Massachusetts regulators fine Morgan Stanley for insider sales at First Republic, spokeswoman told Reuters

(Reuters) – Massachusetts securities regulators fined Morgan Stanley $2 million for failing to properly monitor trades by a First Bank of the Republic (OTC:) from the inside before the bank failed, a spokesman for the regulator said Friday.

Morgan Stanley held a former insider’s account at First Republic and did not confirm with the client that the person was not trading on material non-public information at the time, the spokesman said. The settlement was first reported by the Wall Street Journal.

A Morgan Stanley spokesman said the firm was pleased to have resolved the issue.

The Massachusetts Commonwealth Secretary’s filing with the bank does not name the insider, but the Wall Street Journal named the person James Herbert II, then First Republic’s executive chairman.

Massachusetts regulators have not accused Herbert of wrongdoing in the investigation, the spokesman said. He could not immediately be reached for comment.

Morgan Stanley neither admitted nor denied wrongdoing, according to the Journal.