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KAI RYSSDAL: My what a week it's been for Morgan Stanley. Yesterday the investment bank said its profits jumped more than 50 percent in the fourth quarter. Today, the news isn't quite so rosy. Regulators are accusing Morgan Stanley of repeatedly withholding e-mail from clients who've brought complaints against the firm. The National Association of Securities Dealers says the e-mails might have helped some customers make their cases. But Marketplace's Amy Scott reports it's the excuse the company used that's really got people mad.

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AMY SCOTT: On Wall Street, customer complaints are usually settled through arbitration. The industry's self-regulator, the NASD, says that for several years Morgan Stanley routinely failed to produce e-mail messages related to those cases. The firm claimed the messages had been destroyed in the World Trade Center attacks five years ago. But NASD's enforcement director James Shorris says that's not true.

JAMES SHORRIS: As it turns out, after September 11th, the following Monday, September 17th, the firm using back-up tapes, the firm had restored the e-mail to all of their employees' computers.

Shorris says investors filed 1,200 complaints against Morgan Stanley during the period in question. And many of those cases might have turned on the missing e-mails. Rather than impose a fine, the NASD may ask Morgan Stanley to compensate investors involved in those cases. Attorney Jake Zamansky says dozens of his clients may be owed restitution.

JAKE ZAMANSKY: From September of 2001 straight through to the present, we've requested e-mails, we were given responses that they didn't exist. And it may create a big problem for Morgan Stanley regarding our cases.

In a statement, Morgan Stanley said it tried to settle with the NASD, but that its demands were, quote, "disproportionate and unprecedented." The company declined an interview. But a person familiar with the case says regulators essentially asked Morgan to reopen those 1,200 arbitration cases, and make payments the firm couldn't live with.

In New York, I'm Amy Scott for Marketplace.