Sept 6 (Reuters) - Massachusetts securities regulators

have fined Morgan Stanley ( MS ) $2 million for failing to

properly monitor trades by a First Republic Bank insider before

the bank failed, according to a spokesperson for the regulator

and a consent order disclosed on Friday.

Morgan Stanley ( MS ) held the account for a former insider at

First Republic, and failed to affirm with the customer that the

individual was not trading based on material nonpublic

information at the time, the spokesperson said. The settlement

was first reported by the Wall Street Journal.

The consent order said Morgan Stanley ( MS ) proposed a settlement

on Sept. 3 without admitting or denying wrongdoing. A

spokesperson for the bank said the firm was pleased to have

resolved the matter.

The Secretary of the Commonwealth of Massachusetts's

resolution with the bank does not name the insider, but the Wall

Street Journal named the individual as James Herbert II, the

then-executive chairman of First Republic.

Massachusetts regulators did not name Herbert as a

respondent in the matter, the spokesperson said. He could not be

reached immediately for comment.

Galvin in March 2023 said his office had opened a probe into

stock sales by First Republic insiders, subpoenaing the company

for information about the bank's insider trading policies and

how officers handled their stocks sales that year.

The First Republic stock sales were handled by a Morgan

Stanley ( MS ) managing director based in California, according to the

consent order released by the regulator.

In early 2023, a series of U.S. bank failures roiled the

global banking sector. Sales by executives amid the turmoil

prompted scrutiny from regulators.

In addition to the fine, Morgan Stanley ( MS ) will have to review

its policies to include measures that increase the level of

scrutiny of sales by officers in public companies.