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Morning Coffee: Morgan Stanley bankers live in fear of the text message cops. The new franchises that are hiring in Asia

According to people speaking off the record to the New York Post, Morgan Stanley bankers’ biggest wish for the New Year isn’t for a bull market, a revival of SPACs or even a tiny bit of good news about their Elon Musk loan exposure.  They are hoping that when Ted Pick takes over as CEO, he will end the reign of terror over WhatsApp messages.

It’s been known since the start of the year that MS has had a policy of trying to recoup as much as it can of the $200m SEC fine that was levied on it, by surcharging bankers who created the errant messages. (This is one of the unusual cases of wrongdoing where the crime and its evidence are the same thing).  Apparently, however, the ill-will has been building all year as MS bankers feel that they are being treated unduly harshly.

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Some bankers claim that they’ve been called in to “have a talk with legal” for simply responding to a happy hour message, or for answering the phone when their boss called.  They also claim that they hadn’t been given enough training about the blurred lines between business-related communication and purely social or private conversations with clients or workmates.

Excuses of this sort shouldn’t necessarily be taken at face value – Morgan Stanley had a quite detailed “consequences management framework” relating the size of the penalty to the seriousness of the breach, the seniority of the offender and the number of previous warnings and penalties.  If that framework was properly executed, the vast majority of fines will have landed on people who should have known better and more or less deserved it.  It’s noticeable that so far, everyone who has received what they considered to be an unfair punishment has chosen to suck it up (or whine anonymously to newspapers) rather than to make any sort of formal challenge.

But even allowing for this, MS bankers may feel a little bit hard done by simply because lots of other firms haven’t taken the same policy – in some cases there has been a general charge to the bonus pool and egregious or very senior offenders have been disciplined across the Street, but few banks have made such a systematic effort to fit the punishment to the crime.  This is certainly the thing to do if you want to affect cultural change, but it can’t be pleasant for those on the receiving end.

The bankers hope that Ted Pick is “one of their own”, and might be more sympathetic.  They might be disappointed, particularly since James Gorman is staying on as chairman for a short while, and even after he’s gone, it feels intuitively unlikely that anyone will be keen on making a presentation to the board about how it’s time to be a bit more lax on a compliance issue.  Perhaps the bankers should just get more used to making voice calls.

Elsewhere, in a global industry, it’s very rare for a market slump to be quite so bad that there isn’t a hot market or sector somewhere.  In India, for example, the “Asian deal drought” isn’t a thing, and the labour market is following the revenue.  JM Financial, for example, is planning to hire “at least seven” senior dealmakers and another 15 analysts and associates, as it aims to quintuple its client numbers over the next seven years.

Obviously, a total of 22 new jobs can’t exactly take up all the slack from the cuts being made by firms across the rest of the APAC region, but rapid compound growth often means that things change quicker than you might have thought possible.  It’s already noticeable that banks like Jefferies are making big investments on the ground in India.  Once upon a time, nobody thought that Beijing would be an important financial centre, or that global banks would have their Head of Asia Investment Banking based anywhere other than Japan.


Adieu to the Citigroup municipal bond underwriting and trading franchise, which is “no longer viable given our commitment to increase the firm’s returns”, according to a memo from Andy Morton and Peter Babej.  This was a crown jewel not so long ago, but continued political problems in Texas (where a local law forbids banks which don’t lend to gun manufacturers from getting mandates), combined with cyclically poor trading revenues, have taken the shine off.  The plan is to fully close things down by the end of Q1 24, and it will be an interesting indication of overall market sentiment to see how many of the staff are quickly picked up elsewhere – Jefferies have already taken one team of public healthcare specialists.  (WSJ)

China wants to build a “first class” domestic investment banking sector, but isn’t giving the industry many clues as to what that might mean.  Some have suggested that it will involve mergers to build critical mass and create a national champion to rival the bulge bracket, but others take a clue from government officials’ comments about “supporting high-level technological self-reliance” (SCMP)

Cliff Asness wants us to know that he’s never punched a computer monitor that didn’t in some way deserve it.  The “quant winter” has been long and brutal, but returns have begun to improve at AQR and its founder is trying to keep his temper under control.  He also says that having to fire people was “a living hell” (FT)

The Vatican court sees a number of financial fraud cases which could be thought of as surprising or unsurprising, depending on your perspective.  Angelo Becciu has become the first cardinal to be convicted there, over matters relating to London property dealing. (Bloomberg)

Not exactly a vintage year to win it in, but the statistics seem to suggest that JP Morgan has indeed taken the title for European M&A revenues from Goldman Sachs. (Financial News)

The former Citi oil & gas team that went to Guggenheim but didn’t (apparently) take enough of the Exxon relationship with them to land a role in the biggest deal of the year, have now moved again, to Moelis. (Reuters)

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AUTHORDaniel Davies Insider Comment

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