Morgan Stanley in talks to resolve block trading probes

Morgan Stanley is in talks with US authorities about settling federal investigations into its block buying and selling enterprise, the Wall Avenue funding financial institution disclosed on Tuesday.

The investigations by the Securities and Trade Fee and the US legal professional’s workplace in Manhattan into the dealing with of block trades — a strategy to promote bulk volumes of inventory — by Morgan Stanley’s buying and selling desk are among the many most vital authorized probes the financial institution has confronted in recent times.

In its quarterly 10-Okay regulatory submitting on Tuesday, Morgan Stanley mentioned it was “engaged in discussions relating to potential decision of the investigations” by the US legal professional’s workplace for the Southern District of New York and the SEC into its block buying and selling enterprise.

The financial institution cautioned that there was no assurance {that a} decision can be reached.

The investigations got here to mild in early 2022 after Morgan Stanley positioned one in every of its high executives on its US fairness syndicate desk on go away.

Block trades are bulk gross sales of shares executed by an funding financial institution, usually for a consumer, which are usually sufficiently big to maneuver markets. For years, Morgan Stanley has earned extra charges from block trades than its Wall Avenue friends.

Huge banks dealing with block trades will usually attain out to buyers corresponding to hedge funds to gauge curiosity in potential share gross sales. The opaque apply has lengthy attracted scrutiny as a consequence of sure suspect share worth actions earlier than some block trades come to market.

US authorities are investigating whether or not buyers obtained advance warning of any trades. The SEC has additionally sought info from different banks pertaining to their communication with a variety of patrons, together with hedge funds.

Morgan Stanley had beforehand ordered an inner lawyer to shadow its US fairness syndicate desk, the Monetary Instances has reported, underscoring the gravity of the probe and the steps the lender is taking to beef up supervision.

Along with the US authorities investigations, Morgan Stanley has additionally warned it faces potential civil legal responsibility from investor lawsuits over allegations the financial institution triggered share costs to fall earlier than executing block trades.


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