SPECIFICALLY, THE CALL PRICE AND YIELD THATITS FINANCIAL ADVISORS (FAS) DISCLOSED TO INVESTORS WERE HIGHERTHAN THE ACTUAL CALL PRICE AND YIELD OF THE SECURITIES.FURTHERMORE, AS A GENERAL MATTER, THE FIRM'S FAS FAILED TODISCLOSE TO CUSTOMERS WHO PURCHASED IN THE SECONDARYMARKET THAT THE UNITS WERE INTEREST-ONLY, AMORTIZINGSECURITIES. ALL OF THIS INFORMATION WAS MATERIAL TO INVESTORS.FROM JUNE 2009 THROUGH AUGUST 2010, THE FIRM SOLD THE UNITS TOAPPROXIMATELY 57 CUSTOMERS, WHO PURCHASED OVER $3.6 MILLIONOF THE UNITS. DURING THAT TIME, THE FIRM, AS A RESULT OF THEINCORRECT SET UP OF THE SECURITY IN MSD IN JANUARY 2004,CONTINUED TO NEGLIGENTLY PROVIDE INACCURATE INFORMATIONCONCERNING THE CALL PRICE AND YIELD OF THE UNITS TO INVESTORS.SPECIFICALLY, THE CALL PRICE AND YIELD DISCLOSED BY FAS TOINVESTORS WERE HIGHER THAN THE ACTUAL CALL PRICE AND YIELD OFTHE SECURITIES. FURTHERMORE, AS A GENERAL MATTER, THE FIRMFAILED TO DISCLOSE THE FACT THAT THE UNITS WERE INTEREST-ONLY,AMORTIZING SECURITIES. ALL OF THIS INFORMATION WAS MATERIAL TOINVESTORS. AFTER THE UNITS WERE CALLED, THE FIRM RECEIVED ACUSTOMER COMPLAINT ALLEGING THAT IT HAD MISREPRESENTED THECALL PRICE OF THE UNITS. IN RESPONDING TO THE COMPLAINT, THEFIRM AND ITS PARENT COMPANY DISCOVERED THAT THE SAMEMISREPRESENTATION HAD BEEN MADE TO ALL PERSONS WHOPURCHASED UNITS THROUGH THE FIRM AND ITS PARENT COMPANY. THEFIRM AND ITS PARENT COMPANY HAVE VOLUNTARILY REMEDIATEDCURRENT AND CERTAIN FORMER CUSTOMERS BY MAKING PAYMENTS INTHE TOTAL AMOUNT OF APPROXIMATELY $473,000. THE FIRM AND ITSPARENT COMPANY HAVE AGREED TO PAY APPROXIMATELY $220,000 INREMEDIATION TO ADDITIONAL FORMER CUSTOMERS IDENTIFIED BYFINRA. IN TOTAL, THE FIRM AND ITS PARENT COMPANY SHALL HAVE PAIDOVER $693,000 IN REMEDIATION TO AFFECTED CUSTOMERS. DURING THEPERIOD JUNE 2009 THROUGH AUGUST 2010, THE FIRM SOLD UNITS TOAPPROXIMATELY 57 CUSTOMERS FOR WHICH TRADE CONFIRMATIONSWERE ISSUED. DURING THIS PERIOD, THE TRADE CONFIRMATIONSDISCLOSED CALL PRICES AND YIELDS THAT WERE GREATER THAN THEACTUAL CALL PRICE AND YIELD OF THE UNITS AT THE TIME.







Initiated By: FINRA


Other


N/A




Other Product Type(s): FIXED INCOME SECURITIES

SECURITIES EXCHANGE ACT OF 1934 SECTION 10(B) AND RULE 10B-10THEREUNDER, FINRA RULE 2010: AS A RESULT OF THE INCORRECT SET UPOF THE SECURITY IN ITS PARENT COMPANY'S MASTER SECURITYDATABASE (MSD) IN JANUARY 2004, THE FIRM NEGLIGENTLY PROVIDEDINACCURATE INFORMATION CONCERNING THE CALL PRICE AND YIELD OFUNITS TO INVESTORS. SPECIFICALLY, THE CALL PRICE AND YIELD THATITS FINANCIAL ADVISORS (FAS) DISCLOSED TO INVESTORS WERE HIGHERTHAN THE ACTUAL CALL PRICE AND YIELD OF THE SECURITIES.FURTHERMORE, AS A GENERAL MATTER, THE FIRM'S FAS FAILED TODISCLOSE TO CUSTOMERS WHO PURCHASED IN THE SECONDARYMARKET THAT THE UNITS WERE INTEREST-ONLY, AMORTIZINGSECURITIES. ALL OF THIS INFORMATION WAS MATERIAL TO INVESTORS.FROM JUNE 2009 THROUGH AUGUST 2010, THE FIRM SOLD THE UNITS TOAPPROXIMATELY 57 CUSTOMERS, WHO PURCHASED OVER $3.6 MILLIONOF THE UNITS. DURING THAT TIME, THE FIRM, AS A RESULT OF THEINCORRECT SET UP OF THE SECURITY IN MSD IN JANUARY 2004,CONTINUED TO NEGLIGENTLY PROVIDE INACCURATE INFORMATIONCONCERNING THE CALL PRICE AND YIELD OF THE UNITS TO INVESTORS.SPECIFICALLY, THE CALL PRICE AND YIELD DISCLOSED BY FAS TOINVESTORS WERE HIGHER THAN THE ACTUAL CALL PRICE AND YIELD OFTHE SECURITIES. FURTHERMORE, AS A GENERAL MATTER, THE FIRMFAILED TO DISCLOSE THE FACT THAT THE UNITS WERE INTEREST-ONLY,AMORTIZING SECURITIES. ALL OF THIS INFORMATION WAS MATERIAL TOINVESTORS. AFTER THE UNITS WERE CALLED, THE FIRM RECEIVED ACUSTOMER COMPLAINT ALLEGING THAT IT HAD MISREPRESENTED THECALL PRICE OF THE UNITS. IN RESPONDING TO THE COMPLAINT, THEFIRM AND ITS PARENT COMPANY DISCOVERED THAT THE SAMEMISREPRESENTATION HAD BEEN MADE TO ALL PERSONS WHOPURCHASED UNITS THROUGH THE FIRM AND ITS PARENT COMPANY. THEFIRM AND ITS PARENT COMPANY HAVE VOLUNTARILY REMEDIATEDCURRENT AND CERTAIN FORMER CUSTOMERS BY MAKING PAYMENTS INTHE TOTAL AMOUNT OF APPROXIMATELY $473,000. THE FIRM AND ITSPARENT COMPANY HAVE AGREED TO PAY APPROXIMATELY $220,000 INREMEDIATION TO ADDITIONAL FORMER CUSTOMERS IDENTIFIED BYFINRA. IN TOTAL, THE FIRM AND ITS PARENT COMPANY SHALL HAVE PAIDOVER $693,000 IN REMEDIATION TO AFFECTED CUSTOMERS. DURING THEPERIOD JUNE 2009 THROUGH AUGUST 2010, THE FIRM SOLD UNITS TOAPPROXIMATELY 57 CUSTOMERS FOR WHICH TRADE CONFIRMATIONSWERE ISSUED. DURING THIS PERIOD, THE TRADE CONFIRMATIONSDISCLOSED CALL PRICES AND YIELDS THAT WERE GREATER THAN THEACTUAL CALL PRICE AND YIELD OF THE UNITS AT THE TIME.


