UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

_________________________________________ 

)

In the Matter of: ) 

)

Morgan Stanley & Co. LLC, ) 

Morgan Stanley Capital Services LLC, ) 

Morgan Stanley Capital Group Inc., and ) 

Morgan Stanley Bank, N.A., ) CFTC Docket No. 22-44

)

)

)

Respondents. )

_________________________________________ ) 

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, MAKING 

FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe that 

from at least 2018 to the present (“Relevant Period”), Morgan Stanley & Co. LLC, Morgan 

Stanley Capital Services LLC (including as successor to Morgan Stanley Capital Products LLC), 

Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, N.A. (collectively, “Morgan 

Stanley” or “Respondents”) violated, as set forth below, Sections 4g, 4s(f)(1)(C), 4s(g)(1) and 

(3), and 4s(h)(1)(B) of the Commodity Exchange Act (“Act”), 7 U.S.C. §§ 6g, 6s(f)(1)(C), 

6s(g)(1), (3), 6s(h)(1)(B), and Commission Regulations (“Regulations”) 1.31, 1.35, 23.201(a), 

23.202(a)(1) and (b)(1), 23.602(a), and 166.3, 17 C.F.R. §§ 1.31, 1.35, 23.201(a), 23.202(a)(1), 

(b)(1), 23.602(a), 166.3 (2021). Therefore, the Commission deems it appropriate and in the 

public interest that public administrative proceedings be, and hereby are, instituted to determine 

whether Respondents engaged in the violations set forth herein and to determine whether any 

order should be issued imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondents have 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Respondents admit the facts set forth in Section II below, acknowledge that their conduct 

violated the Act and Regulations and consent to the entry of this Order Instituting Proceedings 
2 

Pursuant to Section 6(c) and (d) of the Commodity Exchange Act, Making Findings, and 

Imposing Remedial Sanctions (“Order”), and acknowledge service of this Order.1

II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

 The Act and Regulations impose recordkeeping and supervision requirements on 

Commission registrants to ensure that they responsibly discharge their crucial role in our 

markets. Compliance with these requirements is essential to the Commission’s efforts to 

promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound 

regulation. 

During the course of a Commission investigation into certain of Morgan Stanley’s 

trading, Commission staff issued a subpoena to Morgan Stanley for certain communications. 

Separately, Commission staff became aware of Morgan Stanley employee use of unapproved 

communication methods for business conversations. Morgan Stanley did not collect, search or 

review those messages to assess whether such communications were responsive to the 

Commission’s subpoena because the messages were sent or received through unapproved 

communication methods on an employee’s personal device. Thereafter, Commission staff 

subpoenaed a Morgan Stanley trader for personal device communications, and Commission staff 

informed Morgan Stanley that the trader no longer possessed certain required records that had 

been sent or received by unapproved methods. 

Months later, in response to Commission staff’s questions regarding Morgan Stanley 

employees’ use of unapproved communication methods on employees’ personal devices, 

Morgan Stanley disclosed that it had conducted certain reviews of the use of unapproved 

communications methods by its employees. Those reviews demonstrated that there was 

widespread and longstanding use of unapproved communication methods by employees—

including senior-level employees—to engage in firm business, including relating to trading in 

CFTC regulated derivatives markets. 

 

 The Commission’s subsequent investigation with respect to Morgan Stanley’s employee 

use of unapproved methods of communication revealed that, during the Relevant Period, Morgan 

Stanley employees, including those at senior levels, communicated both internally and externally 

using unapproved methods, including via personal text messages and WhatsApp messages. 

These written communications were sent and received by Morgan Stanley employees and 

included messages related to Morgan Stanley’s businesses as Commission registrants that were 

required to be maintained under Commission-mandated recordkeeping requirements. These 

 

1

 Respondents agree that the findings of fact and conclusions of law in this Order shall be taken as true and correct 

and be given preclusive effect without further proof in this proceeding and any other proceeding brought by the 

Commission or to which the Commission is a party or claimant, including but not limited to, a proceeding in 

bankruptcy or receivership. Respondents do not consent to the use of the Offer or this Order, or the findings or 

conclusions in this Order, by any other party in any other proceeding.
3 

written communications via unapproved methods generally were not maintained and preserved 

by Morgan Stanley, and Morgan Stanley generally would not have been able to furnish the 

communications promptly to a Commission representative if and when requested. As a result, 

Morgan Stanley violated, as set forth below, Sections 4g, 4s(f)(1)(C), and 4s(g)(1) and (3) of the 

Act, 7 U.S.C. §§ 6g, 6s(f)(1)(C), 6s(g)(1), (3), and Regulations 1.31, 1.35, 23.201(a), and 

23.202(a)(1) and (b)(1), 17 C.F.R. §§ 1.31, 1.35, 23.201(a), 23.202(a)(1), (b)(1) (2021). 

