# UNITED STATES OF AMERICA > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Af5e479ee2345aec6 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 103790 / August 27, 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. 2 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. On April 22, 2025, the Commission issued an Order Approving Modified Plan of Distribution,7 and simultaneously published the Modified Plan of Distribution (the “Plan”).8 The Plan provides for the distribution of the Net Available Fair Fund9 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 Modified Plan.10 Accordingly, it is hereby ORDERED, pursuant to Rule 1104 of the Commission’s Rules, that the Modified 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. 11 For the Commission, by the Division of Enforcement, pursuant to delegated authority.12 Vanessa A. Countryman Secretary 7 Exchange Act Rel. No. 102915 (Apr. 22, 2025). The Proposed Plan was modified to name Sondra Panahi as fund administrator, replacing Joshua Braunstein. 9 All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Proposed Plan. 10 The Plan has been further modified to account for the engagement of a Third-Party to assist the Fund Administrator by performing some of the administrative tasks associated with implementing the Plan. Because engaging a Third-Party will increase the speed with which the Plan is executed, staff has deemed this an immaterial change to the Plan which is for the benefit of harmed investors. 11 17 C.F.R. § 201.1104. 12 17 C.F.R. § 200.30-4(a)(21)(iv). 8 3 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Af5e479ee2345aec6. Public record. Not legal advice.