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE IT IS CENSURED, FINED $25,000, JOINT AND SEVERAL, ANDAGREES TO COMPLETE THE FOLLOWING UNDERTAKINGS: THE FIRM WILLPROVIDE TO ALL PREVIOUSLY IDENTIFIED FORMER CUSTOMERS WHOHAVE NOT RECEIVED REMEDIATION (THE NON-REMEDIATED CUSTOMERS)AS OF THE NOTICE OF ACCEPTANCE (THE EFFECTIVE DATE) OF THE AWCWHO PURCHASED THE UNITS REMEDIATION EQUAL TO THE SUM OF$84.50 PER UNIT OWNED BY SUCH NON-REMEDIATED CUSTOMER ON THECALL DATE. THE FIRM SHALL COMPLETE THE REMEDIATION PROCESSWITHIN 120 DAYS FROM THE EFFECTIVE DATE. WITHIN 150 DAYS FROMTHE EFFECTIVE DATE, THE FIRM WILL SUBMIT TO FINRA A SCHEDULE OFALL NON-REMEDIATED CUSTOMERS WHICH INCLUDES DETAILS OF THENUMBER OF THE UNITS HELD BY THE NON-REMEDIATED CUSTOMER ANDTHE TOTAL DOLLAR AMOUNTS OF RESTITUTION PROVIDED TO EACHCUSTOMER. IF FOR ANY REASON THE FIRM CANNOT LOCATE ANY NON-REMEDIATED CUSTOMER AFTER REASONABLE AND DOCUMENTEDEFFORTS WITHIN 120 DAYS FROM THE DATE THE AWC IS ACCEPTED, ORSUCH ADDITIONAL PERIOD AGREED TO BY A FINRA STAFF MEMBER INWRITING, THE FIRM SHALL FORWARD ANY UNDISTRIBUTED RESTITUTIONAND INTEREST TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTYOR ABANDONED PROPERTY FUND FOR THE STATE IN WHICH THECUSTOMER IS LAST KNOWN TO HAVE RESIDED. THE FIRM SHALL PROVIDESATISFACTORY PROOF OF SUCH ACTION TO FINRA WITHIN 14 DAYS OFFORWARDING THE UNDISTRIBUTED RESTITUTION AND INTEREST TO THEAPPROPRIATE STATE AUTHORITY.FINE PAID IN FULL ON JUNE 4, 2012.


No









WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE IT IS CENSURED, FINED $25,000, JOINT AND SEVERAL, ANDAGREES TO COMPLETE THE FOLLOWING UNDERTAKINGS: THE FIRM WILLPROVIDE TO ALL PREVIOUSLY IDENTIFIED FORMER CUSTOMERS WHOHAVE NOT RECEIVED REMEDIATION (THE NON-REMEDIATED CUSTOMERS)AS OF THE NOTICE OF ACCEPTANCE (THE EFFECTIVE DATE) OF THE AWCWHO PURCHASED THE UNITS REMEDIATION EQUAL TO THE SUM OF$84.50 PER UNIT OWNED BY SUCH NON-REMEDIATED CUSTOMER ON THECALL DATE. THE FIRM SHALL COMPLETE THE REMEDIATION PROCESSWITHIN 120 DAYS FROM THE EFFECTIVE DATE. WITHIN 150 DAYS FROMTHE EFFECTIVE DATE, THE FIRM WILL SUBMIT TO FINRA A SCHEDULE OFALL NON-REMEDIATED CUSTOMERS WHICH INCLUDES DETAILS OF THENUMBER OF THE UNITS HELD BY THE NON-REMEDIATED CUSTOMER ANDTHE TOTAL DOLLAR AMOUNTS OF RESTITUTION PROVIDED TO EACHCUSTOMER. IF FOR ANY REASON THE FIRM CANNOT LOCATE ANY NON-REMEDIATED CUSTOMER AFTER REASONABLE AND DOCUMENTEDEFFORTS WITHIN 120 DAYS FROM THE DATE THE AWC IS ACCEPTED, ORSUCH ADDITIONAL PERIOD AGREED TO BY A FINRA STAFF MEMBER INWRITING, THE FIRM SHALL FORWARD ANY UNDISTRIBUTED RESTITUTIONAND INTEREST TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTYOR ABANDONED PROPERTY FUND FOR THE STATE IN WHICH THECUSTOMER IS LAST KNOWN TO HAVE RESIDED. THE FIRM SHALL PROVIDESATISFACTORY PROOF OF SUCH ACTION TO FINRA WITHIN 14 DAYS OFFORWARDING THE UNDISTRIBUTED RESTITUTION AND INTEREST TO THEAPPROPRIATE STATE AUTHORITY.FINE PAID IN FULL ON JUNE 4, 2012.


Initiated By: FINRA




CENSURE; UNDERTAKING




Other Product Type(s): FIXED INCOME SECURITIES

Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULE 2010 ANDSECURITIES & EXCHANGE ACT SECTION 10(B) AND RULE 10B-10 INCONNECTION WITH THE SALE OF UNITS OF A FIXED INCOME SECURITY INWHICH AN AFFILIATE OF THE FIRM INCORRECTLY SET UP THE UNITS IN ITSMASTER SECURITY DATABASE AND IN BLOOMBERG. FINRA FURTHERALLEGED THAT THE INCORRECT SET-UP CAUSED THE FIRM AND ITSEMPLOYEES TO PROVIDE INACCURATE INFORMATION CONCERNING THECALL PRICE AND YIELD OF THE UNITS TO INVESTORS IN CONFIRMATIONS,STATEMENTS, AND OTHERWISE. FINRA FURTHER ALLEGED THAT THE SET-UP ERRORS ALSO CAUSED THE FIRM AND ITS EMPLOYEES TO FAIL TODISCLOSE TO CUSTOMERS THE INTEREST-ONLY, AMORTIZING FEATUREOF THE UNITS. IN ADDITION, FINRA ALLEGED THAT AS A RESULT, THE FIRMDISCLOSED CALL PRICE AND YIELD INFORMATION TO INVESTORS THATWAS GREATER THAN THE ACTUAL CALL PRICE AND YIELD OF THE UNITSAT THE TIME.


Resolution: Acceptance, Waiver & Consent(AWC)157©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Resolution:


Sanction Details: THE FINE OF $25,000 (WHICH IS JOINT AND SEVERAL WITH MORGANSTANLEY & CO. LLC) WAS PAID ON JUNE 4, 2012. THE FIRM ALSO AGREEDTO AN UNDERTAKING TO PROVIDE CERTAIN CUSTOMERS WITHREMEDIATION TOTALING APPROXIMATELY $220,000. THE REMEDIATIONMUST BE COMPLETED WITHIN 120 DAYS FROM THE EFFECTIVE DATE OFTHE AWC AND FOR ANY CUSTOMER THAT CANNOT BE LOCATED, THE FIRMMUST FORWARD ANY UNDISTRIBUTED RESTITUTION TO THEAPPROPRIATE STATE UNCLAIMED PROPERTY FUND. WITHIN 14 DAYS OFFORWARDING ANY UNDISTRIBUTED REMEDIATION TO A STATE UNCLAIMEDPROPERTY FUND, THE FIRM MUST PROVIDE PROOF OF SUCH ACTION TOFINRA. WITHIN 150 DAYS FROM THE EFFECTIVE DATE OF THE AWC, THEFIRM MUST PROVIDE FINRA WITH A SCHEDULE OF THE DETAILS OF THEREMEDIATION PROVIDED TO EACH CUSTOMER.

Firm Statement ON MAY 21, 2012, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)TO SETTLE ALLEGATIONS RELATED TO THE SALE OF CERTAIN FIXEDINCOME SECURITIES. SPECIFICALLY, THERE WERE FINDINGS IN THE AWCTHAT THE FIRM VIOLATED FINRA RULE 2010 AND SECURITIES &EXCHANGE ACT SECTION 10(B) AND RULE 10B-10 IN CONNECTION WITHTHE SALE OF UNITS OF A FIXED INCOME SECURITY IN WHICH ANDAFFILIATE OF THE FIRM INCORRECTLY SET UP THE UNITS IN ITS MASTERSECURITY DATABASE AND IN BLOOMBERG. FINRA FOUND THAT THEINCORRECT SET-UP CAUSED THE FIRM AND ITS EMPLOYEES TO PROVIDEINACCURATE INFORMATION CONCERNING THE CALL PRICE AND YIELD OFTHE UNITS TO INVESTORS IN CONFIRMATIONS, STATEMENTS, ANDOTHERWISE. FINRA FURTHER FOUND THAT THE SET-UP ERRORS ALSOCAUSED THE FIRM AND ITS EMPLOYEES TO FAIL TO DISCLOSE TOCUSTOMERS THE INTEREST-ONLY, AMORTIZING FEATURE OF THE UNITS.IN ADDITION, FINRA FOUND THAT AS A RESULT, THE FIRM DISCLOSED CALLPRICE AND YIELD INFORMATION TO INVESTORS THAT WAS GREATERTHAN THE ACTUAL CALL PRICE AND YIELD OF THE UNITS AT THE TIME.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE, A FINE OF $25,000 (WHICH IS JOINT ANDSEVERAL WITH MORGAN STANLEY & CO. LLC), AND AN UNDERTAKING TOPROVIDE REMEDIATION TOTALING APPROXIMATELY $220,000 TO CERTAINCUSTOMERS.








