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Watchdog: Follow the Money

Morgan Stanley paying $275M to settle SEC charges

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WASHINGTON (AP) — Morgan Stanley has agreed to pay $275 million to settle U.S. civil charges that it misled investors about risky mortgage bonds it sold ahead of the 2008 financial crisis.

The Securities and Exchange Commission announced the settlement Thursday with the Wall Street bank. The SEC said Morgan Stanley failed to accurately disclose the delinquency status of home mortgages backing two securities deals that it financed and sold in 2007.

The mortgages underlying the securities had a total value of about $2.5 billion, according to the SEC.

New York-based Morgan Stanley neither admitted nor denied the allegations. "We're pleased to have settled this matter," said spokesman Mark Lake.

The $275 million Morgan Stanley is paying includes a $96.4 million penalty and $160.6 million in restitution of profits from sales of the bonds, plus about $18 million in interest. It will be returned to investors in the deals who were harmed, the SEC said.

Morgan Stanley reported in February that it had reached a preliminary agreement with the SEC to pay $275 million to settle the case. The bank said the payment would be charged against its 2013 results and wouldn't affect its earnings this year.

When the housing bubble burst in 2007, millions of home borrowers defaulted on their loans and bundles of mortgages sold by big banks left investors with billions in losses.

The SEC settlement was the latest in a series of federal actions against big Wall Street banks as the government continues to resolve claims over their conduct six years after the crisis.

Goldman Sachs, JPMorgan Chase, Citigroup and other big banks have been accused of abuses in sales of securities linked to mortgages in the years leading up to the crisis. Together, they have paid hundreds of millions in penalties to settle civil charges brought by the SEC, which accused them of deceiving investors about the quality of the bonds they sold.

In November, JPMorgan, the biggest U.S. bank, agreed to pay $13 billion in a civil settlement with the Justice Department and state regulators over its sales of risky mortgage securities. It was the largest settlement ever between the Justice Department and a corporation.

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