 In addition, the widespread use of unauthorized communication methods by Morgan 

Stanley’s employees to conduct firm business violated Morgan Stanley’s own policies and 

procedures, which prohibited such communications. Morgan Stanley did not maintain adequate 

internal controls with respect to the use of unapproved communication methods for businessrelated communications. Indeed, some of the very same supervisory personnel at Morgan 

Stanley responsible for ensuring compliance with Morgan Stanley’s policies and procedures 

themselves utilized unapproved methods of communication to engage in business-related 

communications, in violation of firm policy. Because Morgan Stanley failed to implement a 

diligent supervisory system to ensure compliance with Commission recordkeeping requirements 

and the firm’s own policies and procedures, and because the widespread use of unauthorized 

communication methods resulted in the firm’s failure to maintain Commission-required records, 

Morgan Stanley failed to diligently supervise matters related to its business as a Commission 

registrant in violation of Section 4s(h)(1)(B) of the Act, 7 U.S.C. § 6s(h)(1)(B), and Regulations 

166.3 and 23.602(a), 17 C.F.R. §§ 166.3, 23.602(a) (2021), as set forth below. 

B. RESPONDENTS 

Morgan Stanley & Co. LLC is a Delaware limited liability company with its principal 

place of business in New York, New York. Morgan Stanley & Co. LLC is registered with the 

Commission as a Futures Commission Merchant (“FCM”) and is provisionally registered as a 

swap dealer. 

Morgan Stanley Capital Services LLC is a Delaware limited liability company with its 

principal place of business in New York, New York, and is provisionally registered as a swap 

dealer. During the Relevant Period, Morgan Stanley Capital Services LLC merged with another 

provisionally registered swap dealer, Morgan Stanley Capital Products LLC, which was an 

affiliated Delaware limited liability company. Morgan Stanley Capital Services LLC was the 

surviving entity in the merger. 

Morgan Stanley Capital Group Inc. is a Delaware corporation conducting business on 

behalf of the commodities division of Morgan Stanley, and is provisionally registered as a swap 

dealer. 

Morgan Stanley Bank, N.A. is a federally chartered national banking association with 

its principal place of business in Salt Lake City, Utah, and is provisionally registered as a swap 

dealer. 
4 

C. FACTS 

During the course of a Commission investigation into certain of Morgan Stanley’s 

trading, Commission staff issued a subpoena to Morgan Stanley for specified communications. 

Separately, Commission staff became aware of Morgan Stanley employee use of unapproved 

communication methods for business conversations. Morgan Stanley did not collect, search, or 

review those messages to assess whether such communications were responsive to the 

Commission’s subpoena because the messages were sent or received through unapproved 

communication methods on an employee’s personal device. Thereafter, Commission staff 

subpoenaed the personal device communications of a Morgan Stanley trader, and Commission 

staff informed Morgan Stanley that the trader no longer possessed certain required records that 

had been sent or received by unapproved methods. 

Months later, in response to Commission staff’s questions regarding Morgan Stanley 

employees’ use of unapproved methods on those employees’ personal devices, Morgan Stanley 

disclosed that it had conducted certain reviews of the use of unapproved communications 

methods by its employees. Those reviews demonstrated that there was widespread and 

longstanding use of unapproved communication methods by employees—including senior-level 

employees—to engage in firm business, including relating to trading in CFTC regulated 

derivatives markets. 

Importantly, during the Relevant Period, Morgan Stanley policies and procedures broadly 

prohibited employees from using unapproved communication methods, such as personal text 

messages and WhatsApp, to engage in business-related communications. 

Messages sent through Morgan Stanley-approved communications methods were 

monitored, subject to review, and when appropriate, archived. By contrast, messages sent using 

unapproved communication methods, including over personal WhatsApp, email, and text 

messages, were generally not monitored, subject to review, or archived. 

As a result of Morgan Stanley’s failure to ensure that employees—including supervisors 

and senior-level employees—complied with the firm’s communications policies and procedures, 

Morgan Stanley failed to maintain thousands of business-related communications, including 

communications in connection with its commodities and swaps businesses, and thus failed 

diligently to supervise its businesses as Commission registrants. These supervision failures 

resulted in the widespread use of unapproved methods of communication by many Morgan 

Stanley employees in violation of the firm’s policies and procedures, as well as a widespread 

failure to maintain certain records required to be maintained pursuant to Commission 

recordkeeping requirements. 

