(Reuters) -Massachusetts securities regulators have fined Morgan Stanley $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 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 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 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 will have to review its policies to include measures that increase the level of scrutiny of sales by officers in public companies.

(Reporting by Chris Prentice in New York and Manya Saini in Bengaluru; Editing by Shilpi Majumdar and Jonathan Oatis)