‘Snitches Get Stitches’ – Goldman Sachs Reports on MorganStanley to Hong Kong Regulators

Goldman Sachs reported rival Wall Street bank Morgan Stanley to Hong Kong’s financial regulator over a series of block trades, according to people familiar with the matter, according to a report published in the Financial Times.

Goldman alerted the territory’s Securities and Futures Commission three years ago as part of an “informal” discussion about price drops in the stocks of a small number of Hong Kong-listed companies that occurred shortly before Morgan Stanley brought blocks of shares to market, one of the people said. “It’s noteworthy to file a complaint on a competitor,” the person said.

News of the previously unreported discussion comes as Morgan Stanley faces a US federal investigation into its block trading business, where bulk sales of shares by an investment bank are typically big enough to move markets.

US authorities are investigating several Wall Street banks over suspicions that some investors may have obtained advance warning of block trades, causing a company’s share price to fall sharply before the bulk sales were made.

The Goldman tip-off is the latest sign that the practices being investigated in New York could also affect Morgan Stanley in Asia. In February, the Chinese securities regulator ordered Morgan Stanley to provide information relating to the US block trades probe. Hong Kong’s financial regulator has also started asking banks about their block-trading practices since the US investigations were made public, according to two people close to the matter.

It is not known whether Hong Kong authorities investigated the claim by individuals at Goldman.

Morgan Stanley, Goldman and the SFC declined to comment.