A sampling analysis, for example, of the personal devices of thirty Morgan Stanley 

employees, including 11 associated persons of Morgan Stanley’s swap dealer or Futures 

Commission Merchant businesses, illustrates the breadth of Morgan Stanley’s supervision and 

recordkeeping failures. Of those thirty employees, who ranged in seniority from Analyst to 

Managing Director, the vast majority had violated Morgan Stanley’s communications policies 

and procedures by using personal text message and other unapproved methods to communicate 

with brokers, coworkers, and market participants. Further, those employees’ communications 
5 

revealed that over one hundred more Morgan Stanley employees (including numerous managing 

directors and senior supervisors) conducted firm business via unapproved methods (including in 

thousands of text and WhatsApp messages). 

The Commission’s investigation identified that certain of the communications by Morgan 

Stanley employees using unapproved communication methods constituted records that were 

required to be kept pursuant to Commission recordkeeping requirements, but were not preserved 

and maintained by Morgan Stanley. Commission staff informed Morgan Stanley that staff 

obtained communications from a third party that reflected Morgan Stanley employee use of 

unapproved communication methods for business conversations. 

Morgan Stanley’s recordkeeping and supervision failures were firm-wide and involved 

employees at all levels of authority. Moreover, employees’ use of unapproved communication 

methods was not hidden within the firm. To the contrary, certain supervisors—the very people 

responsible for supervising employees to prevent this misconduct—routinely communicated 

using unapproved methods on their personal devices. In fact, managing directors and senior 

supervisors responsible for implementing Morgan Stanley’s policies and procedures, and for 

overseeing employees’ compliance with those policies and procedures, themselves failed to 

comply with firm policies by communicating using unapproved methods on their personal 

devices about the firm’s Commission-regulated businesses. 

III. LEGAL DISCUSSION 

A. Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan 

Stanley Capital Group Inc., and Morgan Stanley Bank, N.A.’s Failure to 

Maintain Required Records in Violation of Sections 4s(f)(1)(C) and 4s(g)(1) 

and (3) of the Act and Regulations 23.201(a) and 23.202(a)(1) and (b)(1) 

Section 4s(f)(1)(C) of the Act obligates swap dealers to keep “books and records of all 

activities related to its business as a swap dealer . . . in such form and manner and for such period 

as may be prescribed by the Commission by rule or regulation” and those books and records 

must be kept “open to inspection and examination by any representative of the Commission.” 

7 U.S.C. § 6s(f)(1)(C); see also Section 4s(g)(1) and (3) of the Act, 7 U.S.C. § 6s(g)(1), (3) 

(requiring swap dealers to keep daily trading and counterparty records). These statutes are 

implemented, among other places, at Regulations 23.201(a) and 23.202(a)(1) and (b)(1), 

17 C.F.R. §§ 23.201(a), 23.202(a)(1), (b)(1) (2021). 

Regulation 23.201(a) obligates a swap dealer to “keep full, complete, and systematic 

records, together with all pertinent data and memoranda, of all its swaps activities,” including 

“[r]ecords of each transaction, including all documents on which transaction information is 

originally recorded.” Regulation 23.202(a)(1) and (b)(1) requires, in relevant part, every swap 

dealer to keep daily trading records of all swaps and related cash and forward transactions it 

executes including, specifically, a record of oral and written communications provided or 

received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that led to 

the execution of a swap transaction or the conclusion of a related cash or forward transaction. 
6 

During the Relevant Period, as a result of the widespread employee use of unapproved 

communication methods, Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, 

Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, N.A. failed to maintain 

Commission-required transaction records and pre-execution communications. By this conduct, 

Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan Stanley Capital 

Group Inc., and Morgan Stanley Bank, N.A. violated Sections 4s(f)(1)(C) and 4s(g)(1) and (3) of 

the Act and Regulations 23.201(a) and 23.202(a)(1) and (b)(1). 

B. Morgan Stanley & Co. LLC’s Failure to Keep Required Records in Violation 

of Section 4g of the Act and Regulation 1.35 

Section 4g of the Act requires FCMs and other registrants to create and keep books and 

records pertaining to transactions and positions in such form and manner and for such period as 

may be required by the Commission. 7 U.S.C. § 6g. Regulation 1.35(a)(1), 17 C.F.R. 