ON MAY 21, 2012, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)TO SETTLE ALLEGATIONS RELATED TO THE SALE OF CERTAIN FIXEDINCOME SECURITIES. SPECIFICALLY, THERE WERE FINDINGS IN THE AWCTHAT THE FIRM VIOLATED FINRA RULE 2010 AND SECURITIES &EXCHANGE ACT SECTION 10(B) AND RULE 10B-10 IN CONNECTION WITHTHE SALE OF UNITS OF A FIXED INCOME SECURITY IN WHICH ANDAFFILIATE OF THE FIRM INCORRECTLY SET UP THE UNITS IN ITS MASTERSECURITY DATABASE AND IN BLOOMBERG. FINRA FOUND THAT THEINCORRECT SET-UP CAUSED THE FIRM AND ITS EMPLOYEES TO PROVIDEINACCURATE INFORMATION CONCERNING THE CALL PRICE AND YIELD OFTHE UNITS TO INVESTORS IN CONFIRMATIONS, STATEMENTS, ANDOTHERWISE. FINRA FURTHER FOUND THAT THE SET-UP ERRORS ALSOCAUSED THE FIRM AND ITS EMPLOYEES TO FAIL TO DISCLOSE TOCUSTOMERS THE INTEREST-ONLY, AMORTIZING FEATURE OF THE UNITS.IN ADDITION, FINRA FOUND THAT AS A RESULT, THE FIRM DISCLOSED CALLPRICE AND YIELD INFORMATION TO INVESTORS THAT WAS GREATERTHAN THE ACTUAL CALL PRICE AND YIELD OF THE UNITS AT THE TIME.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE, A FINE OF $25,000 (WHICH IS JOINT ANDSEVERAL WITH MORGAN STANLEY & CO. LLC), AND AN UNDERTAKING TOPROVIDE REMEDIATION TOTALING APPROXIMATELY $220,000 TO CERTAINCUSTOMERS.

Disclosure 39 of 42

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Initiated By: FINRA






Other Product Type(s): TRACE-ELIGIBLE SECURITIES, TRACE-ELIGIBLE AGENCY DEBTSECURITIES

Allegations: FINRA RULES 2010, 6730(A), 7450, MSRB RULE G-14 - MORGAN STANLEYSMITH BARNEY LLC TRANSMITTED EXECUTION OR COMBINEDORDER/EXECUTION REPORTS TO THE ORDER AUDIT TRAIL SYSTEM(OATS) THAT OATS WAS UNABLE TO LINK TO THE RELATED TRADEREPORTS IN A FINRA TRANSACTION REPORTING SYSTEM ANDTRANSMITTED EXECUTION OR COMBINED ORDER/EXECUTION REPORTSTO OATS THAT OATS WAS UNABLE TO LINK TO THE RELATED ORDER INTHE NASDAQ MARKET CENTER DUE TO INACCURATE, INCOMPLETE ORIMPROPERLY FORMATTED DATA. THE FIRM FAILED TO REPORT TO THETRADE REPORTING AND COMPLIANCE ENGINE (TRACE) LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE AND TRACE-ELIGIBLE AGENCY DEBTSECURITIES WITHIN 15 MINUTES OF EXECUTION TIME. THIS CONDUCTCONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF FINRA RULE6730(A) AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUTEXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF FINRA RULE 2010. THEFIRM FAILED TO REPORT INFORMATION REGARDING PURCHASE ANDSALE TRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS).



Resolution:


No









Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $62,500, $45,000 OFWHICH WAS FOR MSRB RULE VIOLATIONS. FINE PAID IN FULL ON MAY 29,2012.


No



Initiated By: FINRA




CENSURE




Other Product Type(s): TRACE-ELIGIBLE SECURITIES

Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULE 7450 BYTRANSMITTING REPORTS TO OATS THAT THE OATS SYSTEM WAS UNABLETO LINK TO THE RELATED TRADE REPORTS IN A FINRA TRANSACTIONREPORTING SYSTEM AND BY TRANSMITTING REPORTS TO OATS THAT THEOATS SYSTEM WAS UNABLE TO LINK TO THE RELATED ORDER IN THENASDAQ MARKET CENTER DUE TO INACCURATE, INCOMPLETE ORIMPROPERLY FORMATTED DATA. FINRA FURTHER ALLEGED THAT THEFIRM VIOLATED FINRA RULES 2010 AND 6730(A) BY FAILING TO REPORT TOTRACE LARGE BLOCK S1 TRANSACTIONS IN TRACE-ELIGIBLE AND TRACE-ELIGIBLE AGENCY DEBT SECURITIES WITHIN 15 MINUTES OF THE TIME OFEXECUTION. FINRA FURTHER ALLEGED THAT THE FIRM VIOLATED MSRBRULE G-14 BY FAILING TO REPORT INFORMATION REGARDING PURCHASEAND SALE TRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO THERTRS.








CENSURE


Resolution:


Sanction Details: THE FINE OF $62,500 WAS PAID ON MAY 29, 2012.

Firm Statement ON MAY 9, 2012, FINRA AND MORGAN STANLEY SMITH BARNEY LLCENTERED INTO A LETTER OF ACCEPTANCE, WAIVER, AND CONSENT (AWC)TO SETTLE ALLEGATIONS RELATED TO TRADE REPORTING.SPECIFICALLY, THERE WERE FINDINGS IN THE AWC THAT THE FIRMVIOLATED FINRA RULE 7450 BY TRANSMITTING REPORTS TO OATS THATTHE OATS SYSTEM WAS UNABLE TO LINK TO THE RELATED TRADEREPORTS IN A FINRA TRANSACTION REPORTING SYSTEM AND BYTRANSMITTING REPORTS TO OATS THAT THE OATS SYSTEM WAS UNABLETO LINK TO THE RELATED ORDER IN THE NASDAQ MARKET CENTER DUETO INACCURATE, INCOMPLETE OR IMPROPERLY FORMATTED DATA. FINRAFURTHER FOUND THAT THE FIRM VIOLATED FINRA RULES 2010 AND6730(A) BY FAILING TO REPORT TO TRACE LARGE BLOCK S1TRANSACTIONS IN TRACE-ELIGIBLE AND TRACE-ELIGIBLE AGENCY DEBTSECURITIES WITHIN 15 MINUTES OF THE TIME OF EXECUTION. FINRAFURTHER FOUND THAT THE FIRM VIOLATED MSRB RULE G-14 BY FAILINGTO REPORT INFORMATION REGARDING PURCHASE AND SALETRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO THE RTRS.WITHOUT ADMITTING OR DENYING THE UNDERLYING ALLEGATIONS ANDWITHOUT ADJUDICATION OF ANY ISSUE OF LAW OR FACT, THE FIRMACCEPTED AND CONSENTED TO ENTRY OF FINDINGS AND THEIMPOSITION OF A CENSURE AND A FINE OF $62,500.



Disclosure 40 of 42

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Initiated By: NEW HAMPSHIREBUREAU OF SECURITIES REGULATION


Docket/Case Number: COM10-000

Allegations: RESPONDENT'S DOCUMENT PRODUCTION RESPONSE WAS SUBMITTEDBEYOND THE TIME CONSTRAINTS REQUIRED BY THE BUREAU.








Cease and Desist


FINE, COSTS, RESTITUTION




Other Product Type(s): MUTUAL FUNDS


Resolution:

Other Sanctions Ordered: COSTS $5,000.00.

Sanction Details: $20,000 RESTITUTION TO INVESTOR.

Regulator Statement A COMPLAINT WAS RECEIVED FROM INVESTOR REGARDING INADEQUATESERVICING OF THIS ACCOUNT. RESPONDENT WAS REQUIRED TO FULFILLPRODUCTION REQUESTS OF THE BUREAU AND RESPONSES WERESUBMITTED BEYOND TIME CONSTRAINS IN CONTRAVENTION OF RSA 421-B:8.


No


Consent


Initiated By: NEW HAMPSHIRE BUREAU OF SECURITIES REGULATION



Allegations: A PORTION OF RESPONDENT'S DOCUMENT PRODUCTION WASSUBMITTED TO THE BUREAU BEYOND THE TIME CONSTRAINTSESTABLISHED BY THE BUREAU.








Cease and Desist


FINE, COSTS, RESTITUTION


Other Product Type(s): MUTUAL FUNDS


Resolution:

Other Sanctions Ordered: COSTS $5,000.

Sanction Details: $20,000 RESTITUTION TO INVESTOR.

