Morgan Stanley was fined $5 million by the Financial Industry Regulatory Authority for sales practices involving initial public offerings to individual investors, including that of Facebook Inc.

Morgan Stanley’s brokerage, the world’s largest by number of advisors, didn’t distinguish in its policy between a client’s indication of interest in an IPO and a conditional request to buy, the industry-funded watchdog group said today in a statement. The New York-based firm also failed to monitor compliance with the policy, Finra said.

The fine highlights the potential pitfalls as Morgan Stanley uses the size of its retail brokerage, with more than $1.9 trillion in client assets, to boost its equity-underwriting business. It was the top issuer of global IPOs from February 2012 to May 2013, the time period the fine covers.

“Customers must understand when they are entering a contract to buy shares in an IPO,” Brad Bennett, Finra’s chief of enforcement, said in the statement. “There must not be ambiguity regarding the customer’s obligations given the significant legal differences between an indication of interest and a conditional offer to buy.”

Brokers often gauge clients’ interest in IPOs before the offering’s registration. Indications of interest have to be reconfirmed before becoming binding orders, while conditional orders can be filled if they aren’t canceled.

Yelp IPO

Morgan Stanley’s unclear policy and lack of training may have resulted in the firm’s staff and customers being unsure about the type of commitments made in 83 IPOs over the 15 months, according to Finra.

The company neither admitted nor denied the charges, while consenting to the entry of Finra’s findings.

“Morgan Stanley Wealth Management is committed to offering our clients participation in initial public offerings in accordance with applicable Finra rules and we have enhanced our practices on this point,” Jim Wiggins, a bank spokesman, said in an e-mailed statement.

Facebook became the largest technology IPO when it raised $16 billion in May 2012. The underwriters split about $176 million in fees, and Morgan Stanley handled about 39 percent of the shares. Today’s fine also covered Yelp Inc.’s March 2012 IPO, which raised $107.3 million.