Press Release: Morgan Stanley Sued for Repeated E-Mail Production Failures; 2006-69; May 10, 2006
summary
Morgan Stanley agreed to pay a $15 million penalty and implement reforms after the SEC accused it of repeatedly failing to produce tens of thousands of emails, overwriting backup tapes despite promises to stop, and making false statements during IPO and research analyst investigations from 2000 to 2005.
paragraph
The SEC charged Morgan Stanley with violating federal securities laws by failing to timely produce tens of thousands of emails during investigations into IPO and research analyst misconduct between December 2000 and July 2005. The firm overwrote backup tapes containing at least 200,000 emails after receiving subpoenas, delayed loading emails into its archive, and falsely claimed it had no 1999 tapes—until it secretly located them in May 2004 but withheld disclosure until October 2004. Morgan Stanley settled without admitting guilt, agreeing to a $15 million civil penalty ($5 million to NASD and NYSE), a permanent injunction, and mandatory email preservation policies with independent oversight.
narrative
Morgan Stanley & Co. Incorporated settled with the SEC in May 2006 after being accused of systematic failures to produce emails during two major investigations into IPO and research analyst misconduct spanning December 2000 to July 2005. The SEC alleged that Morgan Stanley overwrote backup tapes containing at least 200,000 potentially responsive emails despite repeatedly assuring regulators that such overwriting had ceased in January 2001. The firm also delayed loading millions of emails into its archive, failed to search backup tapes diligently until 2005, and falsely claimed it had no 1999 tapes—only to discover and conceal them until late October 2004. Morgan Stanley made numerous misstatements to the SEC about the completeness of its document productions and the availability of requested records, prejudicing both investigations. To resolve the matter without admitting guilt, Morgan Stanley agreed to pay a $15 million civil penalty, with $5 million allocated to NASD and the New York Stock Exchange in related proceedings. The settlement included a permanent injunction requiring the firm to implement comprehensive email preservation policies, provide staff training, and retain an independent consultant to audit compliance. The SEC emphasized that the case underscored the critical importance of document production integrity in regulatory enforcement and investor protection.
Classified obstruction(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Parties
antonia chioncivil injunctive actiondocument requestsindependent consultantlinda chatman thomsenmorgan stanleypermanent injunctionproduction failures prejudiced investigationsSecurities and Exchange Commission
Keywords
morgan stanleymorganstanleye-mailsback-up tapesresponsive e-mailse-mailtapescommissionproduction failuresresearch analyste-mail productionanalyst investigationsstanley failedmorgan stanley's
Extracted insights
Dollar amounts 3
- $15.00M $15 Million $10M–$100M
- $15.00M $15 million $10M–$100M
- $5.00M $5 million $1M–$10M
Entities 9
- person antonia chion
- person civil injunctive action
- person document requests
- person independent consultant
- person linda chatman thomsen
- person morgan stanley
- person permanent injunction
- person production failures prejudiced investigations
- agency Securities and Exchange Commission
Triples 17
- Securities and Exchange Commission filed civil injunctive action
- Securities and Exchange Commission charged Morgan Stanley
- Morgan Stanley agreed to settle matter
- Morgan Stanley consented to permanent injunction
- Morgan Stanley agreed to pay $15 million civil penalty
- Morgan Stanley agreed to adopt policies, procedures and training
- Morgan Stanley will hire independent consultant
- Morgan Stanley failed to produce responsive e-mails
- Morgan Stanley over-wrote back-up tapes
- Morgan Stanley made misstatements
- Morgan Stanley did not search diligently
- Securities and Exchange Commission issued subpoenas
- Securities and Exchange Commission issued document requests
- Morgan Stanley delayed loading e-mails
- Morgan Stanley failed to disclose discovery of tapes
- Linda Chatman Thomsen said laws are essential
- Antonia Chion stated production failures prejudiced investigations
Extracted body text (4,611c)
Morgan Stanley Sued for Repeated E-Mail Production Failures Firm Agrees to Pay $15 Million Penalty and Undertake Reforms in Settlement FOR IMMEDIATE RELEASE 2006-69 Washington, D.C., May 10, 2006 - The Securities and Exchange Commission today filed a civil injunctive action against Morgan Stanley & Co. Incorporated for failing to produce tens of thousands of e-mails during the Commission's IPO and Research Analyst investigations from Dec. 11, 2000, through at least July 2005. The Commission alleges in its complaint that Morgan Stanley did not diligently search for back-up tapes containing responsive e-mails until 2005. Morgan Stanley also failed to produce responsive e-mails because it over-wrote back-up tapes. The complaint further alleges that Morgan Stanley made numerous misstatements regarding the status and completeness of its productions; the unavailability of certain documents; and its efforts to preserve requested e-mail. The Commission charged Morgan Stanley with violating the provisions of the federal securities laws requiring Morgan Stanley, a regulated broker-dealer, to timely produce its records and documents to the Commission. Morgan Stanley has agreed to settle this matter. Without admitting or denying the allegations of the complaint, Morgan Stanley has 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, Inc. in separate related proceedings. Morgan Stanley also has agreed to adopt and implement policies, procedures and training focused on the preservation and production of e-mail communications. It also will hire an independent consultant to review these reforms. The settlement terms are subject to court approval. Linda Chatman Thomsen, Enforcement Division Director, said, "The laws requiring broker-dealers to provide documents to the Commission are essential to the Commission's ability to enforce the federal securities laws and protect investors. Today's action underscores the Commission's resolve to ensure the integrity of its investigative processes." Antonia Chion, Associate Director of the SEC's Division of Enforcement, stated, "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." The Commission's