The New York Stock Exchange’s regulatory arm is flexing its muscle, hoping to squeeze confessions out of Wall Street firms that failed to deliver prospectuses to customers.

As reported in The Wall Street Journal Nov. 16, the NYSE enforcement division has given Wall Street firms until Friday, Nov. 19, to fess up to any sales made without first sending out a prospectus. According to the Journal report, Susan Merrill, chief of enforcement, sent letters out directly to the CEOs of many firms back in October stating: “If your review has uncovered instances where prospectuses were not delivered, we request that you inform us of the details surrounding the matter, including any systems problems or other circumstances that caused disruption of delivery.”

The letters are part of a continuing investigation into lapses in this area among many firms on Wall Street. In September, Morgan Stanley was hit with a $19 million fine—the largest fine the NYSE has ever meted out—for prospectus violations and other alleged operational and supervisory failings. Negotiations between the NYSE and the firm over details of the settlement have not yet concluded, according to firm documents, but a source close to the matter expects them to be “finalized soon.”

However, Morgan Stanley is not the only firm in hot water. A source familiar with the NYSE investigation says some but not all of the wirehouses have received letters, and at least one other firm has been found negligent in the delivery of prospectuses to clients. No wirehouse firms contacted for this article wished to comment on the matter.

If more firms are implicated, the potential costs could be huge. Firms may have to offer to reimburse investors holding investments—for which they didn’t receive a prospectus—the full amount invested plus interest. If the customer sold them for a loss, the firm is obligated to compensate the investor.

Morgan Stanley stated in its Form 10-Q that its “aggregate expected costs related to the prospectus delivery matter” were approximately $95 million. This represents the firm’s “best estimate” of the total cost of individual settlements plus the exchange’s fine. Even if all customers brought claims, which the firm “does not believe is probable,” the costs should not exceed $150 million, says Morgan Stanley.

The regulatory counsel of one Wall Street firm suggested there will be a wave of unhappy investors hoping to make a few bucks back from firms that become entangled in this. “It’s going to be tough, but I guarantee someone who bought Google isn’t going to come complaining that they didn’t get a prospectus,” he says. One UBS broker put it another way: “The system wouldn’t work if everyone sat down and read these darn things from cover to cover. Things move too fast, and people need interpreters to understand them anyway.”

The investigation strikes many as an attempt by the exchange to shake off an image of complacency in regard to regulation. Indeed, Richard Ketchum, new regulation head, exists independently of the exchange’s business officials and reports to a committee of the NYSE board, not CEO John Thain. This new governance structure has been lauded as a step in the right direction, according to another source familiar with the NYSE, who says, “In the past, the old regime liked to use regulation as a branding tool. Not anymore.”