Morgan Stanley Agrees to Pay $2.6 billion to end DOJ Probe
Brokerage and investment banking giant Morgan Stanley has agreed to pay $2.6 billion dollars to bring a US Department of Justice (DOJ) investigation into its mortgage-backed securities dealings to a close. In order to resolve the matter and pay the settlement, Morgan Stanley increased its set aside for legal related costs to approximately $2.8 billion and booked the expense to the company’s 2014 financials. The firm told its investors the agreement would bring closure to claims the Justice Department had intended to bring if not for the settlement. The specifics of those claims were not disclosed.
This agreement comes on the heals of another agreement involving the firm’s mortgage backed securities. Morgan Stanley reached a tentative $275 million dollar settlement with the Securities and Exchange Commission (SEC) to resolve an investigation into its mortgage-backed securities deals during the financial crisis. That investigation related to subprime residential mortgage-backed securities the firm sponsored and underwrote in 2007. Under this proposed agreement, the SEC would accuse Morgan Stanley of violating federal securities laws and the bank, per usual, would neither admit nor deny the allegations.