Nasdaq Stockholm issues warning to Morgan Stanley

Stockholm, December 5, 2017 — The Disciplinary Committee of Nasdaq Stockholm has found that Morgan Stanley & Co. International Plc (“Morgan Stanley” or the “Member”) has breached the Nasdaq Nordic Member Rules ver. 3.1, December 1, 2016 (“NMR”) and has therefore issued a warning to the Member.

Morgan Stanley incurred losses in February 2017 through two transactions in two certificates due to technical problems in its systems. Morgan Stanley was aware that its counterparty in these two transactions held long positions in the instruments, and when the Member temporarily requested what is known as a “Sold Out Buy Back” status (“SOBB”)* for the instruments, the counterparty’s only way of exiting from its positions in the certificates was to sell them back to Morgan Stanley at a price determined by the Member itself.

The prices for the two certificates during the period subsequent to the introduction of SOBB status were markedly lower than in preceding periods when normal trading conditions were in effect. No changes in the price of the underlying assets or other relevant factors could explain this. For its own part, Morgan Stanley has stated that the changed pricing was due to the technical problems experienced by the Member.

According to the Disciplinary Committee, Morgan Stanley has not been able to demonstrate that the reduction in the prices could be considered to reflect prevailing market values, and the Disciplinary Committee has concluded that Morgan Stanley’s actions constituted a serious breach of items 4.6.1 and 4.6.2 of the NMR. The Committee also concludes that there were shortcomings in the communication from Nasdaq Stockholm, which is why, despite the severity of the breaches, the sanction is limited to a warning.

A detailed description of the matter and the Disciplinary Committee’s decision is available at:

http://www.nasdaqomx.com/listing/europe/surveillance/stockholm/disciplinarycommittee/decisions/

Participating in the Committee’s ruling were Former Supreme Court Justice Marianne Lundius, Company Director Stefan Erneholm, Company Director Carl Johan Högbom, Company Director Jack Junel, and Lawyer Wilhelm Lüning.

*Sold Out Buy Back is a tool intended to be used by liquidity guarantors when the volumes of the issued financial instruments of an issuer are depleted. The issuer must contact Nasdaq Stockholm to use the function and request that the order book in question is assigned SOBB status. The order book is then cleared and a prefix is issued to the market.

About the Disciplinary Committee
The role of Nasdaq Stockholm’s Disciplinary Committee is to consider suspicions regarding whether Exchange Members or listed companies have breached the rules and regulations applying on the Exchange. If the Exchange suspects that a member or company has acted in breach of the rules, the matter is referred to the Disciplinary Committee. The Exchange investigates and pursues the matter, and the Disciplinary Committee assesses the case and makes decisions regarding possible sanctions. The sanctions imposed on a listed company include a warning, a fine or delisting. The fines levied range from one to 15 annual fees. The possible sanctions for Members are a warning, a fine or expulsion. The monetary penalties levied by the Committee are not included in the Exchange’s transactions, but support a foundation that carries out research on the securities market. The Disciplinary Committee’s Chairman and Deputy Chairman must be lawyers who have served as judges. At least two of the other members must be well-acquainted with conditions on the securities market.

Members: Former Supreme Court Justice Marianne Lundius (Chairman), Supreme Court Justice Ann-Christine Lindeblad (Deputy Chairman), Company Director Stefan Erneholm, Company Director Anders Oscarsson, Lawyer Wilhelm Lüning, Company Director Jack Junel, MBA Ragnar Boman, MBA Carl Johan Högbom, Lawyer Patrik Marcelius, Authorized Public Accountant Magnus Svensson Henryson and Authorized Public Accountant Svante Forsberg.

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