§ 1.35(a)(1) (2021), sets forth some of the books and records that are required to be created and 

maintained by FCMs. Specifically, an FCM must: 

(i) Keep full, complete, and systematic records . . . of all transactions relating to 

its business of dealing in commodity interests . . . which shall include all orders 

(filled, unfilled, or canceled), . . . and all other records, which have been prepared 

in the course of its business of dealing in commodity interests . . . . 

 

*** 

(iii) Keep all oral and written communications provided or received concerning 

quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the 

execution of a transaction in a commodity interest . . . whether transmitted by 

telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, 

mobile device, or other digital or electronic media . . . . 

With the exception of pre-trade communications, all such records are required to be “kept in a 

form and manner that allows for the identification of a particular transaction.” Regulation 

1.35(a)(5), 17 C.F.R. § 1.35(a)(5) (2021). 

As a result of the widespread use of unapproved methods of communication by firm 

employees, which communications were not preserved and maintained, Morgan Stanley & Co. 

LLC failed to keep full, complete, and systematic records of all transactions relating to its 

business of dealing in commodity interests, in violation of Section 4g of the Act and Regulation 

1.35.

C. Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan 

Stanley Capital Group Inc., and Morgan Stanley Bank, N.A.’s Failure to 

Keep Records in Required Manner in Violation of Regulation 1.31 

Regulation 1.31(b)(4), 17 C.F.R. § 1.31(b)(4) (2021), requires that registrants keep all 

books and records that are required to be maintained under the Act and Regulations in such 

manner as to make them “readily accessible” for a period of two years for paper records and for 
7 

the duration of the retention period for electronic records. Upon request of the Commission, all 

of these documents are required to be “promptly” produced. Regulation 1.31(d), 17 C.F.R. 

§ 1.31(d) (2021). Regulation 23.203(b)(1), 17 C.F.R. § 23.203(b)(1) (2021), requires that 

records required to be kept pursuant to Part 23 of the Regulations, be kept in accordance with 

Regulation 1.31, 17 C.F.R. § 1.31 (2021). 

By failing to keep all Commission-required records in such a manner as to make them 

“readily accessible,” Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, 

Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, N.A. violated Regulation 1.31. 

D. Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan 

Stanley Capital Group Inc., and Morgan Stanley Bank, N.A.’s Failure to 

Supervise Diligently in Violation of Section 4s(h)(1)(B) of the Act and 

Regulation 23.602(a) 

Section 4s(h)(1)(B) of the Act, 7 U.S.C. § 6s(h)(1)(B), requires “diligent supervision of 

the business of the registered swap dealer[.]” Regulation 23.602(a) requires that each swap 

dealer “shall establish and maintain a system to supervise, and shall diligently supervise, all 

activities relating to its business performed by its partners, members, officers, employees, and 

agents (or persons occupying a similar status or performing a similar function).” 17 C.F.R. 

§ 23.602(a) (2021). The operative language of Regulation 23.602(a) is similar to the language of 

the Commission’s longstanding supervision regulation for futures and options, Regulation 166.3, 

17 C.F.R. § 166.3 (2021). 

Under Regulation 23.602(a), a violation is demonstrated by showing either that: (1) the 

registrant’s supervisory system was generally inadequate; or (2) the registrant failed to perform 

its supervisory duties diligently. See In re JPMorgan Chase Bank, N.A., CFTC No. 22-07, 2021 

WL 6098347, at *6 (Dec. 17, 2021) (consent order); see also In re Commerzbank AG, CFTC No. 

19-03, 2018 WL 5921385, at *10-11 (Nov. 8, 2018) (consent order) (noting textual similarities 

between Regulation 23.602 and Regulation 166.3, applying case law concerning Regulation 

166.3, and citing In re Murlas Commodities, Inc., CFTC No. 85-29, 1995 WL 523563, at *9 

(Sept. 1, 1995), and In re Paragon Futures Assoc., CFTC No. 88-18, 1992 WL 74261, at *14 

(Apr. 1, 1992)); In re INTL FCStone Markets, LLC, CFTC No. 15-27, 2015 WL 4980321, at *3 

(Aug. 19, 2015) (consent order) (same). Either showing “alone is sufficient to establish a 

violation of the supervision requirement.” Commerzbank, 2018 WL 5921385, at *10 

(interpreting Regulation 23.602 in light of Regulation 166.3 precedents). No evidence of an 

underlying violation is necessary. In re Collins, CFTC No. 94-13, 1997 WL 761927, at *10 

(Dec. 10, 1997) (interpreting Regulation 166.3). Evidence of violations that “‘should be detected 

by a diligent system of supervision, either because of the nature of the violations or because the 

violations have occurred repeatedly,’ is probative of a failure to supervise.” See In re Bank of 

Nova Scotia, CFTC No. 20-26, 2020 WL 4926053, at *10 (Aug. 19, 2020) (consent order) 

(quoting In re Société Générale Int’l Ltd., CFTC No. 19-38, 2009 WL 4915485, at *7 (Sept. 30, 

2019) (consent order)). 

Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan Stanley 

Capital Group Inc., and Morgan Stanley Bank, N.A. failed to supervise their swap dealer 
8 

business activities diligently during the Relevant Period. Morgan Stanley & Co. LLC, Morgan 

Stanley Capital Services LLC, Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, 

N.A. failed to maintain an adequate supervisory system to ensure that employees did not utilize 

unapproved methods to engage in communications relating to firm business, including the swap 

dealer business. Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Morgan 

Stanley Capital Group Inc., and Morgan Stanley Bank, N.A.’s failure to supervise is 

demonstrated by their failure to detect, prevent, and remediate repeated violations of the 

Commission’s recordkeeping requirements and firm policies and procedures. Supervisory 

personnel failed to ensure that employees complied with Morgan Stanley & Co. LLC, Morgan 

Stanley Capital Services LLC, Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, 

N.A.’s Commission recordkeeping obligations and firm communications policies and in some 

instances themselves violated the policies. These supervision failures also resulted in the failure 

to keep and maintain Commission-required records and the failure to maintain the records in 

such a manner as to make them readily available. By this conduct, Morgan Stanley & Co. LLC, 

Morgan Stanley Capital Services LLC, Morgan Stanley Capital Group Inc., and Morgan Stanley 

Bank, N.A. failed to supervise diligently their officers, employees, and agents, in violation of 

Section 4s(h)(1)(B) of the Act and Regulation 23.602(a).

E. Morgan Stanley & Co. LLC’s Failure to Diligently Supervise in Violation of 

Regulation 166.3 

Regulation 166.3 states: 

Each Commission registrant, except an associated person who has no supervisory 

duties, must diligently supervise the handling by its partners, officers, employees 

and agents (or persons occupying a similar status or performing a similar 

function) of all commodity interest accounts carried, operated, advised or 

introduced by the registrant and all other activities of its partners, officers, 

employees and agents (or persons occupying a similar status or performing a 

similar function) relating to its business as a Commission registrant. 

17 C.F.R. § 166.3 (2021). 

A violation under Regulation 166.3 is an independent violation for which no underlying 

violation is necessary. See Collins, 1997 WL 761927, at *10. A violation of Regulation 166.3 is 

demonstrated by showing either that: (1) the registrant’s supervisory system was generally 

inadequate; or (2) the registrant failed to perform its supervisory duties diligently. Murlas 

Commodities, Inc., 1995 WL 523563, at *9; Sansom Refining Co. v. Drexel Burnham Lambert, 

Inc., CFTC No. 82-R448, 1990 WL 282783, at *11 (Feb. 16, 1990) (noting that, under 

Regulation 166.3, registrants have “duty to develop procedures for the detection and deterrence 

of possible wrongdoing by [their] agents” (internal quotation omitted)); In re GNP Commodities, 

Inc., CFTC No. 89-1, 1992 WL 201158, at *17-19 (Aug. 11, 1992) (providing that, even if an 

adequate supervisory system is in place, Regulation 166.3 can still be violated if the supervisory 

system is not diligently administered); see also In re Rosenthall Collins Grp., LLC, CFTC No. 

12-18, 2012 WL 1242406, at *6 (Apr. 12, 2012) (consent order) (respondent failed to perform 

supervisory duties diligently by not following its compliance procedures that were in place). 
9 

Evidence of violations that “should be detected by a diligent system of supervision, either 

because of the nature of the violations or because the violations have occurred repeatedly” is 

probative of a failure to diligently supervise. In re Paragon Futures Assoc., CFTC No. 88-18, 

1992 WL 74261, at *14 (Apr. 1, 1992) (“The focus of any proceeding to determine whether Rule 

166.3 has been violated will be on whether [a] review [has] occurred and, if it did, whether it was 

‘diligent.’”). 

Morgan Stanley & Co. LLC failed to supervise its business as a Commission registrant 

by failing to maintain adequate supervisory systems to ensure that employees complied with 

Morgan Stanley & Co. LLC Commission recordkeeping requirements and firm policies and 

procedures that prohibited business-related communications on unapproved methods of 

communication. The inadequacy of Morgan Stanley & Co. LLC’s supervisory systems is 

demonstrated by the longstanding and repeated violations of Morgan Stanley & Co. LLC’s 

Commission recordkeeping obligations and firm policies and procedures and the fact that the 

supervisory failures resulted in the repeated failure to maintain Commission-required records, to 

ensure that the required records were readily accessible, and that the records could be promptly 

produced upon request. By this conduct, Morgan Stanley & Co. LLC failed to supervise 

diligently its officers, employees, and agents in violation of Regulation 166.3. 

IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the Relevant Period, Morgan 

Stanley & Co. LLC, Morgan Stanley Capital Services LLC (including as successor to Morgan 

Stanley Capital Products LLC), Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, 

N.A. violated Sections 4s(f)(1)(C), 4s(g)(1) and (3), and 4s(h)(1)(B) of the Act, 7 U.S.C. 

§§ 6s(f)(1)(C), 6s(g)(1), (3), 6s(h)(1)(B), and Regulations 1.31, 23.201(a), 23.202(a)(1) and 

(b)(1), 23.602(a), 17 C.F.R. §§ 1.31, 23.201(a), 23.202(a)(1), (b)(1), 23.602(a) (2021); and 

Morgan Stanley & Co. LLC violated Section 4g of the Act, 7 U.S.C. § 6g, and Regulations 1.35 

and 166.3, 17 C.F.R. §§ 1.35, 166.3 (2021). 

V. OFFER OF SETTLEMENT 

Respondents have submitted the Offer in which they: 

A. Acknowledge service of this Order; 

B. Admit the facts described in Section II above and acknowledge that their conduct 

violated the Act and Regulations; 

C. Admit the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

D. Waive: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 
10 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that they may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504, and 28 U.S.C. § 2412, and/or the rules promulgated by the 

Commission in conformity therewith, Part 148 of the Regulations, 17 C.F.R. 

pt. 148 (2021), relating to, or arising from, this proceeding; 

7. Any and all claims that they may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II, §§ 201–253, 110 

Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

E. Stipulate that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondents have consented in the Offer; 

F. Consent, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that Morgan Stanley & Co. LLC, Morgan 

Stanley Capital Services LLC (including as successor to Morgan Stanley Capital 

Products LLC), Morgan Stanley Capital Group Inc., and Morgan Stanley Bank, 

N.A. violated Sections 4s(f)(1)(C), 4s(g)(1) and (3), and 4s(h)(1)(B) of the Act, 7 

U.S.C. §§ 6s(f)(1)(C), 6s(g)(1), (3), 6s(h)(1)(B), and Regulations 1.31, 23.201(a), 

23.202(a)(1) and (b)(1), and 23.602(a), 17 C.F.R. §§ 1.31, 23.201(a), 23.202(a)(1), 

(b)(1), 23.602(a) (2021); and Morgan Stanley & Co. LLC violated Section 4g of 

the Act, 7 U.S.C. § 6g, and Regulations 1.35 and 166.3, 17 C.F.R. §§ 1.35, 166.3 

(2021); 

2. Orders Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC 

(including as successor to Morgan Stanley Capital Products LLC), Morgan Stanley 

Capital Group Inc., and Morgan Stanley Bank, N.A. to cease and desist from 

violating Sections 4s(f)(1)(C), 4s(g)(1) and (3), and 4s(h)(1)(B) of the Act, and 

Regulations 1.31, 23.201(a), 23.202(a)(1) and (b)(1), and 23.602(a); and Morgan 

Stanley & Co. LLC to cease and to cease and desist from violating Section 4g of 

the Act and Regulations 1.35 and 166.3; 

3. Orders Respondents to pay a civil monetary penalty in the amount of seventy-five 

million U.S. dollars ($75,000,000), plus post-judgment interest within fourteen 

days of the date of entry of this Order; and 
11 

4. Orders Respondents and their successors and assigns to comply with the conditions 

and undertakings consented to in the Offer and as set forth in Part VI of this Order; 

and 

G. Represent that Respondents have engaged in a review of certain recordkeeping failures 

and begun a program of remediation. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC (including as 

successor to Morgan Stanley Capital Products LLC), Morgan Stanley Capital Group Inc., 

and Morgan Stanley Bank, N.A. and their successors and assigns shall cease and desist 

from violating Sections 4s(f)(1)(C), 4s(g)(1) and (3), and 4s(h)(1)(B) of the Act, 7 U.S.C. 

