Morgan Stanley said on Tuesday it is responding to potential legal claims from government entities, including the U.S. Department of Justice and several state attorneys general over mortgage securities.
The Wall Street bank said some matters with government entities, which are part of the RMBS Working Group of the Financial Fraud Enforcement Task Force, are in "advanced stages."
The matters include investigations related to its due diligence on loans it purchased for securitization, its communications with ratings agencies, disclosures to investors and its handling of servicing and foreclosure-related issues.
Morgan Stanley also said it will post a tax benefit of about $1.3 billion in the fourth quarter due to the restructuring of a legal entity from a partnership to a corporation. The entity, Morgan Stanley Smith Barney Holdings LLC, is the holding company for the joint venture it created with Citigroup Inc when it agreed to acquire the Smith Barney wealth management business.
The company also reduced its third-quarter earnings per share by one penny, from the 84 cents it reported on Oct. 17 to 83 cents per share. The reduction was caused by higher expenses related to delivering investment prospectuses to wealth management clients.
Morgan Stanley made the disclosures in its quarterly 10-Q filing with the U.S. Securities and Exchange Commission.
