Morgan Stanley accused of duping EU regulators to comply with post-Brexit rules

Morgan Stanley has been accused of making up a fake job title for one of its employees in an attempt to trick EU regulators into believing it had moved top execs to Europe to meet post-Brexit rules.

The Financial Times reported that a German banker, who was hired in 2021 as an executive director, the rank below managing director, was given the title ‘head of loan trading’, but was allegedly told not to actively use the title.

In a German court case, which is hearing the appeal to his dismissal from Morgan Stanley, the banker said he had been told by his superior that his title “only existed on paper”.

Instead, he said he had been given the title solely to meet regulatory requirements, as the European Central Bank has pushed international banks to move top staff managing European businesses to the continent after the UK left the European Union.

The banker claimed that his job had been to find and sell distressed European loans, rather than overseeing a trading desk, giving him more ability to impact the bank’s risk profile.

Changes to Germany’s employment law since Brexit mean that material risk-takers can be fired more easily than normal employees, meaning that the misleading job title has left the banker more vulnerable to dismissal.

The bank’s arguments were rejected by the court, which ruled that his formal position was not enough to qualify him as a material risk-taker, which should instead be decided by actual tasks and competencies.

The court added it was not convinced that the banker was given relevant “tasks, responsibilities and competencies” and ruled that, legally, “he was no risk-taker”.

While the court case does not name the bank, sources with knowledge of the case told the Financial Times it was Morgan Stanley.

Morgan Stanley was contacted for comment on the report.

Last month, Morgan Stanley reported that its profits had missed analyst expectations, due to paying over $500m in one-time charges over investigations by US authorities.