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Morgan Stanley's (MS) Wealth Arm Scrutinized by Federal Reserve
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The U.S. Federal Reserve is scrutinizing Morgan Stanley’s (MS - Free Report) wealth-management division to check if the bank has sufficient controls in place to prevent rich foreign customers from laundering money. The news was first reported by the Wall Street Journal, citing people familiar with the matter.
According to the people familiar with the matter, the way Morgan Stanley examines foreigners and the origins of their money before taking them on as customers, is being probed.
The scrutinizing started as a routine review a few years ago. However, after regulators found that Morgan Stanley’s due diligence on clients and anti-money-laundering efforts were lacking, the Fed went deep with its investigation.
Morgan Stanley has been privately scolded by the Fed for not making all the required changes. Moreover, the bank’s wealth management business head, Andy Saperstein, has been meeting with Fed officials to address the issues.
The Federal Reserve and Morgan Stanley have not yet made any comments on the matter.
Morgan Stanley’s Other Legal Matters
A few days ago, it was reported that Morgan Stanley might pay around $500 million-$1 billion to resolve a long-running probe into how it handled private stock sales.
As part of a potential settlement with the Department of Justice and the U.S. Securities and Exchange Commission, the bank likely agreed to tighten internal controls.
Last month, MS, DRW Securities LLC and Barclays Capital, a division of Barclays PLC (BCS - Free Report) , received victory in getting the VIX index manipulation lawsuit dismissed.
The suit claimed that the firms, along with others, manipulated the VIX index in 2018, which resulted in hundreds of millions of dollars in losses to investment funds that bought options contracts tied to the benchmark.
There were claims that the defendants flashed tens of thousands of quotes for out-of-the-money SPX options in February 2018, which were quickly canceled. The defendants were, hence, accused of influencing calculations of the volatility index by Cboe Global Markets, which is the exchange that sets it.
MS, Barclays Capital and others jointly said that the claims by the plaintiffs were false and “fatally flawed.”
Over the past six months, shares of MS have lost 9.3% against the industry’s rise of 2.4%.
Recently, Capital One Financial Corporation (COF - Free Report) faced a lawsuit from savers who claimed that the bank used deceptive practices to make them think that they were earning the highest interest rate available from the company's online banking arm amid the increasing rate environment.
The plaintiffs claimed that COF misleadingly and fraudulently created a new high-yield account rather than increasing the rates on its 360 Savings account.
In the high interest rate environment, COF’s existing 360 Savings account customers, who were seeking juicier yields, were required to open a 360 Performance Savings account.
Per the lawsuit, “Capital One's conduct caused its 360 Savings account holders to lose millions of dollars of interest in the aggregate since September 2019, and especially since interest rates began rising rapidly in March of 2022.”
The lawsuit seeks monetary damages plus an end to Capital One's alleged misconduct, such as through an order that the bank convert all 360 Savings accounts to 360 Performance Savings accounts.
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Morgan Stanley's (MS) Wealth Arm Scrutinized by Federal Reserve
The U.S. Federal Reserve is scrutinizing Morgan Stanley’s (MS - Free Report) wealth-management division to check if the bank has sufficient controls in place to prevent rich foreign customers from laundering money. The news was first reported by the Wall Street Journal, citing people familiar with the matter.
According to the people familiar with the matter, the way Morgan Stanley examines foreigners and the origins of their money before taking them on as customers, is being probed.
The scrutinizing started as a routine review a few years ago. However, after regulators found that Morgan Stanley’s due diligence on clients and anti-money-laundering efforts were lacking, the Fed went deep with its investigation.
Morgan Stanley has been privately scolded by the Fed for not making all the required changes. Moreover, the bank’s wealth management business head, Andy Saperstein, has been meeting with Fed officials to address the issues.
The Federal Reserve and Morgan Stanley have not yet made any comments on the matter.
Morgan Stanley’s Other Legal Matters
A few days ago, it was reported that Morgan Stanley might pay around $500 million-$1 billion to resolve a long-running probe into how it handled private stock sales.
As part of a potential settlement with the Department of Justice and the U.S. Securities and Exchange Commission, the bank likely agreed to tighten internal controls.
Last month, MS, DRW Securities LLC and Barclays Capital, a division of Barclays PLC (BCS - Free Report) , received victory in getting the VIX index manipulation lawsuit dismissed.
The suit claimed that the firms, along with others, manipulated the VIX index in 2018, which resulted in hundreds of millions of dollars in losses to investment funds that bought options contracts tied to the benchmark.
There were claims that the defendants flashed tens of thousands of quotes for out-of-the-money SPX options in February 2018, which were quickly canceled. The defendants were, hence, accused of influencing calculations of the volatility index by Cboe Global Markets, which is the exchange that sets it.
MS, Barclays Capital and others jointly said that the claims by the plaintiffs were false and “fatally flawed.”
Over the past six months, shares of MS have lost 9.3% against the industry’s rise of 2.4%.
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Currently, MS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Firms Facing Legal Issues
Recently, Capital One Financial Corporation (COF - Free Report) faced a lawsuit from savers who claimed that the bank used deceptive practices to make them think that they were earning the highest interest rate available from the company's online banking arm amid the increasing rate environment.
The plaintiffs claimed that COF misleadingly and fraudulently created a new high-yield account rather than increasing the rates on its 360 Savings account.
In the high interest rate environment, COF’s existing 360 Savings account customers, who were seeking juicier yields, were required to open a 360 Performance Savings account.
Per the lawsuit, “Capital One's conduct caused its 360 Savings account holders to lose millions of dollars of interest in the aggregate since September 2019, and especially since interest rates began rising rapidly in March of 2022.”
The lawsuit seeks monetary damages plus an end to Capital One's alleged misconduct, such as through an order that the bank convert all 360 Savings accounts to 360 Performance Savings accounts.