Morgan Stanley (MS) has reached an agreement to pay $275 million to settle the U.S. Government’s fraud allegations related to the bank’s sale of mortgage-backed securities ahead of the financial crisis.
The deal settles charges that Morgan Stanley and two of its subsidiaries misled investors over the delinquency status of mortgage loans packaged with two subprime securities, the U.S. Securities and Exchange Commission said Thursda y. As part of the agreement, Morgan Stanley is neither admitting nor denying the SEC’s allegations.
“Morgan Stanley understated the number of delinquent loans behind these securitizations during a critical juncture of the financial crisis and denied investors the full extent of the facts necessary to make informed investment decisions,” Michael Osnato, chief of the SEC Enforcement Division’s complex financial instruments unit, said in a statement.
Coins2Day’s Stephen Gandel has previously written about the fact that Morgan Stanley had been the one major bank to more or less avoid the onset of fines and settlements faced by its Wall Street rivals in the wake of the financial crisis. Unlike most of its banking brethren, Morgan Stanley did not disclose in regulatory filings last fall how much money it set aside for potential legal costs, while other banks – including Bank of America, Citibank, Goldman Sachs and JP Morgan – said they were stashing billions of dollars apiece for future settlements.
Bank of America is still in talks with the government over exactly how much it will pay to settle its own mortgage-related claims, with its price-tag rumored to be as much as $13 billion. Citigroup agreed to pay $7 billion earlier this month, while JP Morgan previously agreed to pay $13 billion. Goldman reached a then-record $550 million settlement with the SEC in 2010 over its own marketing of mortgage-backed securities.
