Morgan Stanley has already compensated the investors, agreed to pay fines of pounds 240,000, and insists it has tightened internal controls in its private finance division. All well and good.
But one worrying aspect of the affair still persists at Morgan Stanley and, as far as I know, every other London-based investment bank which runs discretionary accounts for private clients. This is that the bank continues to act as the counter-party in derivatives transactions conducted on behalf of clients. In other words, it handles both sides of the deal.
The conflict of interest is blatant. It's the equivalent of handing your money over to a bookie, asking him to decide which bets to place with himself and letting him choose the odds. It isn't allowed in Morgan Stanley's home country of the US. It shouldn't be allowed here.Reuse content