Goldman Flagged Morgan Stanley Block Trades to H.K.’s SFC: FT

Bloomberg News, Bloomberg News

The Two International Finance Center, left, and other buildings in Hong Kong, China, on Wednesday, May, 26, 2021. Hong Kong's unemployment rate fell for a second straight month in April as the city slowly emerges from an extended slump fueled by the pandemic and social unrest. Photographer: Paul Yeung/Bloomberg , Bloomberg

(Bloomberg) -- Goldman Sachs Group Inc. reported Morgan Stanley to Hong Kong’s financial regulator over a series of block trades by its rival three years ago, the Financial Times reported, citing people familiar with the matter.

Goldman alerted the Securities and Futures Commission as part of an “informal” discussion about prices in the stocks of a number of Hong Kong-listed companies that occurred shortly before Morgan Stanley brought blocks of shares to market, FT said. Trades including Wuxi Biologics Cayman Inc. stock are among those flagged and it’s not clear whether the authorities investigated the claim by individuals at Goldman, according to the paper.

Spokespeople for Goldman Sachs and Morgan Stanley declined to comment. The Securities and Futures Commission didn’t immediately respond to requests for comment.

Morgan Stanley disclosed in February that regulators and prosecutors are investigating various aspects of its block-trading business, acknowledging the firm itself is under scrutiny. Morgan Stanley overtook Goldman in recent years to become the biggest block trader in the industry.

U.S. investigators have been gathering communications involving employees at a number of banks, as well as outside money managers known to acquire slugs of stock in confidential offerings. As part of the probe, authorities are trying to determine whether any dealmakers improperly tipped off investors to transactions big enough to move share prices.

Morgan Stanley executed nine block trade transactions for Wuxi between 2020 and 2021, FT reported, citing Bloomberg data. There is no suggestion of wrongdoing by Wuxi. The Chinese company did not respond to the newspaper’s request for comment.

China’s securities regulator earlier required Morgan Stanley’s China ventures to provide information and explain media reports about the U.S. bank’s block-trading business being probed by the Securities and Exchange Commission.