NYSE Fines Lehman, Morgan Stanley

Lehman Bros. Holdings Inc. and Morgan Stanley were fined and censured by the New York Stock Exchange’s enforcement division, the NYSE said Wednesday.

Lehman, the fourth-largest U.S. securities firm, was fined $175,000 for entering more than 245 test orders in what appeared to be real trades to test its system during business hours and failing to adequately monitor the testing. Morgan Stanley, the No. 2 firm, will pay $140,000 because it had $455 million less than required as collateral for loans.

They consented to the penalties without admitting or denying guilt.

Morgan Stanley’s collateral was too low as of July 31, 2002, because supervisory failures and a lack of written procedures allowed the use of margined securities as collateral, the NYSE said. The firm has taken steps to prevent similar violations in the future, the NYSE said in its ruling. Morgan Stanley spokesman Ray O’Rourke and Lehman spokeswoman Kerrie Ann Cohen declined to comment.

Also, the NYSE fined David Memmott, head of Morgan Stanley’s block-trading desk, $100,000 and suspended him for six weeks for allegedly making transactions that artificially inflated the share price of energy producer AES Corp. Memmott, who didn’t admit or deny guilt, agreed to the penalty.