Firm Statement THE BUREAU RECEIVED A COMPLAINT FROM A CUSTOMER ALLEGINGINADEQUATE SERVICING OF HIS ACCOUNT. THE BUREAU REQUESTEDTHAT RESPONDENT PRODUCE DOCUMENTS IN CONNECTION WITH THECOMPLAINT. A PORTION OF THE DOCUMENTS WERE PRODUCED BEYONDTHE TIME CONSTRAINTS ESTABLISHED BY THE BUREAU.


Consent

Disclosure 41 of 42

i


Initiated By: NEW JERSEY BUREAU OF SECURITIES








Allegations: MORGAN STANLEY SMITH BARNEY, LLC ("MSSB") DID NOT OBTAIN THEREQUIRED TRADING AUTHORIZATION FORM FROM CLIENTS WHOALLEGED UNAUTHORIZED TRADING ACTIVITY IN THEIR ACCOUNT. MSSBFAILED TO COMPLY WITH ITS OWN WRITTEN POLICIES AND PROCEDURESFROM THE RELEVANT TIME PERIOD FOR ACCEPTING AND TRANSACTINGBUSINESS PURSUANT TO A POWER OF ATTORNEY.










CEASE AND DESIST


Resolution:

Other Sanctions Ordered: AGREED AND ORDERED THAT, MSSB WILL CEASE AND DESIST FROMFUTURE VIOLATION OF THE SECURITIES LAW; AND IT IS FURTHERORDERED THAT, MSSB IS ASSESSED A CIVIL MONETARY PENALTY IN THEAMOUNT OF $40,000 WITH $10,000 OF THIS AMOUNT SUSPENDED BASEDUPON THE REMEDIAL MEASURES.

Sanction Details: MORGAN STANLEY SMITH BARNEY, LLC DID NOT MAKE AND KEEPACCURATE BOOKS AND RECORDS, IN VIOLATION OF N.J.S.A.49:3-59(B) BY FAILING TO OBTAIN SIGNED "TRADINGAUTHORIZATION: NON-MORGAN STANLEY FINANCIAL ADVISORFORMS" AND "TRADING AUTHORIZATION: NON-MORGAN STANLEYFINANCIAL ADVISOR FORMS" AS REQUIRED BY THE MSSBCOMPLIANCE MANUAL §7.4.2.2.2 AND §7.4.2.2.1 RESPECTIVELY.

Regulator Statement MSSB FULLY COOPERATED WITH THE BUREAU'S INVESTIGATION.AS PART OF THE COOPERATION, MSSB SETTLED THE COMPLAINTBROUGHT BY THE COMPLAINANTS AND PAID TO THEM $115,384.62 INRESTITUTION.MSSB HAS REVISED ITS SUPERVISORY PROCEDURES WITH RESPECTTO POWERS OF ATTORNEY TO AVOID FUTURE OCCURRENCE OF THISTYPE OF INCIDENT.


No


Consent


Allegations: MORGAN STANLEY & CO. FAILED TO COMPLY WITH ITS OWN WRITTENPOLICIES AND PROCEDURES BY HAVING A CLIENT, WHO OTHERWISE HADA VALID POWER OF ATTORNEY ON FILE WITH THE FIRM, EXECUTE THEINCORRECT INTERNAL THIRD PARTY TRADING AUTHORIZATION FORM.







Initiated By: NEW JERSEY BUREAU OF SECURITIES




CEASE AND DESIST





MORGAN STANLEY & CO. FAILED TO COMPLY WITH ITS OWN WRITTENPOLICIES AND PROCEDURES BY HAVING A CLIENT, WHO OTHERWISE HADA VALID POWER OF ATTORNEY ON FILE WITH THE FIRM, EXECUTE THEINCORRECT INTERNAL THIRD PARTY TRADING AUTHORIZATION FORM.


Resolution:

Other Sanctions Ordered: THE FIRM WAS ASSESSED A CIVIL MONETARY PENALTY OF $40,000.$10,000 OF THIS FINE WAS SUSPENDED BASED UPON THE FIRM'SREMEDIAL ACTIONS.

Sanction Details: THE FIRM DID NOT MAKE AND KEEP ACCURATE BOOKS AND RECORDS, INVIOLATION OF N.J.S.A.49:3-59(B) BY FAILING TO OBTAIN SIGNED "TRADINGAUTHORIZATION: NON-MORGAN STANELY FINANCIAL ADVISOR FORMS" ASREQUIRED BY THE FIRM'S COMPLIANCE MANUAL SECTIONS 7.4.2.2.2 AND7.4.2.2.1 RESPECTIVELY.

Firm Statement THE FIRM FULLY COOPERATED WITH THE BUREAU'S INVESTIGATION. INRESTITUTION, THE FIRM HAS REVISED ITS SUPERVISORY PROCEDURESWITH RESPECT TO POWERS OF ATTORNEY TO AVOID A FUTUREOCCURRENCE OF THIS TYPE OF INCIDENT.


Consent

Disclosure 42 of 42

i


Allegations: FINRA RULE 2010, NASD RULES 2110, 2440, 3010, INTERPRETATIVEMATERIAL 2440-1, 2440-2, MSRB RULES G-17, G-27, G-30(A) - MORGANSTANLEY SMITH BARNEY LLC IN PAIRS OF TRANSACTIONS, SOLD(BOUGHT) CORPORATE BONDS TO (FROM) CUSTOMERS AND FAILED TOSELL (BUY) SUCH BONDS AT A PRICE THAT WAS FAIR, TAKING INTOCONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKETCONDITIONS WITH RESPECT TO EACH AT THE TIME OF THETRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WASENTITLED TO A PROFIT. IN PAIRS OF TRANSACTIONS, THE FIRMSOLD/PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO ACUSTOMER AT AN AGGREGATE PRICE (INCLUDING ANY MARKUP ORMARKDOWN) THAT WAS NOT FAIR AND REASONABLE, TAKING INTOCONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BESTJUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALERAS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THETRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED INCONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER ORMUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT AND THE TOTALDOLLAR AMOUNT OF THE TRANSACTION. THE FIRM IMPLEMENTEDSEVERAL SUPERVISORY REPORTS (SALES CREDIT RECAP REPORT,MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB)/TRADE REPORTINGAND COMPLIANCE ENGINE (TRACE) VARIANCE REPORTS, CROSSBROKER-DEALER REPORT AND PRINCIPAL VARIANCE REPORT) THAT ITUSED TO REVIEW MARKUPS AND MARKDOWNS CHARGED TO ITSCUSTOMERS BUT THE FIRM'S SUPERVISORY SYSTEM WAS INADEQUATEBECAUSE ITS EXCEPTION REPORTS WERE NOT DESIGNED TO INCLUDEMARKUPS/MARKDOWNS BELOW FIVE PERCENT BUT NONETHELESS MAYHAVE BEEN EXCESSIVE; THE FIRM'S POLICIES AND PROCEDURES DID NOTIDENTIFY MARKUPS AND MARKDOWNS BY AGGREGATING THE SALESCREDIT CHARGED TO THE CUSTOMER WITH THE WHOLESALE DESKCOMPENSATION FOR PURPOSES OF DETERMINING WHETHER A MARKUPOR MARKDOWN WAS EXCESSIVE. THE FIRM'S SUPERVISORY SYSTEM DIDNOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS, ANDFINRA RULES CONCERNING BOTH CORPORATE AND MUNICIPAL MARKUPSAND MARKDOWNS.







