HomeBusinessMorgan Stanley Stock Plunges as Regulators Open Investigation into the Asset Arm

Morgan Stanley Stock Plunges as Regulators Open Investigation into the Asset Arm

Shares of Morgan Stanley plunged Thursday after the Wall Street Journal reported that the bank’s wealth arm is facing multiple federal investigations into its customer due diligence practices and potential money laundering risks.




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The Securities and Exchange Commission, the Office of the Comptroller of the Monetary Fund and Treasury Department officials are involved in the investigation, the WSJ reported, citing unnamed sources. The latest round of research comes after the Federal Reserve launched a similar investigation in November.

Regulators are investigating whether Morgan Stanley properly vetted potential clients and their sources of wealth, and how they monitored their financial activities.

Some research concerns Morgan Stanley’s international clients. The SEC last year sent Morgan Stanley a list of current and former clients who questioned the bank’s vetting process. One listed client is a billionaire with ties to Russia, which has been sanctioned by Britain. Other clients were cut off from E-Trade, Morgan Stanley’s trading platform, due to red flags, but still managed to do business with the financial advisor unit. according to the WSJ.

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The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) also provided a list of client names to Morgan Stanley. The bank also received an administrative subpoena from the Treasury Department’s Office of Foreign Assets Control for information about its sanctions policies and procedures.

Morgan Stanley has worked to address the problems by investing in compliance, technology and artificial intelligence to better analyze cash flows associated with its wealth business, the WSJ reported.

Still, the Fed told Morgan Stanley it is considering supervisory measures.

Morgan Stanley stock performance

MS shares fell 5.7% on Thursday. The stock has gone through multiple consolidations and has been unable to reach new highs since February 2022. Morgan Stanley retreated 5.9% this year.

The bank will report its first quarter results early April 16. JPMorgan (JPM), Wells Fargo (WFC) and BlackRock kick off the results early on Friday.

You can follow Harrison Miller for more stock market news and updates on X/Twitter @IBD_Harrison

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