(Reuters) – Morgan Stanley said on Thursday U.S. regulators and prosecutors were probing various aspects of the investment bank’s block trading business.
The disclosure in a regulatory filing follows reports that the U.S. Securities and Exchange Commission (SEC) is probing whether financial executives may have broken rules by tipping off hedge funds ahead of large sales of shares, known as “block trades”.
The SEC is investigating Morgan Stanley and Goldman Sachs, along with the U.S. Department of Justice, Reuters reported last week, citing a source with knowledge of the matter.
The bank said on Thursday that since June 2019, it has been responding to requests for information from the SEC related to the investigation of various aspects of the its block trading business.
Morgan Stanley also said since August last year it has been responding to requests for information from the U.S. Attorney’s Office for the Southern District of New York in connection with its investigation.
Broker-dealers frequently buy and sell blocks of shares, either on behalf of clients or as part of a hedging strategy, which are large enough to move a company’s share price.
Block trading tends to increase during times of volatility, as institutional investors rebalance their portfolios.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Maju Samuel)
