Morgan Stanley May Pay Up to $1 Billion to Resolve US Probe into Private Stock Sales

Morgan Stanley is reportedly in negotiations to settle a prolonged U.S. investigation into its handling of private stock sales. The bank may pay between $500 million and $1 billion to resolve the matter, according to sources familiar with the situation. As part of the potential settlement with the Department of Justice and the U.S. Securities and Exchange Commission (SEC), the bank may agree to strengthen its internal controls. However, it is unlikely to plead guilty to any crime, and individuals are not expected to face criminal charges.

Both Morgan Stanley and the Manhattan U.S. Attorney's office, as well as the SEC, have refrained from commenting on the matter, citing their policies of neither confirming nor denying investigations.

A successful settlement would bring an end to a protracted legal issue for the Wall Street institution. CEO James Gorman is poised to hand over the reins to Ted Pick next year, with a commitment to continue serving as executive chairman to address the block trading investigation.

Earlier this year, Morgan Stanley disclosed its cooperation with U.S. regulators regarding investigations into its block-trading practices and provided relevant information to the authorities.

An individual familiar with the matter noted that the bank's upcoming quarterly earnings filing would contain similar language to its previous filings regarding the block trading probe. However, it would not include any estimates of potential fines, as the source preferred to remain anonymous when discussing regulatory affairs.

Block trades involve single orders for substantial trades, typically initiated by institutional investors. Broker-dealers execute these orders in small portions over time to avoid causing significant price movements.