Morgan Stanley Let Failed Muni Bond Trades Sit Open, Finra Says

Morgan Stanley was fined $1.6 million by Wall Street’s self-regulator on Thursday for not closing out failed municipal bond trades in time.

The bank didn’t cancel or close 239 inter-dealer municipal bond trades in a timely manner from December 2016 to August 2021, according to the Financial Industry Regulatory Authority, or Finra. Morgan Stanley didn’t “take prompt steps to obtain physical possession or control of municipal security positions that are short more than 30 calendar days,” Finra said.

The bank fixed its internal procedures regarding the muni trades in 2021, Finra said. Under US securities rules, failed inter-dealer muni ...