Morgan Stanley, already under federal investigation in the US, is now facing another probe. This time, it’s in Korea.
From a report that broke last night on Bloomberg:
Morgan Stanley’s stock short selling practices are being inspected by South Korea as part of a broader effort by the nation’s financial watchdog to clamp down on bets against equities, according to a person familiar with the matter.
Goldman was fined in 2018 for naked short selling in the Korean market. Regulators may be looking for similar infractions by Morgan.
This comes as Morgan forces another executive out under mysterious circumstances. Executive Director Charles Leisure was placed on leave last week.
From a report out over the weekend, also on Bloomberg:
Charles Leisure, an executive director who worked on the New York-based bank’s equity syndicate desk, was put on leave this week, people with direct knowledge of the matter said, asking not to be named because the information isn’t public. He was part of a team that handled block trades — deals that have been facing scrutiny from federal prosecutors in the Southern District of New York and the US Securities and Exchange Commission.
Leisure worked for Pawan Passi. Both handled block trades, or buying and selling of large amounts of stock.
Big investors rely on banks like Morgan to quietly offload huge chunks of stock. Morgan may have tipped hedge funds to the sales beforehand, giving them a chance to front-run the trades.
Banks have an incentive to play footsie with hedge funds because of what’s called prime brokerage. A hedge fund’s prime broker handles the fund’s trades, a very lucrative relationship.
If a bank gives them information about market-moving trades, the bank could be more likely to win that business.
So far, nothing has been proven against Leisure, Passi or Morgan itself. Perhaps all its trades were aboveboard.
But consider the overall picture.
Multiple executives in the same area placed on leave. Investigations spreading from one country to the next.
Even other Wall Street banks are raising concerns about Morgan’s activity, a rare move.
Something tells me that where there’s smoke, there’s fire.
What do you think is going on at Morgan Stanley? Leave a comment at the bottom and let me know!
More on markets:
Wall Street Banks Turn on Each Other as Federal Probe Looms
Is Melvin’s Gabe Plotkin Headed to Prison?
Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%
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Photo: “Morgan Stanley Headquarters” by Alex E. Proimos is licensed under CC BY-NC 2.0.