Regulators Probe Morgan Stanley's Wealth-Management Division: Report

Zinger Key Points
  • Federal regulators investigate Morgan Stanley's wealth-management client vetting.
  • The investigation focuses on Morgan Stanley's diligence in identifying prospective clients.

Multiple federal regulators are reportedly investigating Morgan Stanley MS over its client vetting processes amid concerns of potential money laundering within its wealth-management division.

The Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, and other Treasury Department offices are involved, alongside the Federal Reserve, which initiated a similar inquiry last November, signaling potential supervisory actions, reported The Wall Street Journal.

The investigation primarily focuses on Morgan Stanley’s diligence in identifying prospective clients, the source of their wealth, and monitoring their financial activities, particularly among international clients, the report added.

Morgan Stanley’s former CEO, now executive chairman, James Gorman, stated the bank is enhancing compliance and technology to track wealth-related transactions, as per the report.

The SEC’s inquiry extends to questionable clients, including a Russian-linked billionaire sanctioned by the U.K. and individuals with suspicious financial activities.

Additionally, the Treasury’s Financial Crimes Enforcement Network (FinCEN) and the OCC have sent requests for information.

Morgan Stanley’s wealth division, vital since the 2008 financial crisis, now contributes half of its total revenue, sustaining the bank through market fluctuations.

However, the wealth unit’s growth has slowed, with flat revenue in the fourth quarter and decreased net new assets.

According to the WSJ report, the SEC and FinCEN are scrutinizing disparities in vetting procedures between E*Trade and Morgan Stanley’s financial-adviser unit, prompting inquiries into the technology and processes integration following Morgan Stanley’s acquisition of E*Trade.

Price Action: MS shares are trading lower by 0.14% at $86.72 on the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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