§§ 6s(f)(1)(C), 6s(g)(1), (3), 6s(h)(1)(B), and Regulations 1.31, 23.201(a), 23.202(a)(1) 

and (b)(1), and 23.602(a), 17 C.F.R. §§ 1.31, 23.201(a), 23.202(a)(1), (b)(1), 23.602(a) 

(2021); and Morgan Stanley & Co. LLC and its successors and assigns shall cease and 

desist from violating Section 4g of the Act, 7 U.S.C. § 6g, and Regulations 1.35 and 

166.3, 17 C.F.R. §§ 1.35, 166.3 (2021). 

B. Respondents shall pay a civil monetary penalty in the amount of seventy-five million US 

dollars ($75,000,000) (“CMP Obligation”), within fourteen days of the date of the entry 

of this Order. If the CMP Obligation is not paid in full within fourteen days of the date of 

entry of this Order, then post-judgment interest shall accrue on the CMP Obligation 

beginning on the date of entry of this Order and shall be determined by using the 

Treasury Bill rate prevailing on the date of entry of this Order pursuant to 28 U.S.C. 

§ 1961. 

Respondents shall pay the CMP Obligation and any post-judgment interest by electronic 

funds transfer, U.S. postal money order, certified check, bank cashier’s check, or bank 

money order. If payment is to be made other than by electronic funds transfer, then the 

payment shall be made payable to the Commodity Futures Trading Commission and sent 

to the address below:

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

6500 S. MacArthur Blvd. 

HQ Room 266 

Oklahoma City, OK 73169 

9-AMC-AR-CFTC@faa.gov 

 If payment is to be made by electronic funds transfer, Morgan Stanley shall contact Tonia 

King or her successor at the above email address to receive payment instructions and 

shall fully comply with those instructions. Respondents shall accompany payment of the 

CMP Obligation with a cover letter that identifies the paying Respondent(s) and the name 
12 

and docket number of this proceeding. The paying Respondent(s) shall simultaneously 

transmit copies of the cover letter and the form of payment to the Chief Financial Officer, 

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, 

Washington, D.C. 20581; 

C. Respondents and their successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. Morgan Stanley shall conduct: 

a. A comprehensive review of Morgan Stanley’s supervisory, compliance, and 

other policies and procedures designed to ensure that Morgan Stanley’s 

electronic communications, including those found on personal electronic 

devices, including without limitation, cellular phones (“Personal Devices”), 

are preserved in accordance with the requirements of the Act, the Regulations, 

and Morgan Stanley’s policies and procedures. 

b. A comprehensive review of training conducted by Morgan Stanley to ensure 

personnel are complying with the requirements regarding the preservation of 

electronic communications, including those found on Personal Devices, in 

accordance with the requirements of the Act and the Regulations, and Morgan 

Stanley’s policies and procedures, including by ensuring that Morgan Stanley 

personnel certify in writing on a quarterly basis that they are complying with 

preservation requirements. 

c. An assessment of the surveillance program measures implemented by Morgan 

Stanley to ensure compliance, on an ongoing basis, with the requirements 

found in the Act, the Regulations, and Morgan Stanley’s policies and 

procedures to preserve electronic communications, including those found on 

Personal Devices. 

d. An assessment of the technological solutions that Morgan Stanley has begun 

implementing to meet the record retention requirements of the Act, the 

Regulations, and Morgan Stanley’s policies and procedures, including an 

assessment of the likelihood that Morgan Stanley personnel will use the 

technological solutions going forward and a review of the measures employed 

by Morgan Stanley to track employee usage of new technological solutions. 

e. An assessment of the measures used by Morgan Stanley to prevent the use of 

unauthorized communications methods for business communications by 

employees. This assessment should include, but not be limited to, a review of 

the firm’s policies and procedures to ascertain if they provide for any 

significant technology and/or behavioral restrictions that help prevent the risk 

of the use of unapproved communications methods on Personal Devices (e.g., 

trading floor restrictions). 
13 

f. A review of Morgan Stanley’s electronic communications surveillance 

routines to ensure that electronic communications through approved 

communications methods found on Personal Devices are incorporated into 

Morgan Stanley’s overall communications surveillance program. 

g. A comprehensive review of the framework adopted by Morgan Stanley to 

address instances of non-compliance by Morgan Stanley employees with 

Morgan Stanley’s policies and procedures concerning the use of Personal 

Devices to communicate about Morgan Stanley business in the past. This 

review shall include a survey of how Morgan Stanley determined which 

employees failed to comply with Morgan Stanley policies and procedures, the 

corrective action carried out, an evaluation of who violated policies and why, 

what penalties were imposed, and whether penalties were handed out 

consistently across business lines and seniority levels. 

