Allegations of misrepresentation against Morgan Stanley broker Pawan Passi have brought block trading practices under intense regulatory scrutiny. For investors affected by these allegations, or anyone concerned about the integrity of institutional trading, understanding the specifics of the case may help to understand what to do next.
If you or someone you know has been impacted by Pawan Passi or another broker, don’t hesitate to reach out to Meyer Wilson today. Our attorneys are experienced in broker misconduct cases and will help to guide you through the process with a free consultation.
Allegations Against Pawan Passi: Confidentiality Violations
From June 2018 to August 2021, Pawan Passi (CRD#: 5527731), the former head of the equity syndicate desk at Morgan Stanley, allegedly disclosed confidential information about upcoming block trades to select investors. This conduct reportedly violated both firm policy and client confidentiality agreements.
According to the SEC and DOJ, this misuse of non-public information allowed hedge funds and other institutional clients to profit in excess of $100 million by front-running large stock trades. These block trades were supposed to remain confidential until execution. Instead, the advance disclosures gave certain clients unfair advantages—at the expense of market integrity and other investors.
The charges against Passi and Morgan Stanley raise serious concerns:
- Violation of client trust: Confidential block trade details were allegedly shared inappropriately.
- Market manipulation: Investors may have traded ahead of large stock transactions for profit.
- Broad financial impact: These trades affected market pricing and fairness.
As of January 12, 2024, Pawan Passi has been barred by the SEC for at least one year following these allegations.
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FINRA Rule 2020: Misrepresentation and Fraud
The alleged actions also implicate FINRA Rule 2020, which prohibits the use of manipulative, deceptive, or fraudulent devices in connection with the purchase or sale of any security.
Under this rule, brokers are prohibited from:
- Making false or misleading statements.
- Engaging in insider trading or front-running.
- Omitting key information that investors would reasonably rely on.
Passi’s reported conduct—sharing confidential block trade details that enabled illicit gains—is an example of how such violations can cause widespread damage. Firms also have a duty to supervise and implement safeguards to prevent these kinds of breaches. When they fail to do so, they may also be held liable.
Understanding Block Trades and Investor Risk
Block trading refers to the private negotiation of large stock orders, typically 10,000 shares or more. These transactions are commonly executed outside of public exchanges to minimize disruption in market prices. While often handled in “dark pools” or through block trading desks, the goal is discretion—not manipulation.
Problems arise when:
- Brokers leak block trade information to select investors.
- Traders act on that information before the market adjusts.
- Other investors unknowingly buy or sell at manipulated prices.
When brokers fail to protect the confidentiality of these transactions, it undermines trust and can lead to significant financial harm for ordinary investors who are unaware of what’s happening behind the scenes.
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How Meyer Wilson Can Help Investors Affected By Pawan Passi
If you’ve experienced investment losses you believe may be related to unfair trading practices, misrepresentation, or broker misconduct related to Pawan Passi, Meyer Wilson can help you understand your legal options. Our firm has recovered millions for investors who were harmed by unethical practices, including unauthorized trading and misrepresentation.
Our team can help you:
- Review your account for evidence of misconduct or misrepresentation.
- Evaluate whether you were affected by block trading violations.
- Pursue recovery through arbitration or legal claims when appropriate.
Contact our team today. We represent investors nationwide and only charge a fee if we recover money for you.
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Frequently Asked Questions
What is a material misrepresentation?
A material misrepresentation is a false or misleading statement (or omission) about an important fact that a reasonable investor would rely on. These are often used to deceive clients about the risks or value of an investment.
Are block trades illegal?
No. Block trades are legal and commonly used in institutional investing. However, leaking information about them or using that information for personal gain is illegal.
Recovering Losses Caused by Investment Misconduct.
