More e-mail trouble for Morgan Stanley.

Morgan Stanley continues to pay for withholding e-mails that it claimed were lost during 9/11.

In late September 2007, the securities firm agreed to pay $12.5 million to settle charges that it lied to arbitration claimants and regulators, telling them on several occasions that e-mails they requested had been destroyed in the 9/11 terrorist attacks on New York's World Trade Center.

According to media sources, the settlement with the Financial Industry Regulatory Authority (FINRA, formerly NASD) included a $3 million fine. Morgan Stanley also agreed to establish a $9.5 million fund to pay several thou sand eligible arbitration claimants for failing to provide the e-mails and for failing to provide some claimants with updates to a supervisory manual during discovery. The securities firm did not admit wrongdoing.

In October, regulators fined Morgan Stanley another $7.5 million to settle separate, unrelated charges that over a five-year period (2000-2005) it provided customers with insufficient written trade confirmations for municipal securities and bonds. The Securities and Exchange Commission also ordered Morgan Stanley to retain an independent consultant to review its policies and procedures.

The problems began after the firm's New York City e-mail servers were destroyed in the 9/11 attacks. Millions of e-mails were presumed lost, but it was later revealed they had been backed up on other servers or on individual employee computers.

According to FINRA documents, however, Morgan Stanley falsely maintained to arbitration claimants and regulators until March 2005 that it had no e-mails predating October 2001. But according to the documents, prior to March 2005, Morgan Stanley had not searched its restored e-mails. Until that date, it had deleted millions of e-mails by overwriting or deleting backup files.