Morgan Stanley has received a £1.4m fine from the FSA after a trader mis-stated positions worth $12m.
The trader involved was also banned from performing any function in relation to regulated activities and received a personal fine of £105,000.
The FSA says Morgan Stanley failed to put in place adequate supervision to prevent Matthew Sebastian Piper from mis-marking certain positions.
Piper failed to accurately price certain positions in illiquid financial products, resulting in Morgan Stanley making a $120m negative adjustment in June 2008.
The FSA says the firm's systems and controls were inadequate, and it failed to prevent or detect Piper's mis-marking in a timely manner.
Piper was found to have deliberately mis-marked the positions and tried to hide the losses by manipulating the firm's monitoring processes.
Margaret Cole, director of enforcement at the FSA, says: "Piper has been banned because his misconduct was deliberate, frequent and repeated over a six-month period. He was a senior and experienced trader who held a position of trust at the firm. This was clearly a serious breach of the standards of behaviour we expect of approved persons.
"Firms must take care to allocate sufficient resources to supervise adequately those activities that they choose to undertake. Where a firm fails to act accordingly the FSA will take action against the firm."
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