complaint, filed in the United States District Court for the District of Columbia, includes the following allegations. Beginning in December 2000 and continuing through October 2004, the Commission issued subpoenas and document requests to Morgan Stanley for e-mails and back-up tapes containing e-mail in the IPO and Research Analyst investigations. Morgan Stanley did not search diligently for back-up tapes containing responsive e-mails until 2005. Consequently, Morgan Stanley failed to timely produce e-mails contained on thousands of back-up tapes that were readily accessible. These tapes have yielded tens of thousands of responsive e-mails. Despite Morgan Stanley's assertion in both the IPO and Research Analyst investigations that it had not retained any 1999 tapes that backed-up e-mail, numerous back-up tapes from 1999 existed and were located by Morgan Stanley beginning in May 2004. However, Morgan Stanley did not disclose its discovery of these tapes until late October 2004, after the Commission began investigating Morgan Stanley's e-mail production failures. Morgan Stanley also failed for months to produce e-mails sought in the Research Analyst investigation because it delayed loading millions of e-mails into its e-mail archive database (the E-Mail Archive) and searching them for responsive e-mails. In addition, Morgan Stanley failed to produce responsive e-mails by over-writing back-up tapes after receiving Commission subpoenas and requests despite its repeated representations to the Commission and the staff that all over-writing had ceased in January 2001. Through at least December 2002, Morgan Stanley's continued over-writing destroyed at least two hundred thousand e-mails, including some e-mails which likely were responsive to the Commission's subpoenas and requests in the IPO and Research Analyst investigations. # # # For further information contact: Antonia Chion, Associate Director, SEC Division of Enforcement (202) 551-4842. Chris Conte, Assistant Director, SEC Division of Enforcement (202) 551-4834. Additional materials: Litigation Release No. 19693 http://www.sec.gov/news/press/2006/2006-69.htm Home | Previous Page Modified: 05/10/2006
OCR text (4,611c · plain-text · 99% conf)
Morgan Stanley Sued for Repeated E-Mail Production Failures Firm Agrees to Pay $15 Million Penalty and Undertake Reforms in Settlement FOR IMMEDIATE RELEASE 2006-69 Washington, D.C., May 10, 2006 - The Securities and Exchange Commission today filed a civil injunctive action against Morgan Stanley & Co. Incorporated for failing to produce tens of thousands of e-mails during the Commission's IPO and Research Analyst investigations from Dec. 11, 2000, through at least July 2005. The Commission alleges in its complaint that Morgan Stanley did not diligently search for back-up tapes containing responsive e-mails until 2005. Morgan Stanley also failed to produce responsive e-mails because it over-wrote back-up tapes. The complaint further alleges that Morgan Stanley made numerous misstatements regarding the status and completeness of its productions; the unavailability of certain documents; and its efforts to preserve requested e-mail. The Commission charged Morgan Stanley with violating the provisions of the federal securities laws requiring Morgan Stanley, a regulated broker-dealer, to timely produce its records and documents to the Commission. Morgan Stanley has agreed to settle this matter. Without admitting or denying the allegations of the complaint, Morgan Stanley has 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, Inc. in separate related proceedings. Morgan Stanley also has agreed to adopt and implement policies, procedures and training focused on the preservation and production of e-mail communications. It also will hire an independent consultant to review these reforms. The settlement terms are subject to court approval. Linda Chatman Thomsen, Enforcement Division Director, said, "The laws requiring broker-dealers to provide documents to the Commission are essential to the Commission's ability to enforce the federal securities laws and protect investors. Today's action underscores the Commission's resolve to ensure the integrity of its investigative processes." Antonia Chion, Associate Director of the SEC's Division of Enforcement, stated, "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." The Commission's complaint, filed in the United States District Court for the District of Columbia, includes the following allegations. Beginning in December 2000 and continuing through October 2004, the Commission issued subpoenas and document requests to Morgan Stanley for e-mails and back-up tapes containing e-mail in the IPO and Research Analyst investigations. Morgan Stanley did not search diligently for back-up tapes containing responsive e-mails until 2005. Consequently, Morgan Stanley failed to timely produce e-mails contained on thousands of back-up tapes that were readily accessible. These tapes have yielded tens of thousands of responsive e-mails. Despite Morgan Stanley's assertion in both the IPO and Research Analyst investigations that it had not retained any 1999 tapes that backed-up e-mail, numerous back-up tapes from 1999 existed and were located by Morgan Stanley beginning in May 2004. However, Morgan Stanley did not disclose its discovery of these tapes until late October 2004, after the Commission began investigating Morgan Stanley's e-mail production failures. Morgan Stanley also failed for months to produce e-mails sought in the Research Analyst investigation because it delayed loading millions of e-mails into its e-mail archive database (the E-Mail Archive) and searching them for responsive e-mails. In addition, Morgan Stanley failed to produce responsive e-mails by over-writing back-up tapes after receiving Commission subpoenas and requests despite its repeated representations to the Commission and the staff that all over-writing had ceased in January 2001. Through at least December 2002, Morgan Stanley's continued over-writing destroyed at least two hundred thousand e-mails, including some e-mails which likely were responsive to the Commission's subpoenas and requests in the IPO and Research Analyst investigations. # # # For further information contact: Antonia Chion, Associate Director, SEC Division of Enforcement (202) 551-4842. Chris Conte, Assistant Director, SEC Division of Enforcement (202) 551-4834. Additional materials: Litigation Release No. 19693 http://www.sec.gov/news/press/2006/2006-69.htm Home | Previous Page Modified: 05/10/2006