Initiated By: FINRA






Other Product Type(s): MUNICIPAL SECURITIES

FINRA RULE 2010, NASD RULES 2110, 2440, 3010, INTERPRETATIVEMATERIAL 2440-1, 2440-2, MSRB RULES G-17, G-27, G-30(A) - MORGANSTANLEY SMITH BARNEY LLC IN PAIRS OF TRANSACTIONS, SOLD(BOUGHT) CORPORATE BONDS TO (FROM) CUSTOMERS AND FAILED TOSELL (BUY) SUCH BONDS AT A PRICE THAT WAS FAIR, TAKING INTOCONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKETCONDITIONS WITH RESPECT TO EACH AT THE TIME OF THETRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WASENTITLED TO A PROFIT. IN PAIRS OF TRANSACTIONS, THE FIRMSOLD/PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO ACUSTOMER AT AN AGGREGATE PRICE (INCLUDING ANY MARKUP ORMARKDOWN) THAT WAS NOT FAIR AND REASONABLE, TAKING INTOCONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BESTJUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALERAS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THETRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED INCONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED INEFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER ORMUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT AND THE TOTALDOLLAR AMOUNT OF THE TRANSACTION. THE FIRM IMPLEMENTEDSEVERAL SUPERVISORY REPORTS (SALES CREDIT RECAP REPORT,MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB)/TRADE REPORTINGAND COMPLIANCE ENGINE (TRACE) VARIANCE REPORTS, CROSSBROKER-DEALER REPORT AND PRINCIPAL VARIANCE REPORT) THAT ITUSED TO REVIEW MARKUPS AND MARKDOWNS CHARGED TO ITSCUSTOMERS BUT THE FIRM'S SUPERVISORY SYSTEM WAS INADEQUATEBECAUSE ITS EXCEPTION REPORTS WERE NOT DESIGNED TO INCLUDEMARKUPS/MARKDOWNS BELOW FIVE PERCENT BUT NONETHELESS MAYHAVE BEEN EXCESSIVE; THE FIRM'S POLICIES AND PROCEDURES DID NOTIDENTIFY MARKUPS AND MARKDOWNS BY AGGREGATING THE SALESCREDIT CHARGED TO THE CUSTOMER WITH THE WHOLESALE DESKCOMPENSATION FOR PURPOSES OF DETERMINING WHETHER A MARKUPOR MARKDOWN WAS EXCESSIVE. THE FIRM'S SUPERVISORY SYSTEM DIDNOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS, ANDFINRA RULES CONCERNING BOTH CORPORATE AND MUNICIPAL MARKUPSAND MARKDOWNS.









Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED, FINED $1,000,000, JOINTLY ANDSEVERALLY, $500,000 OF WHICH IS ALLOCATED TO THE MSRB, ANDORDERED TO PAY $371,475.98 IN RESTITUTION TO INVESTORS, JOINTLYAND SEVERALLY, OF WHICH $198,828.45 IS ALLOCATED TO THE MSRB,PLUS INTEREST. A REGISTERED PRINCIPAL OF THE FIRM SHALL SUBMITSATISFACTORY PROOF OF PAYMENT OF THE RESTITUTION, OR OFREASONABLE AND DOCUMENTED EFFORTS UNDERTAKEN TO EFFECTRESTITUTION TO FINRA NO LATER THAN 120 DAYS AFTER ACCEPTANCEOF THIS AWC. ANY UNDISTRIBUTED RESTITUTION AND INTEREST SHALLBE FORWARDED TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTYOR ABANDONED PROPERTY FUND FOR THE STATE IN WHICH THECUSTOMER LAST RESIDED. THE FIRM IS ALSO REQUIRED TO REVISE ITSWRITTEN SUPERVISORY PROCEDURES REGARDING SEVERALSUPERVISORY REPORTS (SALES CREDIT RECAP REPORT, MSRB/TRACEVARIANCE REPORTS, CROSS BROKER-DEALER REPORT AND PRINCIPALVARIANCE REPORT) THAT IT USED TO REVIEW MARKUPS ANDMARKDOWNS CHARGED TO ITS CUSTOMERS WITHIN 90 BUSINESS DAYSOF ACCEPTANCE OF THIS AWC BY THE NAC.


No




Allegations: FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULE 2010, NASD RULES2440, AND INTERPRETIVE MATERIAL 2440-1 AND 2440-2 IN CONNECTIONWITH PAIRS OF SALES/PURCHASES OF CORPORATE BONDS TO/FROMCUSTOMERS AT A PRICE THAT WAS NOT FAIR, TAKING INTOCONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKETCONDITIONS WITH RESPECT TO EACH AT THE TIME OF THETRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WASENTITLED TO A PROFIT (INCLUDING ANY MARKUP OR MARKDOWN).

FINRA FURTHER ALLEGED THAT THE FIRM VIOLATED MSRB RULES G-17AND G-30(A) IN CONNECTION WITH PAIRS OF SALES/PURCHASES OFMUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO/FROM A CUSTOMERAT AN AGGREGATE PRICE (INCLUDING ANY MARKDOWN OR MARKUP)THAT WAS NOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALLRELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER,DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKETVALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OFANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THETRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THETRANSACTION, THE FACT THAT THE BROKER, DEALER, OR MUNICIPALSECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL DOLLARAMOUNT OF THE TRANSACTION.

FINRA FURTHER ALLEGED THAT THE FIRM VIOLATED NASD RULES 3010AND 2110, FINRA RULE 2010, AND MSRB RULES G-17 AND G-27 BECAUSETHE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS, REGULATIONS, AND FINRA RULESCONCERNING BOTH CORPORATE AND MUNICIPAL MARKUPS ANDMARKDOWNS.







Initiated By: FINRA




UNDERTAKING, CENSURE, RESTITUTION




Other Product Type(s): DEBT - MUNICIPAL

FINRA ALLEGED THAT THE FIRM VIOLATED FINRA RULE 2010, NASD RULES2440, AND INTERPRETIVE MATERIAL 2440-1 AND 2440-2 IN CONNECTIONWITH PAIRS OF SALES/PURCHASES OF CORPORATE BONDS TO/FROMCUSTOMERS AT A PRICE THAT WAS NOT FAIR, TAKING INTOCONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKETCONDITIONS WITH RESPECT TO EACH AT THE TIME OF THETRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WASENTITLED TO A PROFIT (INCLUDING ANY MARKUP OR MARKDOWN).

FINRA FURTHER ALLEGED THAT THE FIRM VIOLATED MSRB RULES G-17AND G-30(A) IN CONNECTION WITH PAIRS OF SALES/PURCHASES OFMUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO/FROM A CUSTOMERAT AN AGGREGATE PRICE (INCLUDING ANY MARKDOWN OR MARKUP)THAT WAS NOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALLRELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER,DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKETVALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OFANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THETRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THETRANSACTION, THE FACT THAT THE BROKER, DEALER, OR MUNICIPALSECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL DOLLARAMOUNT OF THE TRANSACTION.

FINRA FURTHER ALLEGED THAT THE FIRM VIOLATED NASD RULES 3010AND 2110, FINRA RULE 2010, AND MSRB RULES G-17 AND G-27 BECAUSETHE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS, REGULATIONS, AND FINRA RULESCONCERNING BOTH CORPORATE AND MUNICIPAL MARKUPS ANDMARKDOWNS.


Resolution:


Sanction Details: SANCTION DETAIL: THE JOINT AND SEVERAL FINE OF $1,000,000 WAS PAIDON NOVEMBER 10, 2011. THE UNDERTAKING TO REVISE WRITTENSUPERVISORY PROCEDURES MUST BE COMPLETED WITHIN 90 BUSINESSDAYS OF ACCEPTANCE OF THE AWC. PROOF OF PAYMENT OF THE JOINTAND SEVERAL RESTITUTION TO INVESTORS IN THE AMOUNT OF$371,715.86 MUST BE PROVIDED TO FINRA WITHIN 120 DAYS OFACCEPTANCE OF THE AWC.









Sanction Details: SANCTION DETAIL: THE JOINT AND SEVERAL FINE OF $1,000,000 WAS PAIDON NOVEMBER 10, 2011. THE UNDERTAKING TO REVISE WRITTENSUPERVISORY PROCEDURES MUST BE COMPLETED WITHIN 90 BUSINESSDAYS OF ACCEPTANCE OF THE AWC. PROOF OF PAYMENT OF THE JOINTAND SEVERAL RESTITUTION TO INVESTORS IN THE AMOUNT OF$371,715.86 MUST BE PROVIDED TO FINRA WITHIN 120 DAYS OFACCEPTANCE OF THE AWC.






Arbitration Award - Award / Judgment

Brokerage firms are not required to report arbitration claims filed against them by customers; however, BrokerCheckprovides summary information regarding FINRA arbitration awards involving securities and commodities disputesbetween public customers and registered securities firms in this section of the report. The full text of arbitration awards issued by FINRA is available at www.finra.org/awardsonline.

Disclosure 1 of 99


Type of Event: ARBITRATION

Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

Disputed Product Type:

Sum of All Relief Requested:

Disposition:

Disposition Date:

Sum of All Relief Awarded:

FINRA

07/22/2009

09-03872

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

MUTUAL FUNDS

$339,439.00

AWARD AGAINST PARTY

02/15/2011

$105,000.01

There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.

