Morgan Stanley last week agreed to pay $15 million to settle a civil action brought by the US Securities and Exchange Commission for failing to produce tens of thousands of emails requested during SEC investigations from 2000 to 2005.
William Malcolm, a data protection specialist with Pinsent Masons, the law firm behind OUT-LAW.COM says other firms – including those in the UK – should treat this as a wake-up call for good records management.
The SEC claimed that Morgan Stanley "did not diligently search for back-up tapes containing responsive emails until 2005." It also failed to produce responsive emails because it over-wrote back-up tapes, destroying at least 200,000 emails, according to the allegations.
The complaint further alleged that Morgan Stanley made numerous misstatements regarding the status and completeness of its productions; the unavailability of certain documents; and its efforts to preserve requested email. The Commission charged Morgan Stanley with violating the provisions of the federal securities laws requiring Morgan Stanley, a regulated broker-dealer, to timely produce its records and documents to the SEC.
"Morgan Stanley's repeated production failures and misstatements prejudiced two major investigations," said Antonia Chion, Associate Director of the SEC's Enforcement Division. "This settlement will require Morgan Stanley to put into place reforms to prevent similar misconduct from recurring."
Morgan Stanley has neither admitted nor denied the allegations. In addition to the payment, the firm has agreed to adopt new staff training procedures on email preservation.
"Good records management and data retention policies are now key corporate governance issues," said William Malcolm. "The range of legal and commercial drivers that impact on retention issues for the public and private sector alike is growing almost daily."
He warned companies to learn from the Morgan Stanley experience.
"Information, or the lack of it, can be an asset or a liability," said Malcolm. "If you do not know what you hold or how long you should hold it then you are running a bit of lottery."