(Bloomberg) - Another Morgan Stanley executive whose communications were sought in a US probe into how Wall Street handles big stock trades has been placed on leave, amid a flurry of behind-the-scenes activity in the investigation.
Charles Leisure, an executive director who worked on the New York-based bank’s equity syndicate desk, was put on leave this week, people with direct knowledge of the matter said, asking not to be named because the information isn’t public. He was part of a team that handled block trades -- deals that have been facing scrutiny from federal prosecutors in the Southern District of New York and the US Securities and Exchange Commission.
Authorities overseeing the case have stepped up inquiries in recent weeks, people with knowledge of those efforts said. That includes interviewing Wall Street professionals about certain transactions and sending additional requests for more specific information. The burst of activity by federal prosecutors comes after the resolutions of criminal cases against Glencore PLC and a unit of Allianz SE, as well as the filing of fraud charges against executives at Archegos Capital Management.
The action against Leisure comes nine months after his Morgan Stanley superior Pawan Passi was also put on leave. Authorities haven’t accused anyone of wrongdoing and the bank hasn’t said why it took action against the executives.
A spokesperson for Morgan Stanley declined to comment as did the Justice Department and the SEC. Leisure didn’t respond to messages seeking comment. An email sent to his work address triggered an automated reply that he is “out of the office and will not be reviewing incoming email communications.”
Cultivating Relationships
Morgan Stanley is embroiled in the sprawling investigation examining how Wall Street bankers work with hedge funds and other buyers to privately carry out stock sales big enough to move prices. The bank disclosed a probe into its block-trading business earlier this year.
The investigation focuses on a corner of Wall Street trading that still relies on cultivating relationships that help banks out-bid rivals and win deals. That has long raised suspicions and sometimes complaints from investors.
Company founders and other major stakeholders hire bankers to help them discreetly unload large blocks of stock without sending the price into a tailspin. The banks, in turn, often work with hedge funds willing to take the risk of acquiring a slug of equities on short notice. Conversations for those deals can stray into legal gray areas, and if sellers see prices slip just before deals are done, they’re known to raise questions about potential information leaks.
Morgan Stanley faces potential civil liability from allegations that it caused stock prices to drop before completing a block trade, the bank disclosed in a regulatory filing in May.
Still, the opening of an inquiry does not necessarily mean that any case will ultimately be brought.
Leisure previously worked for Passi, who was the head of the US equity syndicate desk and led the bank’s communications with investors for equity transactions. The firm placed Passi on leave in November. Earlier this year, it picked another executive to take over his seat, installing Arnaud Blanchard head of Americas equity syndicate.
Bloomberg reported in February that the Justice Department had sought communications involving more than a dozen professionals at Wall Street firms, including at Morgan Stanley and some of its key clients. That list included at least three of Passi’s colleagues including Leisure. The others were Evan Damast, its global head of equity and fixed-income syndicate, and John Paci, a senior equities trading executive.
By Sridhar Natarajan and Matt Robinson