2. Written Report of Findings: 

a. Within forty-five (45) days after completion of the review set forth in subparagraphs 1.a. through 1.g. above, Morgan Stanley shall submit a detailed 

written report of its findings to the Commission staff (the “Report”). The 

Report shall include a description of the review performed, the names of the 

individuals who performed the review, the conclusions reached, and a 

summary of the plan for implementing the recommended changes in or 

improvements to Morgan Stanley’s policies and procedures. 

b. Morgan Stanley shall adopt all recommendations contained in the Report 

within one hundred and thirty-five (135) days of the date of the Report. 

c. The Report will likely include confidential financial, proprietary, competitive 

business or commercial information. Public disclosure of the reports could 

discourage cooperation, impede pending or potential government 

investigations or undermine the objectives of the reporting requirement. For 

these reasons, among others, the reports and the contents thereof are intended 

to remain and shall remain non-public, except: (1) pursuant to court order; 

(2) as agreed to by the parties in writing; (3) to the extent that the Commission 

determines in its sole discretion that disclosure would be in furtherance of the 

Commission’s discharge of its duties and responsibilities; or (4) is otherwise 

required by law. 

3. One-Year Evaluation: Morgan Stanley shall assess its program for the preservation, 

as required under the Act, Regulations, and Morgan Stanley’s policies and 

procedures, of electronic communications, including those found on Personal 

Devices, commencing one year after submitting the Report required by Paragraph 2.a. 

above. Morgan Stanley shall require this review to evaluate Morgan Stanley’s 

progress in the areas described in Paragraph 1.a. through 1.g. above. After this 

review, Morgan Stanley shall submit a report (the “One Year Report”) to the 
14 

Commission staff and shall ensure that the One Year Report includes an updated 

assessment of Morgan Stanley’s policies and procedures with regard to the 

preservation of electronic communications (including those found on Personal 

Devices), training, surveillance programs, and technological solutions implemented in 

the prior year period. 

4. Reporting Discipline Imposed: For two years following the entry of this Order, 

Morgan Stanley shall notify the Commission staff as follows upon the imposition of 

any discipline imposed by Morgan Stanley, including, but not limited to, written 

warnings, loss of any pay, bonus, or incentive compensation, or the termination of 

employment, with respect to any employee found to have violated Morgan Stanley’s 

policies and procedures concerning the preservation of electronic communications, 

including those found on Personal Devices: (1) at least 48 hours before the filing of a 

Form 8-T; or (2) within ten (10) days of the imposition of other discipline. 

5. Recordkeeping: Morgan Stanley shall preserve, for a period of not less than six (6) 

years from the end of the fiscal year last used, the first two (2) years in an easily 

accessible place, any record of compliance with these undertakings. 

6. Public Statements: Respondents agree that neither they nor any of their successors 

and assigns, agents or employees under their authority or control shall take any action 

or make any public statement denying, directly or indirectly, any findings or 

conclusions in this Order or creating, or tending to create, the impression that this 

Order is without a factual basis; provided, however, that nothing in this provision 

shall affect Respondents’: (1) testimonial obligations; or (2) right to take legal 

positions in other proceedings to which the Commission is not a party. Respondents 

and their successors and assigns shall comply with this agreement, and shall 

undertake all steps necessary to ensure that all of its agents and/or employees under 

their authority or control understand and comply with this agreement. 

7. Cooperation, in General: Respondents shall cooperate fully and expeditiously with 

the Commission, including the Commission’s Division of Enforcement, in this action, 

and in any current or future Commission investigation or action related thereto. 

Respondents shall also cooperate in any investigation, civil litigation, or 

administrative matter related to, or arising from, the subject matter of this action. 

8. Partial Satisfaction: Respondents understand and agree that any acceptance by the 

Commission of any partial payment of Respondents’ CMP Obligation shall not be 

deemed a waiver of their obligation to make further payments pursuant to this Order, 

or a waiver of the Commission’s right to seek to compel payment of any remaining 

balance. 

9. Deadlines: For good cause shown, Division staff may extend any of the procedural 

dates relating to the undertakings. Unless otherwise specified, deadlines for 

procedural dates shall be counted in calendar days, except that if the last day falls on 
15 

a weekend or federal holiday, the next business day shall be considered to be the last 

day. 

10. Change of Address/Phone: Until such time as Respondents satisfy in full their CMP

Obligation as set forth in this Order, Respondents shall provide written notice to the

Commission by certified mail of any change to their telephone numbers and mailing

addresses within ten calendar days of the change.

The provisions of this Order shall be effective as of this date. 

By the Commission. 

_________________________________ 

Robert N. Sidman 

Deputy Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: September 27, 2022