The Financial Industry Regulatory Authority (FINRA) has censured and fined Morgan Stanley $325,000 for issuing thousands of research reports containing inaccurate information violating its catch-all Rule 1010.

According to a settlement letter, Morgan Stanley released 11,000 equity research reports containing price charts with stock ratings from the wrong year. Morgan Stanley also issued an additional 1,616 reports that did not include complete disclosures concerning Morgan Stanley's beneficial ownership of certain stocks featured in the reports.

FINRA attributed the issues to software errors. Still, the inaccurate reports violate FINRA's rules requiring firms to have a reasonably designed supervisory system and its disclosure requirements for research reports.

According to AdvisorHub, Morgan Stanley updated its price chart software in 2019, but a typographical error caused the charts to label a five-year-old rating as a three-year-old rating. The error was identified in January 2020, but Morgan Stanley continued to publish the reports until February 2020.

The failure to include complete disclosures in the beneficial ownership reports appears to be linked to the firm's integration of asset manager Eaton Vance. Firms must note when they have an interest of greater than 1 percent in the security featured in the report. Still, due to a system error, Morgan Stanley's software did not include holdings from the investment manager in its calculation. 

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