Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Morgan Stanley shares fall on investigation reports

By CNNMoney.com staff

NEW YORK (CNNMoney.com) -- Shares of Morgan Stanley fell Wednesday following reports that U.S. federal prosecutors are looking into whether Morgan Stanley misled investors about complex mortgage derivatives it designed.

Citing people familiar with the matter, the Wall Street Journal said that investigators are scrutinizing Morgan's so-called collateralized debt obligations, or CDOs.

Morgan Stanley (MS, Fortune 500) opened at $27.34 and dropped more than 4% to $27.11 per share after the market open.

Morgan Stanley told CNN it is not aware of any probe. "We have not been contacted by the Justice Department about the transactions being raised by the WSJ," said spokesman Jeanmarie McFadden. "And we have no knowledge of a Justice Department investigation into these transactions."

The U.S. Attorney's office told CNN that it will not confirm or deny any investigation and the Journal said the Securities and Exchange Commission declined to comment.

According to the newspaper report, Morgan arranged and marketed the pools of bond-related investments but at the same time its own traders would sometimes bet that their value would fall.

The newspaper said investigators are looking at how Morgan represented its roles in these transactions.

The probe, which is at a preliminary stage, is the latest example of how regulators are increasing scrutiny of a broad range of Wall Street firms, the report said.

The SEC last month filed civil charges against Goldman Sachs (GS, Fortune 500). The suit alleges Goldman defrauded investors in a sale of securities tied to subprime mortgages.

CNN's Jason Kessler contributed to this report To top of page

Index Last Change % Change
Dow 17,081.89 -49.97 -0.29%
Nasdaq 4,796.61 -42.03 -0.87%
S&P 500 2,003.69 -13.77 -0.68%
Treasuries 2.06 -0.04 -2.10%
Data as of 1:17am ET
Company Price Change % Change
Bank of America Corp... 15.52 0.00 0.00%
EMC Corp 27.55 -0.80 -2.82%
General Electric Co 27.87 -0.22 -0.78%
Alcoa Inc 10.03 -0.05 -0.50%
Intel Corp 32.04 -0.17 -0.53%
Data as of Oct 13


JPMorgan's earnings report on Tuesday show how the late summer market chaos and low interest rates hurt its business. More

A big tax hike on the rich won't reduce inequality in America much, new study finds. More

American and British police have managed to stop a massive hacking operation that infected computers worldwide, stealing at least $10 million from the United States alone. More

This pension fund mistakenly overpaid 589 retirees, and now demands that they pay it back -- with interest. More