Morgan Stanley discloses US probe into its block-trading business

[NEW YORK] Morgan Stanley said US regulators and prosecutors are investigating various aspects of its block-trading business, acknowledging the firm itself is under scrutiny as authorities dig into how Wall Street bankers and money managers carry out stock transactions big enough to move prices.

The New York-based investment bank has been responding since August to requests for information from the US Attorney's Office for the Southern District of New York, the company said in a regulatory filing Thursday (Feb 24). It's also been fielding requests from the US Securities and Exchange Commission since June 2019, the firm said, noting that it's cooperating.

US investigators have been gathering communications involving employees at a number of banks, as well as outside money managers known to acquire slugs of stock in confidential offerings, Bloomberg reported last week. As part of the probe, authorities are trying to determine whether any banks' dealmakers improperly tipped off investors to transactions big enough to move share prices.

Morgan Stanley overtook Goldman Sachs Group in recent years to become the biggest block trader in the industry. Authorities have sought information pertaining to several of its managers, people familiar with the matter have said, and in November the firm put a key executive involved in communicating with clients on block trades on leave.

No one has been accused of wrongdoing, and the opening of a probe doesn't necessarily mean that civil or criminal charges will follow. BLOOMBERG