Lawyer to watch Morgan Stanley traders during inquiry

MORGAN Stanley has ordered a lawyer to watch over bankers in its block trading division amid a US federal investigation into big share transactions.

The Wall Street bank has installed the lawyer on its US equity syndicate desk to supervise staff and answer their legal questions, the Financial Times reported. It follows a crackdown by US authorities on block trading, the practice of bulk selling shares in quantities large enough to move markets.

It comes just days after Charles Leisure, an executive director on the bank’s desk, was put on leave, Bloomberg reported. Pawan Passi, a senior equities banker whom Mr Leisure reported to, was put on leave in November.

Neither Mr Passi nor Mr Leisure have been accused of any wrongdoing and the bank has not said why it took action against the executives.

Morgan Stanley disclosed earlier this year that it was being investigated by the US Department of Justice and Securities and Exchange Commission (SEC) over allegations that it caused stock prices to drop before completing a block trade. The SEC launched its inquiry in 2019, with the Justice Department beginning its review in 2021.

When executing block trades, bankers often speak with potential buyers to gauge demand. It is understood these talks sometimes involve sharing details under a non-disclosure agreement and other times using generic terms to mask the identity of the company involved.

Last year, Morgan Stanley dumped $5bn (£4bn) of shares in Archegos, a family office, the night before the fund was hit by a fire sale that ultimately led to its collapse. Morgan Stanley was contacted for comment. Mr Passi and Mr Leisure were contacted for comment.