Morgan Stanley (MS) will pay $2.6 billion to settle charges brought by the Department of Justice over its marketing and sales of residential mortgage-backed securities, federal authorities announced Thursday.
“In today's agreement, Morgan Stanley acknowledges it sold billions of dollars in subprime RMBS certificates in 2006 and 2007 while making false promises about the mortgage loans backing those certificates,” acting U.S. Attorney Brian J. Stretch of the Northern District of California said in a statement released by the Justice Department.
The settlement preserves the government's ability to bring criminal charges against Morgan Stanley and does not release individuals from potential civil or criminal liability.
New York state and Illinois, which along with the Department of Justice are part of a special RMBS Working Group, also announced separate settlements with Morgan Stanley for $550 million and $22.5 million, respectively.
In July 2014, Morgan Stanley agreed to pay $275 million to settle charges brought by the Securities and Exchange Commission that it did not fully disclose the delinquent loans backing the subprime RMBS.
Morgan Stanley said in a statement that it was pleased to have finalized the settlements, and had already reserved the amounts called for, which affected fourth quarter 2014 results. No impact is expected in the current quarter.