Morgan Stabnley is understood to be the leading US investment bank facing a “significant” enforcement action by New York and Massachusetts. New York Attorney General Eliot Spitzer, Massachusetts Secretary of State William Galvin and U.S. Representative Barney Frank of Massachusetts are also expected to announce a broader inquiry into the sale of mutual funds.
Morgan Stanley disclosed on Friday that the Securities and Exchange Commission has been investigating the sales practices of its funds since April 29. Reports suggest Galvin has been leading an investigation into Morgan Stanley’s mutual fund practices. The nature of the enforcement action reminds unknown but Spitzer referred last week to “an attack on the 75 percent of Americans who own stock.” Separately, the NASD is considering recommending a disciplinary action against Morgan Stanley, Morgan Stanley said in the regulatory filing. The Wall Street Journal reported Monday that U.S. securities regulators have told Morgan Stanley it may be charged with unlawful profit sharing by raking in outsize commissions from customers who received shares in hot initial public offerings during the stock-market bubble.