He has been in his post for less than two weeks, but Morgan Stanley’s new chief executive Ted Pick can already reflect on the removal of a regulatory overhang that had dogged the firm for the last couple of years.
On Friday, as some of the biggest US banks were busy reporting their 2023 full-year earnings, the Securities and Exchanges Commission (SEC) and the US Attorney for the Southern District of New York – on behalf of the US Department of Justice – announced the end of an investigation into Morgan Stanley’s equity block trading business with the firm agreeing to pay about $250 million to settle charges of fraud and for failing to ensure that private-side information did not leak into the public side of the bank.
The charges described a pattern of behaviour between 2018 and 2021 whereby the bank’s former US head of equity syndicate, Pawan Passi, and one unnamed subordinate would routinely leak details of upcoming block trades to buy-side contacts in expectation of them shorting the stocks in the market and then covering those shorts via allocations from Morgan Stanley if it were to be leading the deals.
It has been an embarrassing affair for the bank – and threatened to be so for Pick too, given his background in equity capital markets.
