“Securities and Exchange Commission Chairman William Donaldson lashed out at the head of Morgan Stanley for comments that seemed to play down SEC charges that the securities firm had misled investors with stock research,” writes Deborah Solomon in today’s Wall Street Journal.

“In a strongly worded letter suggesting regulators won’t tolerate a business-as-usual attitude about the faulty-research scandal, Mr. Donaldson said statements by Morgan Stanley Chairman Philip Purcell ‘reflect a disturbing and misguided perspective” on Morgan’s alleged misconduct.”

“The National Association of Securities Dealers, which oversees the sales practices of brokers, also wrote Mr. Purcell about his remarks.”

“Mr. Purcell Thursday backed away from his previous statements.”

“On Monday, Morgan Stanley agreed to pay $125 million to settle charges that it misled investors with tainted research as part of a $1.4 billion global settlement with the nine other Wall Street firms.”

“Morgan Stanley, which didn’t admit or deny any wrongdoing, was accused by regulators of paying other firms to provide research coverage; compensating analysts based in part on the amount of investment-banking business they brought in; and not preventing conflicts.”

“On Tuesday, Mr. Purcell told a conference of institutional investors that he didn’t see anything in the settlement that would concern the retail investor about Morgan Stanley. When asked about the payments for research, Mr. Purcell said his firm simply passed the money on to other firms and had no involvement in the research.”

“Mr. Donaldson fired back on Wednesday, telling Mr. Purcell that in light of the charges against Morgan Stanley, ‘your reported comments evidence a troubling lack of contrition and lead me to wonder about Morgan Stanley’s commitment to compliance with the letter and spirit of the law.’ “

“He also cautioned Mr. Purcell to not deny the SEC’s allegations, saying that it would be seen as a breach of the settlement.”