FINRA charged Morgan Stanley & Co. Inc. and Morgan Stanley Smith Barney LLC with charging customers excessive markups and markdowns fixed income transactions.  FINRA found that the firms had charged MU's and MD's ranging from just under 5% to 13.8% on corporate and municipal bond transactions - higher than warranted given the usual factors, including market conditions, cost of execution, and value of services rendered. The firms agreed to pay a $1mn fine and $371K in disgorgement to customers.  According to EVP Tom Gira in Market Regulation, "Morgan Stanley clearly violated fair pricing standards and FINRA will continue to require firms that violate such standards to make their customers whole" - even in cases where markups or markdowns were under 5%. The sanctions pertain to violations that took place from 2003 through 2010. 5% is Not a Bright Line. That last point was emphasized by a FINRA finding that Morgan Stanley's supervisory reports for corporate and municipal bond transactions in customer accounts were not designed to include MUs/MDs that were below 5%, but nonetheless may have been excessive. Before August 2009, Morgan Stanley's pols and procedures considered only one of 2 charges that the firm added to the price of a bond when it determined whether a MU or MD was fair and reasonable.  The firms also were ordered to revise its WSPs regarding such supervisory reviews. For further details, go to:   [FINRA News Release, 11/10/11]   and  [FINRA AWC #20060056031-01]