Disclosure 2 of 99

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Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

FINRA

09/14/2009

09-05070

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNTRELATED-FAILURE TO SUPERVISE





www.finra.org/awardsonline

https://www.finra.org/arbitration-and-mediation/arbitration-awards-online?search=09-03872



Case Number:



Disposition:

Disposition Date:


09-05070

COMMON STOCK; CORPORATE BONDS; MUTUAL FUNDS; PREFERREDSTOCK

$150,000.00

AWARD AGAINST PARTY

11/18/2010

$136,112.00


Disclosure 3 of 99

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Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/11/2009

09-05094

ACCOUNT RELATED-DIVIDENDS; ACCOUNT RELATED-OTHER

$2,843.63

AWARD AGAINST PARTY

03/14/2010

$87.50


Disclosure 4 of 99

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Arbitration Forum:

Case Initiated:

Allegations:

FINRA

09/14/2009

ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-EXECUTIONS-FAILURE TOEXECUTE








Case Initiated:

Case Number:



Disposition:

Disposition Date:


09/14/2009

09-05246

MUTUAL FUNDS

$165,000.00

AWARD AGAINST PARTY

01/11/2011

$85,507.00


Disclosure 5 of 99

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Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

09/30/2009

09-05568

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-NEGLIGENCE

COMMON STOCK; MUTUAL FUNDS

$480,000.00

AWARD AGAINST PARTY

02/22/2011

$124,156.01


Disclosure 6 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT 172©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

11/23/2009

09-06125

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT

VARIABLE ANNUITIES

$25,425.00

AWARD AGAINST PARTY

07/06/2010

$212.50


Disclosure 7 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

11/03/2009

09-06164

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE


$275,000.00

AWARD AGAINST PARTY

12/23/2010

$300.00


Disclosure 8 of 99

i










Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/08/2009

09-06282

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OTHER; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE;ACCOUNT RELATED-NEGLIGENCE

$2,000,000.00

AWARD AGAINST PARTY

07/29/2012

$150,000.00


Disclosure 9 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/18/2009

09-06918

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

COMMON STOCK; OPTIONS

$9,565,064.00

AWARD AGAINST PARTY

04/11/2011

$2,388,230.05









Disclosure 10 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/29/2009

09-07062

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-ERRORS-CHARGES; ACCOUNT RELATED-EXCHANGES; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; DONOT USE-EXECUTIONS-FAILURE TO EXECUTE; OTHER-INDEMNIFICATION

CERTIFICATE OF DEPOSIT; CORPORATE BONDS; GOVERNMENTSECURITIES

$86,963.00

AWARD AGAINST PARTY

03/24/2011

$15,000.01


Disclosure 11 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:


FINRA

01/15/2010

10-00119

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-NEGLIGENCE

ANNUITIES; COMMON STOCK; CORPORATE BONDS; UNKNOWN TYPE OFSECURITIES 175©2018 FINRA. All rights reserved. Report about MORGAN STANLEY









Disposition:

Disposition Date:


ANNUITIES; COMMON STOCK; CORPORATE BONDS; UNKNOWN TYPE OFSECURITIES

Unspecified Damages

AWARD AGAINST PARTY

09/19/2011

$190,000.00


Disclosure 12 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

02/11/2010

10-00156

ACCOUNT RELATED-TRANSFER

ANNUITIES

$20,000.00

AWARD AGAINST PARTY

08/03/2010

$212.50


Disclosure 13 of 99

i



Arbitration Forum:

Case Initiated:

Allegations:

FINRA

03/10/2010

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE







Case Initiated:

Case Number:



Disposition:

Disposition Date:


03/10/2010

10-00278

OTHER TYPES OF SECURITIES

$366,000.00

AWARD AGAINST PARTY

09/13/2011

$172,445.00


Disclosure 14 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

02/18/2010

10-00383


CERTIFICATE OF DEPOSIT; EXCHANGE-TRADED FUNDS; MUNICIPAL BONDFUNDS; MUNICIPAL BONDS; MUTUAL FUNDS

$30,000.00

AWARD AGAINST PARTY

09/26/2010

$25,425.00


Disclosure 15 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE








Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/12/2010

10-01606


COMMON STOCK

$518,379.04

AWARD AGAINST PARTY

05/23/2011

$127,000.00


Disclosure 16 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

07/05/2010

10-02604

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE


$33,000.00

AWARD AGAINST PARTY

09/08/2011

$37,731.01


Disclosure 17 of 99

i










Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

08/03/2010

10-03414

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

OTHER TYPES OF SECURITIES; VARIABLE ANNUITIES

$435,392.00

AWARD AGAINST PARTY

10/30/2011

$57,335.00


Disclosure 18 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

08/09/2010

10-03498

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

COMMON STOCK; LIMITED PARTNERSHIPS

$2,000,000.00

AWARD AGAINST PARTY

08/22/2012

$272,650.00









Disclosure 19 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

09/19/2010

10-03733

ACCOUNT RELATED-ERRORS-CHARGES; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER; DO NOT USE-EXECUTIONS-INCORRECT QUANTITY

MUTUAL FUNDS

$8,398.36

AWARD AGAINST PARTY

05/19/2011

$325.00


Disclosure 20 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

FINRA

09/30/2010

10-04327

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-NEGLIGENCE

HEDGE FUND; OTHER TYPES OF SECURITIES

$211,221.00

AWARD AGAINST PARTY180©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Disposition:

Disposition Date:


AWARD AGAINST PARTY

06/17/2013

$19,180.01


Disclosure 21 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/17/2010

10-04564

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE;ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

COMMON STOCK

$2,675,000.00

AWARD AGAINST PARTY

03/15/2012

$305,000.00


Disclosure 22 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT RELATED-BREACH OF CONTRACT;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER; DO NOT USE-EXECUTIONS-OTHER; DO NOT USE-OTHER-OTHER







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

11/24/2010

10-04646


$84,358.00

AWARD AGAINST PARTY

09/11/2011

$23,188.05


Disclosure 23 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

11/17/2010

10-04783

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

MUTUAL FUNDS

$127,956.11

AWARD AGAINST PARTY

12/19/2011

$48,000.00


Disclosure 24 of 99

i











Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

11/11/2010

10-04929

UNKNOWN TYPE OF CONTROVERSIES

$1,000,000.00

AWARD AGAINST PARTY

09/15/2013

$3,185,301.73


Disclosure 25 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/03/2010

10-05343

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER; DO NOT USE-EXECUTIONS-FAILURE TO EXECUTE; DO NOT USE-EXECUTIONS-OTHER;DO NOT USE-OTHER-OTHER ; OTHER-INDEMNIFICATION

COMMON STOCK

Unspecified Damages

AWARD AGAINST PARTY

11/21/2011

$148,989.33


i183©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Disclosure 26 of 99



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/20/2010

10-05558

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-NEGLIGENCE

ANNUITIES; VARIABLE ANNUITIES

$25,455.48

AWARD AGAINST PARTY

06/16/2011

$212.50


Disclosure 27 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/31/2010

10-05734

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT RELATED-EXCHANGES

VARIABLE ANNUITIES

$17,986.00

AWARD AGAINST PARTY

06/16/2011

$17,460.50

There may be a non-monetary award associated with this arbitration.








Please select the Case Number above to view more detailed information.

Disclosure 28 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/04/2011

11-00932

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

$2,697,566.00

AWARD AGAINST PARTY

06/23/2013

$288,443.97


Disclosure 29 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:

FINRA

04/07/2011

11-01283

ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZEDTRADING; ACCOUNT RELATED-FAILURE TO SUPERVISE

COMMON STOCK; CORPORATE BONDS; EXCHANGE-TRADED FUNDS;PREFERRED STOCK

$280,000.00

AWARD AGAINST PARTY

04/30/2012185©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Disposition Date:


04/30/2012

$300.00


Disclosure 30 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/12/2011

11-01360

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-ERRORS-CHARGES; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE


$6,673.00

AWARD AGAINST PARTY

11/22/2011

$162.50


Disclosure 31 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:


FINRA

06/05/2011

11-02126

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

EXCHANGE-TRADED FUNDS; MUTUAL FUNDS186©2018 FINRA. All rights reserved. Report about MORGAN STANLEY









Disposition:

Disposition Date:


EXCHANGE-TRADED FUNDS; MUTUAL FUNDS

$483,449.25

AWARD AGAINST PARTY

11/14/2012

$70,375.00


Disclosure 32 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

08/02/2011

11-02923

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE


$976,000.00

AWARD AGAINST PARTY

08/01/2012

$600.01


Disclosure 33 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

11/23/2011

11-04028

UNIT INVESTMENT TRUST

$12,049.00

AWARD AGAINST PARTY

06/07/2012

$5,792.50


Disclosure 34 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

11/22/2011

11-04250

ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-OTHER

COMMON STOCK

$1,000,000.00

AWARD AGAINST PARTY

01/23/2013

$200,488.01


Disclosure 35 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT RELATED-BREACH OF CONTRACT








Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

01/23/2012

11-04409

PREFERRED STOCK

$10,325.00

AWARD AGAINST PARTY

09/06/2012

$10,162.50


Disclosure 36 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

01/24/2012

12-00159

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY;ACCOUNT ACTIVITY-UNAUTHORIZED TRADING


$1,000,000.01

AWARD AGAINST PARTY

05/22/2014

$150,600.01


Disclosure 37 of 99

i



Allegations: ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-NEGLIGENCE








Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/12/2012

12-00507

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-NEGLIGENCE

Unspecified Damages

AWARD AGAINST PARTY

01/14/2013

$299,198.56


Disclosure 38 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/05/2012

12-00694

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

FANNIE MAE

$57,361.21

AWARD AGAINST PARTY

06/19/2013

$48,300.00


Disclosure 39 of 99

i










Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/26/2012

12-01108

ACCOUNT RELATED-NEGLIGENCE


$22,664.22

AWARD AGAINST PARTY

09/24/2012

$23,089.23


Disclosure 40 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/12/2012

12-01653

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

LIMITED PARTNERSHIPS; VARIABLE ANNUITIES

$310,000.00

AWARD AGAINST PARTY

08/26/2013

$220,300.00









Disclosure 41 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/24/2012

12-01971

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-SUITABILITY

COMMON STOCK

$1,100,000.00

AWARD AGAINST PARTY

02/21/2014

$600.00


Disclosure 42 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/10/2012

12-02080

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

COMMON STOCK; CORPORATE BONDS; MUNICIPAL BONDS; OPTIONS

$1,000,000.00

AWARD AGAINST PARTY

10/07/2014

$75,000.00









Disclosure 43 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/21/2012

12-02242

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-MARGIN CALLS; ACCOUNTRELATED-NEGLIGENCE; ACCOUNT RELATED-TRANSFER

COMMODITIES FUTURES; COMMON STOCK; STRUCTURED PRODUCTS

$46,000,000.01

AWARD AGAINST PARTY

07/15/2015

$327,000.00


Disclosure 44 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:


FINRA

06/21/2012

12-02257

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE










Disposition:

Disposition Date:


$4,429,613.00

AWARD AGAINST PARTY

07/23/2015

$2,382,851.01


Disclosure 45 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/08/2012

12-03086

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNT RELATED-FAILURE TO SUPERVISE;ACCOUNT RELATED-NEGLIGENCE

$50,000.00

AWARD AGAINST PARTY

07/17/2013

$300.00


Disclosure 46 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

FINRA

09/24/2012

12-03263

ACCOUNT ACTIVITY-SUITABILITY








Case Number:



Disposition:

Disposition Date:


12-03263

COMMON STOCK; HEDGE FUND; OPTIONS; STOCK INDEX FUTURES

$10,000.00

AWARD AGAINST PARTY

05/22/2013

$162.50


Disclosure 47 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/24/2012

12-03486

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY

EXCHANGE-TRADED FUNDS

$42,937.00

AWARD AGAINST PARTY

08/06/2013

$600.00


Disclosure 48 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE








Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

11/27/2012

12-03934

ANNUITIES; COMMON STOCK; VARIABLE ANNUITIES

Unspecified Damages

AWARD AGAINST PARTY

04/09/2014

$150,250.00


Disclosure 49 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/05/2012

12-04102

ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT RELATED-FAILURE TOSUPERVISE; DO NOT USE-EXECUTIONS-EXECUTION PRICE

MUNICIPAL BONDS

$4,529.00

AWARD AGAINST PARTY

06/04/2013

$162.50


Disclosure 50 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-OTHER-OTHER








Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/10/2012

12-04120

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-OTHER-OTHER

$64,078.46

AWARD AGAINST PARTY

05/20/2013

$64,678.47


Disclosure 51 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

01/14/2013

12-04345

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTRELATED-FAILURE TO SUPERVISE; DO NOT USE-EXECUTIONS-FAILURE TOEXECUTE

COMMON STOCK; EXCHANGE-TRADED FUNDS; MUNICIPAL BONDS

$100,000.00

AWARD AGAINST PARTY

04/24/2014

$19,148.00


Disclosure 52 of 99

i








Disclosure 52 of 99



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/05/2013

13-00549

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-NEGLIGENCE

$10,000,000.01

AWARD AGAINST PARTY

03/20/2016

$34,387,777.98


Disclosure 53 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/23/2013

13-00785

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER

CERTIFICATE OF DEPOSIT

$370,000.00

AWARD AGAINST PARTY

06/08/2014

$4,430.00









Disclosure 54 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/22/2013

13-00891

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTRELATED-FAILURE TO SUPERVISE

Unspecified Damages

AWARD AGAINST PARTY

06/24/2014

$113,208.01


Disclosure 55 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

FINRA

05/12/2013

13-01093

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTACTIVITY-OMISSION OF FACTS; ACCOUNT RELATED-NEGLIGENCE

COMMON STOCK; EXCHANGE-TRADED FUNDS; OTHER TYPES OFSECURITIES

$2,400,000.00








Disposition:

Disposition Date:


AWARD AGAINST PARTY

04/27/2014

$50,000.00


Disclosure 56 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/09/2013

13-01677

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-FAILURE TO SUPERVISE;ACCOUNT RELATED-NEGLIGENCE

$73,135.00

AWARD AGAINST PARTY

12/01/2014

$69,765.00


Disclosure 57 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:


FINRA

08/07/2013

13-02157

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-SUITABILITY

OTHER TYPES OF SECURITIES; PREFERRED STOCK










Disposition:

Disposition Date:


OTHER TYPES OF SECURITIES; PREFERRED STOCK

$60,696.00

AWARD AGAINST PARTY

03/18/2014

$11,326.00


Disclosure 58 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/21/2013

13-03045

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-TRANSFER; DO NOT USE-EXECUTIONS-FAILURE TO EXECUTE

COMMON STOCK; PREFERRED STOCK

$5,466.82

AWARD AGAINST PARTY

12/04/2014

$5,466.82


Disclosure 59 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING;ACCOUNT RELATED-ERRORS-CHARGES; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

11/15/2013

13-03115

LIMITED PARTNERSHIPS

$257,723.06

AWARD AGAINST PARTY

01/30/2015

$202,961.00


Disclosure 60 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

01/02/2014

13-03767

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT RELATED-BREACH OF CONTRACT;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

HEDGE FUND

$1,263,000.00

AWARD AGAINST PARTY

05/10/2015

$253,402.01


Disclosure 61 of 99

i











Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

02/14/2014

14-00394

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-NEGLIGENCE

$40,000.00

AWARD AGAINST PARTY

02/13/2015

$5,000.00


Disclosure 62 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/25/2014

14-00771



Unspecified Damages

AWARD AGAINST PARTY

07/15/2015

$325,526.00


Disclosure 63 of 99

i203©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Disclosure 63 of 99



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/03/2014

14-00829

$10,000,000.01

AWARD AGAINST PARTY

06/14/2016

$3,586,989.01


Disclosure 64 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/19/2014

14-01468

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURETO SUPERVISE

COMMON STOCK; EXCHANGE-TRADED FUNDS

$1,200,000.00

AWARD AGAINST PARTY

05/18/2015

$25,000.00









Disclosure 65 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/29/2014

14-01604

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT RELATED-BREACH OF CONTRACT;ACCOUNT RELATED-FAILURE TO SUPERVISE; DO NOT USE-OTHER-OTHER

ANNUITIES

$1,280,000.01

AWARD AGAINST PARTY

02/01/2016

$825,600.01


Disclosure 66 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

FINRA

06/16/2014

14-01864

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING; ACCOUNT RELATED-BREACH OF CONTRACT;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

$439,840.52








Disposition:

Disposition Date:


AWARD AGAINST PARTY

06/30/2015

$150,000.00


Disclosure 67 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

09/29/2014

14-02702

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTACTIVITY-UNAUTHORIZED TRADING; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

COMMON STOCK; CORPORATE BONDS; EXCHANGE-TRADED FUNDS;LIMITED PARTNERSHIPS; MUNICIPAL BOND FUNDS; MUNICIPAL BONDS;MUTUAL FUNDS; PREFERRED STOCK; UNIT INVESTMENT TRUST

Unspecified Damages

AWARD AGAINST PARTY

03/26/2017

$250.00


Disclosure 68 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-EXECUTIONS-FAILURE TO EXECUTE







