Morgan Stanley’s wealth management arm probed by regulators

Federal regulators, including the SEC and the Treasury Department, are actively investigating Morgan Stanley’s procedures for vetting clients at risk of money laundering.

Regulators are particularly interested in the differences between Morgan Stanley and its digital trading platform E*Trade’s vetting processes, questioning the decision-making behind integrating the two systems.

E*Trade is also a wealth-management wing, overseeing around $5 trillion.

Key issues regulators point out include client identity verification and monitoring financial activity, particularly among international clients. The Federal Reserve is also examining similar concerns.

The scrutiny led to a more than 5% drop in Morgan Stanley’s shares. Its former CEO and current Chairman, James Gorman, said the company is actively addressing these concerns.