Another Blow to Morgan Stanley
Another Blow to Morgan Stanley - This Time Inside Trading
By James Cooper
If you currently hold stocks of Morgan Stanley or plan to open a private wealth management account with the bank, I urge you to think twice about whether you really want to do business with the firm (at least for now). Too many operational losses incurred in the past two years that brought questions to the quality of management.
Photo: wirednewyork.com
Over the past few years various Morgan Stanley employees were involved in high profile criminal cases that shocked the industry. It will take years, not months, for MS to rebuild its image. In 2007, several ex Morgan Stanley stock-loan desk workers allegedly took millions of dollars in kickbacks.
The traders involved in this case engaged in collusive loan transactions, routinely directed Morgan Stanley stock-loan business to two co-conspirators as "finders", and resulted in Morgan Stanley having to pay millions of "finder’s fees" to companies controlled by the traders themselves and their friends. These shell companies provided no real finding services while secret kickbacks were paid. This may not be a single, unfortunate incident, similar cases abound. Last year, Randi Collotta, former Morgan Stanley compliance officer, pleaded guilty to insider-trading charges, while Jennifer Wang, former Morgan Stanley Vice President, was sentenced to prison for inside trading.
Incidents like these not only show that some Morgan Stanley employees completely lacked integrity, they also show that the company has serious internal control problems. For an investment bank of this size, there are layers of controls that should have detected the problem much earlier. Compliance office, risk control, product control, operations, audit - if these departments were effective in what they do they would have identified the funny business.
With its disappointing quarterly results, Morgan Stanley CEO is still holding on to the job. Accordingly to New York Times, John Mack is one of the highest paid CEO in the world, with total package over $41.7 million.
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