Morgan Stanley (MS)

Morgan Stanley (MS) stock dropped by 5.25% following reports that a group of US regulators is examining the firm's efforts to prevent potential money laundering by wealthy clients.

• Regulatory Scrutiny: The Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, and other Treasury Department offices are investigating whether Morgan Stanley has adequately investigated the identities of risky clients. This scrutiny adds to the Federal Reserve's previous examination of the firm's controls.
• Regulatory Focus: The SEC and the Treasury's Financial Crimes Enforcement Network are particularly interested in certain clients outside the US who have raised red flags and the bank's policies to address these concerns. The SEC has questioned Morgan Stanley about its business dealings with individuals who had been cut off by E*Trade, a digital-trading platform acquired by the bank.
• Morgan Stanley's Response: Morgan Stanley has informed regulators that it is enhancing its controls and procedures to address the concerns raised. The bank has also met with Federal Reserve officials to alleviate any concerns. Additionally, the Office of the Comptroller of the Currency issued a formal warning to the firm last year, demanding that executives address its concerns regarding anti-money laundering programs.

Shares of Morgan Stanley (MS) dropped by 6.78% from $80.33 to $74.88 in the trading on Wednesday, October 18, 2023. The reason why MS stock down is due to its disappointing Q3 earnings:

• The bank's earnings fell by 9%, attributed to a significant decline in investment-banking revenue, with fees for mergers and acquisitions advising plummeting by over 30%. Morgan Stanley's stock experienced its largest one-day decline since June 2020, reflecting a weak performance compared to other major banks.
• Despite the setback, CEO James Gorman expressed optimism for 2024, expecting a rebound in revenue as the Federal Reserve eases interest rate hikes. The broader industry faced challenges, with a 28% drop in merger and acquisition deal values during the first three quarters of the year.
• While Morgan Stanley's wealth-management business saw a 5% revenue increase, it disappointed some shareholders with lower-than-expected asset inflows, while retail-trading activity declined year-over-year.