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Morgan Stanley (NYSE:MS) has agreed to pay $249M to resolve a long-running investigation into allegations that some of its staff mishandled information about private stock sales, the Securities and Exchange Commission said in a statement Friday.
The SEC charged the Wall Street bank and the former head of its equity syndicate desk, Pawan Passi, with fraud involving the disclosure of confidential information about the sale of block trades. The regulator also charged Morgan Stanley (MS) with failing to enforce its policies concerning the misuse of material non-public information tied to block trades.
Block trades involve large shareholders who seek to sell a large quantity of shares of an issuer’s stock at once.
“Despite assuring selling shareholders that they would keep their efforts to sell large blocks of stock confidential, Morgan Stanley and Pawan Passi instead leaked that material non-public information to mitigate their own risk, win more block trade business, and generate over a hundred million dollars in illicit profits,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The SEC ordered Morgan Stanley (MS) to pay about $28M in prejudgment interest, as well as an $83M civil penalty. At the same time, the agency ordered Passi to pay a $250K civil penalty, in addition to imposing associational, penny stock, and supervisory bars.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal resolutions with Morgan Stanley and Passi. The SEC’s ordered disgorgement and prejudgment interest for Morgan Stanley will be deemed partially satisfied by the forfeiture and restitution paid by the firm, which totals $136.5M, pursuant to its criminal resolution.
