Morgan Stanley Agrees to Fine for Missing E-Mails

Wall Street powerhouse Morgan Stanley & Co. has agreed to pay a $15-million civil fine to settle federal regulators’ allegations that it repeatedly failed to provide tens of thousands of e-mails which they sought in investigations over several years, federal regulators said Wednesday.

The Securities and Exchange Commission announced the settlement with Morgan Stanley, which neither admitted nor denied the allegations but did consent to a permanent injunction against future violations of the securities laws. New York-based Morgan Stanley also agreed to reform its system for handling e-mails and to hire an independent consultant to review the changes it makes.

In a civil lawsuit filed in federal court in Washington, the SEC also accused the investment firm of making “numerous misstatements” regarding its efforts to preserve and produce the requested e-mails.

The SEC sought them from December 2000 through July 2005 in connection with its investigations of conflicts of interest in how Wall Street brokerage houses did business.

Also Wednesday, Morgan Stanley dismissed about 500 broker trainees and said it would slash the number it accepts in the future as part of an effort to boost profitability at its retail unit.

The firm’s Dallas-based training program “has failed” to meet its goals, according to an internal memo sent by Morgan Stanley private wealth management head James Gorman. It marks the biggest structural change to the unit since Gorman left Merrill Lynch & Co. for Morgan Stanley in February.

Morgan Stanley had 9,000 brokers as of Feb. 28. The New York-based firm will cut its four-year training program to between 700 and 1,000 new trainees each year from the current range of 1,500 to 2,500, according to Gorman’s memo.

The average Morgan Stanley financial advisor generated $490,000 in revenue in fiscal 2005, according to the firm’s annual report. That compares with $766,000 at Merrill and $556,000 at Citigroup Inc.’s Smith Barney.

Shares of Morgan Stanley fell 54 cents Wednesday to $65.21.