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Morgan Stanley (MS - Analyst Report), in an attempt to end an ongoing investigation against its sub-prime mortgage business, has agreed to pay a tentative sum of $275 million to the Securities and Exchange Commission (SEC). However, nothing is confirmed officially as the SEC has yet to finalize the amount.

The proposed settlement fee takes into account profits generated from the sale of mortgage-backed loans and securities by Morgan Stanley during the pre-crisis period. Further, it considers penalties the bank has to pay as compensation for the losses which investors had to bear due to its malpractices.

In the pre-crisis period, major banks like Morgan Stanley often indulged in faulty lending activities and resorted to risky ventures to maximize profits without considering investors’ security.

However, the regulatory environment in the U.S. tightened following the crisis with the controversial activities of banks including like Morgan Stanley, Citigroup Inc. (C - Analyst Report), Deutsche Bank AG, The Goldman Sachs Group, Inc. (GS - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) coming into focus. Since then, these Wall Street biggies have been facing a tough time as they seem to be trapped in the never ending process of lawsuits and settlements.

In 2013, Morgan Stanley paid a hefty sum of $1.95 billion as settlement fees, which weighed heavily against the company’s earnings. Going forward, there appears to be little hope of respite as the company will likely continue to face regulators’ fury.

Nevertheless, the recent settlement fee will not impact earnings in the forthcoming quarters as the company had already set aside reserves in the last quarter.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold).

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