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

10/09/2014

14-02847

$61,000.00

AWARD AGAINST PARTY

10/28/2015

$44,400.00


Disclosure 69 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

11/19/2014

14-03492


CERTIFICATE OF DEPOSIT; COMMON STOCK

$500,000.00

AWARD AGAINST PARTY

04/13/2016

$300.00


Disclosure 70 of 99

i



Allegations:207©2018 FINRA. All rights reserved. Report about MORGAN STANLEY







Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

01/12/2015

14-03522

Unspecified Damages

AWARD AGAINST PARTY

11/24/2015

$70.00


Disclosure 71 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/24/2014

14-03669

ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-OTHER


$48,805.00

AWARD AGAINST PARTY

06/23/2015

$300.00


Disclosure 72 of 99

i










Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

01/30/2015

14-03705

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

ANNUITIES; COMMON STOCK; EXCHANGE-TRADED FUNDS; MUTUALFUNDS

$2,000,000.01

AWARD AGAINST PARTY

12/08/2015

$1,058,617.75


Disclosure 73 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

03/18/2015

15-00624

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

Unspecified Damages

AWARD AGAINST PARTY

07/21/2016

$625,000.01









Disclosure 74 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/12/2015

15-01066

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

COMMON STOCK; PREFERRED STOCK; PRIVATE EQUITIES

$900,000.00

AWARD AGAINST PARTY

05/22/2016

$816,800.01


Disclosure 75 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:

FINRA

06/10/2015

15-01340

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-ERRORS-CHARGES

EXCHANGE-TRADED FUNDS

$3,948.00

AWARD AGAINST PARTY

11/10/2015








Disposition Date:


11/10/2015

$87.50


Disclosure 76 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

07/27/2015

15-01700

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-FRAUD; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-OTHER; ACCOUNTACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

CERTIFICATE OF DEPOSIT; COMMON STOCK; CORPORATE BONDS; GINNIEMAES; GOVERNMENT SECURITIES; LIMITED PARTNERSHIPS; MUNICIPALBOND FUNDS; MUNICIPAL BONDS; MUTUAL FUNDS; OTHER TYPES OFSECURITIES; STRUCTURED PRODUCTS; UNIT INVESTMENT TRUST

Unspecified Damages

AWARD AGAINST PARTY

05/31/2016

$8,606,599.00


Disclosure 77 of 99

i



Arbitration Forum:

Allegations:

FINRA

ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE







Arbitration Forum:

Case Initiated:

Case Number:



Disposition:

Disposition Date:


FINRA

08/09/2015

15-01809

MUNICIPAL BONDS

$46,258.19

AWARD AGAINST PARTY

04/03/2016

$26,582.52


Disclosure 78 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

07/28/2015

15-01906

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER

$300,000.00

AWARD AGAINST PARTY

09/22/2016

$300.00


Disclosure 79 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE








Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

07/29/2015

15-01926

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

MUTUAL FUNDS

$9,910.50

AWARD AGAINST PARTY

03/08/2016

$426.50


Disclosure 80 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/04/2015

15-02910

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER


Unspecified Damages

AWARD AGAINST PARTY

06/08/2017

$396,623.00









Disclosure 81 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

12/04/2015

15-03239

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-OTHER

COMMON STOCK

$900,000.00

AWARD AGAINST PARTY

05/14/2017

$150,000.00


Disclosure 82 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



FINRA

02/29/2016

16-00523

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-CHURNING; ACCOUNT ACTIVITY-FRAUD; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZEDTRADING; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

ANNUITIES; COMMON STOCK; REAL ESTATE INVESTMENT TRUST; UNITINVESTMENT TRUST

$540,000.00214©2018 FINRA. All rights reserved. Report about MORGAN STANLEY








Disposition:

Disposition Date:


$540,000.00

AWARD AGAINST PARTY

06/06/2017

$110,425.00


Disclosure 83 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/24/2016

16-00762

ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURETO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-EXECUTIONS-FAILURE TO EXECUTE

PREFERRED STOCK; PRIVATE EQUITIES

$200,000.00

AWARD AGAINST PARTY

04/05/2017

$4,000.00


Disclosure 84 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

FINRA

03/21/2016

16-00805

ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; ACCOUNT RELATED-OTHER








Case Number:



Disposition:

Disposition Date:


16-00805


$50,000.00

AWARD AGAINST PARTY

09/11/2016

$300.00


Disclosure 85 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

05/25/2016

16-01467

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-OTHER; ACCOUNTACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

COMMON STOCK; MUNICIPAL BOND FUNDS; MUNICIPAL BONDS;PREFERRED STOCK

$80,000.00

AWARD AGAINST PARTY

10/23/2017

$63,349.00


Disclosure 86 of 99

i



Allegations: ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-NEGLIGENCE








Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/12/2016

16-01538

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-NEGLIGENCE

COMMODITIES FUTURES

Unspecified Damages

AWARD AGAINST PARTY

11/22/2017

$209,775.00


Disclosure 87 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

06/07/2016

16-01601

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNTACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE

MUTUAL FUNDS

$50,000.00

AWARD AGAINST PARTY

12/22/2016

$37,531.01









Disclosure 88 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

07/19/2016

16-01949

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

CORPORATE BONDS

$639,082.83

AWARD AGAINST PARTY

08/02/2017

$450.00


Disclosure 89 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:

FINRA

07/28/2016

16-02067

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE

COMMON STOCK; LIMITED PARTNERSHIPS

$154,000.00

AWARD AGAINST PARTY

05/03/2017








Disposition Date:


05/03/2017

$29,360.00


Disclosure 90 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

08/04/2016

16-02231

$1,000,000.00

AWARD AGAINST PARTY

12/21/2017

$663,898.00


Disclosure 91 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:


FINRA

08/03/2016

16-02234

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT RELATED-ERRORS-CHARGES;ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-EXECUTIONS-FAILURE TO EXECUTE; TRADINGDISPUTES-MANIPULATION

ANNUITIES; OTHER TYPES OF SECURITIES219©2018 FINRA. All rights reserved. Report about MORGAN STANLEY









Disposition:

Disposition Date:


ANNUITIES; OTHER TYPES OF SECURITIES

$50,000.00

AWARD AGAINST PARTY

04/13/2017

$225.00


Disclosure 92 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

09/05/2016

16-02514

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY

$108,000.00

AWARD AGAINST PARTY

10/29/2017

$20,000.00


Disclosure 93 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

FINRA

09/19/2016

16-02585

ACCOUNT ACTIVITY-FRAUD; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE








Case Number:



Disposition:

Disposition Date:


16-02585

COMMON STOCK; EXCHANGE-TRADED FUNDS; MUTUAL FUNDS

$258,227.00

AWARD AGAINST PARTY

12/12/2017

$170,362.00


Disclosure 94 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

10/05/2016

16-02697

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OTHER;ACCOUNT ACTIVITY-SUITABILITY

VARIABLE ANNUITIES

$500,000.00

AWARD AGAINST PARTY

11/30/2017

$37,170.22


Disclosure 95 of 99

i



Arbitration Forum:

Case Initiated:

Allegations:

FINRA

12/16/2016

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT ACTIVITY-UNAUTHORIZED TRADING








Case Initiated:

Case Number:



Disposition:

Disposition Date:


12/16/2016

16-03580

COMMON STOCK; OPTIONS

Unspecified Damages

AWARD AGAINST PARTY

01/08/2018

$79,369.51


Disclosure 96 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

02/17/2017

17-00356

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

401(K); COMMON STOCK; CORPORATE BONDS; EXCHANGE-TRADEDFUNDS; MUTUAL FUNDS; PREFERRED STOCK; VARIABLE ANNUITIES

$55,333.00

AWARD AGAINST PARTY

10/09/2017

$0.00


Disclosure 97 of 99

i










Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/04/2017

17-00792

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-FRAUD;ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACHOF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

COMMON STOCK

$50,000.00

AWARD AGAINST PARTY

09/18/2017

$7,800.00


Disclosure 98 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

04/27/2017

17-00854

ACCOUNT ACTIVITY-SUITABILITY

CORPORATE BONDS

$18,000.00

AWARD AGAINST PARTY

09/05/2017

$212.50









Disclosure 99 of 99

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

09/26/2017

17-02555

ACCOUNT ACTIVITY - ELDER ABUSE; ACCOUNT ACTIVITY-BRCH OFFIDUCIARY DT; ACCOUNT ACTIVITY-MANIPULATION; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OFCONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNTRELATED-NEGLIGENCE

COMMON STOCK

$35,451.00

AWARD AGAINST PARTY

04/18/2018

$42,093.00








End of Report

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