Following this announcement, Morgan Stanley will pay the fee in order to end years-long criminal and civil investigations into its handling of large stock trades for clients and customers. The settlements that were made with the Department of Justice and Securities and Exchange Commission are expected to resolve charges of deception, fraud, and compliance failures over so-called block trades.
At the same time, the enterprises will also end a longstanding legal worry represented by the Wall Street bank, which entered a three-year nonprosecution agreement, while also not facing criminal charges.
Block trades are given the possibility to stock prices because of their size. Hedge funds and other investors who know about such trades will have the possibility to make money and funds by placing their own trades in anticipation. According to Reuters, despite its promise to keep the information confidential, two traders passed information about impending block trades to various investors and customers. This process is expected to provide Morgan Stanley the opportunity to reduce its risks when purchasing the trades, with businesses and companies, while also generating more than USD 100 million of illegal profit.
Morgan Stanley admitted to making false statements in connection with block trades, from the period of 2018 through August of 2021. The USD 249.4 million payment includes multiple fines, restitution, and the overall forfeiture of ill-gotten gains and funds.
The Justice Department agreed to hold off the prosecuting process of the former head of Morgan Stanley’s US-based equity syndicate desk, who entered a deferred prosecution agreement in the past and admitted its wrongdoing. He was charged with one count of securities fraud, which was set to be dropped after six months if he complied with his deferred prosecution agreement. He pleaded not guilty in federal court, as he admitted to promising sellers of large blocks of stock that he would keep details about the sale confidential.
The bank and authorities had been in talks since last May in order to resolve the probe. The authorities expected that a second employee of the company (who was not identified and not charged) also worked on the equity syndicate desk.
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