Eric R. Dinallo, chief of the investment protection bureau in the office of the New York State Attorney General Elliot Spitzer, has joined Morgan Stanley as managing director and head of regulatory affairs. In this role, Dinallo will work federal and state regulators, as well as industry self-regulatory organizations. He will start Sept. 8, reporting to Chief Legal Officer Donald Kempf.
The securities industry is facing new challenges, Kempf said in a statement. Just last week, Massachusetts regulators sued Morgan Stanley for enticing its brokers with higher commissions and bonuses to sell in-house funds. The state believes these sales tactics earned Morgan $5 million to $8 million in commissions since January alone. Regulators are also looking into the relationship between Morgan Stanleys analysts and IPO underwriting.
Dinallo worked closely with Spitzer on the $1.4 billion regulatory settlement with 10 investment firms, including Morgan. "Morgan Stanleys legal problems are probably not over. Who better to handle that than the guy who had previously been going after them?" Tim Woolston, a portfolio manager at Boston Advisors who holds shares in Morgan, told Reuters.
"This guy knows all the players and is able to interpret their actions," Brad Hintz, an analyst at Sanford Bernstein, told Reuters.
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