Regulators Probing Morgan Stanley: Worst Case?
Many probes fall flat, but it’s the ones that matriculate into something more that we have to pay close attention to.
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* Reports of regulator probes are hitting our Morgan Stanley shares
* Here’s our thinking and what we’re watching to make our next move
Ahead of its quarterly earnings report, something that will have us digging into quarterly results tomorrow from JP Morgan JPM, Citigroup C, and Wells Fargo WFC, Morgan Stanley MS shares are under pressure today following reports the company’s wealth management arm is being probed by multiple regulators.
Per these reports, the main issues are whether the bank has been sufficiently investigating the identities of prospective clients, where their wealth comes from, and how it monitors their financial activity, the report said.
Many probes fall flat, but it’s the ones that matriculate into something more that we have to pay close attention to. Given the nature of the matter, it would appear to fall under “knowing your client” and proper record keeping, making it something that should either be confirmed or dismissed in short order.
Based on what is known so far, our thinking is worst case, Morgan would likely face a fine and be required to make some operational changes. We will continue to monitor the case for developments, but from a business and stock perspective, recent market and investment banking activity support our favorable stance on MS shares.
MS shares have support at both the 100-day and 200-day moving averages of $87 and $84. Should those support levels hold and comments tomorrow support improving IPO volumes, we would be interested in rounding out our position in MS shares.
At the time of publication, TheStreet Pro Portfolio was long MS.
