Morgan Stanley CEO James Gorman has slightly more than two weeks left in his nearly 14-year tenure at the helm of the Wall Street giant — and many of the rank and file are counting the days.
That’s because junior bankers are hoping to catch a break after weathering more than a year of harrowing interrogations and punishing fines stemming from a clampdown by the Securities and Exchange Commission for doing business on messaging apps in breach of record-keeping rules.
Out of $2 billion levied by the SEC across nearly a dozen US banks, Morgan Stanley was slapped with a $125 million fine in September 2022 — and Gorman took unusual measures to take it out of the hide of employees rather than investors, sources said.
Insiders at Morgan Stanley describe a “witch-hunt” atmosphere since early 2022 when the probe was first announced.
Hundreds of bankers were interrogated in lawyers’ offices about whether they’ve used personal devices to text their colleagues and bosses, according to sources.
“When we got an email saying ‘legal wants to talk’ we thought it would be training not punishment,” a Morgan Stanley source griped.
Fines ranged from a few thousand dollars to as much as $1 million.
Many complained they were fined without being given adequate training or warnings, and that offenses in some instances seemed trifling.
Some claim they got dinged for answering the phone when their boss called or responded to benign messages about work happy hours.
By comparison, Goldman also paid $125 million and JPMorgan was fined $200 million.
But those banks weren’t as aggressive about nickeling and diming individual employees, sources said.
Those who were ousted had either knowingly violated policies or when asked hadn’t been honest.
“It was more about the cover up,” one source said.
Goldman fired former global head of transaction banking over WhatsApp misuse.
JPMorgan fired Edward Koo — who’d been at the firm two decades — for reportedly starting a WhatsApp chat devoted to “market chatter.”
Other members of the group were slapped with a fine but kept their jobs.
One former banker at Jefferies was fined nearly $50,000 and then resigned after bragging in a text message that a deal he was working on would pay off his mortgage.
At Morgan Stanley, terrified bankers are hoping the air will clear on Jan. 1, when Ted Pick — a veteran trader who is “loved by the foot soldiers,” according to a source — takes the reins from Gorman as the bank’s new CEO.
“Culture and loyalty are important to him,” the source said of Pick, adding that many are specifically hoping that will mean an end to the texting clampdown.
Of course, some sources close to the bank caution there has been no official change to policy when it comes to collecting fines.
Sources say that Gorman has been on edge since the bank lost nearly $1 billion after family office Archegos melted down in 2021.
The loss has pushed Gorman to believe in stricter protocols, sources said.
The Archegos meltdown was “the worst loss in my tenure in over a decade that we’ve had,” Gorman said. “There were warning signs and you know this was a miss on our part.”
Still, some insiders say the time may be ripe for a lighter touch at Morgan Stanley when it comes to dealing with the talent.
“The easiest course of action for managers is to make things as restrictive as possible,” a source told On The Money. “Of course, that’s not the smartest approach to make employees happy.”
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