Morgan Stanley has agreed to pay a $2 million fine to settle an investigation by Massachusetts securities regulators into the trading activities of First Republic Bank's former CEO, James Herbert, in the months leading up to the bank's collapse in 2023. Herbert sold nearly $7 million worth of shares, avoiding a complete loss when the bank was deemed insolvent. The settlement highlights that Morgan Stanley lacked adequate processes to review insider trading and failed to conduct reasonable post-trade reviews. The firm neither admitted nor denied the violations but has committed to ending non-compliant practices and conducting an internal review of its policies and procedures.