Morgan Stanley’s Deceptive Practices Exposed in New York
Morgan Stanley & Co. LLC, one of the world’s largest financial institutions, has agreed to pay $153 million in fines for engaging in deceptive practices in its block trades business. The company has entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York, admitting to making false statements in connection with the sale of certain ‘block trades’ from 2018 through August 2021.
The investigation, led by U.S. Attorney Damian Williams and Assistant Director in Charge of the New York Field Office of the FBI James Smith, uncovered a scheme in which Morgan Stanley’s employees, including Pawan Passi, the former head of the company’s U.S. Equity Syndicate Desk, deceived block sellers by promising confidentiality knowing that they would turn around and share that information with others to use to trade.
As part of the agreement, Morgan Stanley will forfeit $72,515,141 to the United States, representing its profits from the Relevant Blocks, pay $64,016,082 in restitution, representing the harm it caused to the sellers of the Relevant Blocks, and pay a $16,900,000 fine. The non-prosecution agreement requires Morgan Stanley to continue to cooperate with and provide information to the United States for at least three years from the date of the agreement.
Pawan Passi, the former head of Morgan Stanley’s U.S. Equity Syndicate Desk, has also entered into a deferred prosecution agreement with the U.S. Attorney’s Office, pending court approval. In the agreement, Passi admitted to promising sellers of certain equity blocks that Morgan Stanley would keep information concerning their potential sales confidential, knowing that he would disclose that information to buy-side investors and that those investors would use the information to trade in advance of the block sales.
The case has been assigned to U.S. District Judge Analisa Torres, and a court appearance has been scheduled before U.S. Magistrate Judge Robyn F. Tarnofsky today at 11:00 a.m. U.S. Attorney Williams said, ‘Morgan Stanley, through the supervisor of its block trades business, Pawan Passi, deceived block sellers by promising confidentiality knowing that they would turn around and share that information with others to use to trade. This fact serves as a reminder that we are watching. And we will continue to hold accountable those who engage in such deceptive practices.’
The investigation into Morgan Stanley’s deceptive practices is a reminder that the U.S. Attorney’s Office is committed to holding accountable those who engage in such practices. The non-prosecution agreement with Morgan Stanley is a significant step in this effort, and serves as a warning to other financial institutions that engage in similar practices.
As the investigation continues, it is clear that Morgan Stanley’s deceptive practices have had a significant impact on the financial markets. The company’s admission to making false statements in connection with the sale of certain ‘block trades’ is a serious offense, and the fines imposed by the U.S. Attorney’s Office are a significant step in holding the company accountable.
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Key Facts
- State: New York
- Category: Financial Crimes
- Source: DOJ Press Release â†â€â€
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