Morgan Stanley settles email lawsuit

NEW YORK – US investment bank Morgan Stanley has settled a lawsuit with the Securities and Exchange Commission (SEC) in which the regulator alleged that the firm failed to produce "tens of thousands of emails" during the SEC's investigation into initial public offerings and research analysts from December 11, 2000 through July 2005.

The SEC said Morgan Stanley "did not diligently search for back-up tapes containing responsive emails until 2005. Morgan Stanley also failed to produce responsive emails because it over-wrote back-up tapes." The complaint also alleges that the firm "made numerous misstatements regarding the status and completeness of its productions; the unavailability of certain documents; and its efforts to preserve requested email." The regulator charged Morgan Stanley with violating the provisions of the federal securities laws requiring it, as a regulated broker-dealer, to produce its records and documents in a timely fashion to the regulator.

The investment bank settled the suit without admitting or denying the allegations. It has also consented to a permanent injunction and payment of a $15 million civil penalty, $5 million of which will be paid to NASD and the New York Stock Exchange in separate related proceedings. The firm has also agreed to adopt and implement policies, procedures and training focused on the preservation and production of email communications.

Antonia Chion, associate director of the SEC's division of enforcement, said "Morgan Stanley's repeated production failures and misstatements prejudiced two major investigations. This settlement will require Morgan Stanley to put into place reforms to prevent similar misconduct from recurring."