Morgan Stanley said it was cooperating with U.S. regulators over investigations into its block-trading practices and providing authorities with information, according to a filing on Friday.
The Wall Street firm added it could face civil claims from market participants who said they were harmed by the company's practices. Block trades are single orders for large trades, typically placed by institutional investors. Morgan Stanley said it has been responding to subpoenas and other requests for information from the U.S. Attorney's Office for the Southern District of New York and the enforcement division of the Securities and Exchange Commission. The authorities did not immediately respond to requests for comment. "The investigations are focused on whether the firm and/or its employees shared and/or used information regarding impending block transactions in violation of federal securities laws and regulations," the company said.
The bank said it has also has responded to demands from shareholders for records concerning the investigations.
The company also provided an update on a class action
lawsuit brought by investors.
On Feb. 6, a New York state judge refused to dismiss a
proposed class action against Morgan Stanley and other
underwriters that helped the media company Viacom Inc sell $2.7
billion of stock in March 2021.
Investors claimed the bank and other underwriters should have disclosed risks associated with Archegos Capital Management, a $36 billion family office founded by New York investor Bill Hwang.
Archegos collapsed in
March 2021 after failing to meet margin calls on swaps on
Viacom CBS and other stocks. Several large banks sustained
substantial losses.
(Reporting by Saeed Azhar and Jonathan Stempel in New York,
Anirban Chakroborti in Bengaluru; Editing by Krishna Chandra
Eluri, Lananh Nguyen and David Gregorio)
