Morgan Stanley slides on report of wealth unit probe

Morgan Stanley (MS) shares are trading lower Thursday following a Wall Street Journal report that the bank's wealth management unit is facing an investigation from several federal agencies. The Securities and Exchange Commission (SEC) and Office of the Comptroller of the Currency (OCC), among others, are looking into Morgan Stanley's efforts to combat potential money laundering from wealthy clients.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: Take a look at shares of Morgan Stanley. Sliding more than 5% on the day. The bank's wealth unit reportedly facing an investigation from several federal agencies over its efforts to prevent possible money laundering by wealthy clients.

The Wall Street Journal saying the probe is centered around whether the firm is doing enough to vet potential clients, and also says Morgan Stanley is addressing concerns from regulators. But that didn't seem to be enough to keep the stock from falling in today's session in reaction to this. And according to the journal, it's a number of different regulatory departments, including the SEC, the OCC, the Office of the Comptroller of the Currency, and other Treasury Department offices.

JOSH LIPTON: Yeah, it sounds like it basically boils down to Morgan Stanley, again, according to the journal. The question is whether they've been kind of sufficiently investigating the identities of prospective clients and where their wealth is actually coming from. And obviously, for investors, that wealth unit in focus.

I mean, it is now Morgan Stanley's biggest unit. It does about it's responsible for about half of Morgan Stanley's revenue. They made a series of acquisitions in that area. So top of mind for investors. And no surprise when a headline like that hits. You're going to see a reaction.

JULIE HYMAN: Right. And it includes the SEC looking into, for example, a client who's a billionaire with ties to Russia who had been sanctioned by the United Kingdom. All of this part of what's known in the financial services business as KYC, Know Your Customer. And there are a lot of regulations around financial services and who they can do business with who are not on various lists of sanctioned individuals.

JOSH LIPTON: Story we'll keep an eye on.