Morgan Stanley Agrees $249 Million Settlement For Fraud Charges By The SEC
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The U.S. Securities and Exchange Commission (SEC) has slammed a $259 million fine on Morgan Stanley for the company’s failure to adhere to strict guidelines on its block trading practices. According to the SEC, Morgan Stanley failed to enforce information barriers in its block trading services.
The probe started last year after the SEC discovered a non-disclosure of confidential information by Morgan Stanley and Pawan Passi, the company’s head of the equity syndicate desk.
The SEC Says Stanley Morgan Broke Non-Disclosure Agreement
Morgan Stanley did not deny making false representations for trades between 2018 and 2021. However, it reiterated that it has adjusted its statements and created more explicit policies since then.
Apart from its agreement to pay the fine, Stanley Morgan has also accepted restitution for all ill-gotten gains and payment of penalty charges to both agencies.
In line with the company’s decision, the Justice Department has also held back its prosecution of Pawan Passi, who admitted his misconduct from 2018 to 2021.
Gary Gensler, SEC’s Chair, stated that the seller trusted Passi and Stanley Morgan with confidential information about upcoming block trades that shouldn’t be disclosed to the public. The sellers were assured that the information would be kept confidential. However, while leaking the info, Passi and Stanley Morgan broke that agreement by using the same information to gain more financial grounds. Their actions violated the federal security laws even when they earned millions of dollars from such an arrangement.
The Director of the Division of Enforcement at SEC, Gurbir Grewal, stated that Pawan Passi and Morgan Stanley tried to mitigate their risks by leaking confidential information. This is after they have assured shareholders and investors that they would keep their plans to sell large blocks of stock confidential.
The SEC Is Committed To Protecting The Interests Of Investors
Grewal noted that their actions enabled them to reduce their risks and acquire more block trading businesses, leading to more illicit profits in millions of dollars.
Grewal said the SEC is committed to protecting the interests of investors and the general public’s interests from unscrupulous market practices.
The fraud charges against Stanley Morgan indicate that the regulator is committed to holding offenders liable for their actions. The SEC will continue to hold lawbreakers in the market accountable, irrespective of the sophistication of the perpetrators of the fraud complication.
