UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 102915 / April 22, 2025

ADMINISTRATIVE PROCEEDING

File No. 3-21825

In the Matter of

Morgan Stanley & Co. LLC,

ORDER APPROVING MODIFIED

PLAN OF DISTRIBUTION

Respondent.

ADMINISTRATIVE PROCEEDING

File No. 3-21826

In the Matter of

Pawan Kumar Passi,

Respondent.

On January 12, 2024, the Commission issued two separate but related, settled orders

against Morgan Stanley & Co. LLC (“Morgan Stanley”)1 and Pawan Kumar Passi (“Passi”)2

(collectively, the “Respondents”). In the Orders, the Commission found that, from at least June

2018 through August 2021, Passi and another employee on Morgan Stanley’s Equity Syndicate

Desk in the Americas (the “Syndicate Desk”) perpetrated a fraud involving large blocks of stock

that the investment banking firm purchased from investors (the “Selling Shareholders”). The

Commission found that the two employees, in violation of duties of confidentiality and Morgan

Stanley’s policies, disclosed to certain buy-side investors non-public, potentially market-moving

information, concerning impending “block trades” that the firm had been invited to bid on or was

in the process of negotiating with selling shareholders. The Commission further found that

Morgan Stanley failed to enforce information barriers to prevent material non-public information

involving certain block trades from being discussed by the Syndicate Desk. According to the

Morgan Stanley Order, by this conduct, Morgan Stanley generated more than $138 million in

1

Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 15(b) and 21C of the

Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist

Order, Exchange Act Rel. No. 99336 (Jan. 12, 2024), Admin. Proc. File No. 3-21825 (the “Morgan Stanley Order”).

2

Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 15(b) and 21C of the

Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist

Order, Exchange Act Rel. No. 99337 (Jan. 12, 2024), Admin. Proc. File No. 3-21826 (the “Passi Order” and

together with the Morgan Stanley Order, the “Orders”).

profits across 28 transactions. The Commission found that Morgan Stanley and Passi willfully

violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5

thereunder, and that Morgan Stanley willfully violated Section 15(g) of the Exchange Act.

In the Morgan Stanley Order, the Commission ordered Morgan Stanley to disgorge

$138,297,046, plus prejudgment interest of $28,057,775, for a total of $166,354,821, which

would be offset by the value of forfeiture and restitution paid by Morgan Stanley pursuant to a

January 11, 2024, non-prosecution agreement with the U.S. Attorney for the Southern District of

New York in parallel criminal proceedings (the “Criminal Proceeding”).3 The Commission

further ordered Morgan Stanley to pay a civil penalty of $83,000,000 to the Commission, and the

Commission would hold all funds paid pursuant to the Morgan Stanley Order pending a decision

as to whether the Commission would seek to distribute them.

In the Passi Order, the Commission ordered Passi to pay a civil penalty of $250,000 to

the Commission, and the Commission would hold all funds paid pursuant to the Passi Order

pending a decision as to whether the Commission would seek to distribute them.

The Respondents have paid in full. They have collectively paid $83,250,000 in civil

penalties, and Morgan Stanley, after the offset of forfeiture and restitution paid in the Criminal

Proceeding, has paid disgorgement and prejudgment interest totaling $29,823,598. In total, the

Respondents have paid $113,073,598.

On September 27, 2024, the Commission issued an order4 that created the Morgan

Stanley Fair Fund, consisting of the $113,073,598 paid from the Respondents, pursuant to the

Orders.

The assets of the Morgan Stanley Fair Fund are subject to the continuing jurisdiction and

control of the Commission. The Morgan Stanley Fair Fund has been deposited in a Commissiondesignated account at the United States Department of the Treasury, and any interest accrued

will be added to the Morgan Stanley Fair Fund for the benefit of investors.

On February 26, 2025, the Division of Enforcement, pursuant to delegated authority,

published a Notice of Proposed Plan of Distribution and Opportunity for Comment (“Notice”),5

pursuant to Rule 1103 of the Commission’s Rules on Fair Fund and Disgorgement Plans

(“Commission’s Rules”);6 and simultaneously posted the Proposed Plan of Distribution (the

“Proposed Plan”). The Notice advised interested persons that they could obtain a copy of the

Proposed Plan from the Commission’s public website or by submitting a written request to

Joshua Braunstein, United States Securities and Exchange Commission, 100 F Street, NE,

Washington, DC 20549-5876. The Notice also advised that all persons desiring to comment on

3

For more on the Criminal Proceeding, see https://www.justice.gov/usao-sdny/pr/us-attorneyannouncesagreements-morgan-stanley-and-former-senior-employee-pawan-passi.

4

Order Creating and Consolidating Fair Funds and Setting Deadline to Submit a Proposed Plan of Distribution,

Exchange Act Rel. No. 101215 (Sept. 27, 2024).

5

Exchange Act Rel. No. 102488 (Feb. 26, 2025).

6

17 C.F.R. § 201.1103.

the Proposed Plan could submit their comments, in writing, within 30 days of the Notice. The

Commission received no comments on the Proposed Plan during the comment period.

The Proposed Plan provides for the distribution of the Net Available Fair Fund7 to

compensate investors for losses on their sales of blocks of shares of the Securities in the

Transactions identified in Exhibit B attached to the Proposed Plan.

The Division of Enforcement now requests that the Commission approve the Proposed

8

Plan.

Accordingly, it is hereby ORDERED, pursuant to Rule 1104 of the Commission’s Rules,9

that the Proposed Plan is approved, and the approved Modified Plan of Distribution shall be

posted simultaneously with this order on the Commission’s website at www.sec.gov.

For the Commission, by the Division of Enforcement, pursuant to delegated authority.10

Vanessa A. Countryman

Secretary

7

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Proposed

Plan.

8

The Proposed Plan has been modified to name Sondra Panahi, as fund administrator, replacing Joshua Braunstein.

9

17 C.F.R. § 201.1104.

10

17 C.F.R. § 200.30-4(a)(21)(iv).