Nine members of Morgan Stanley’s US equity derivatives and structured product team quit to join Wachovia today. They join part of a staffing exodus from the US investment bank that its senior executives hope will be stemmed by yesterday’s resignation of embattled chief executive Philip Purcell.Three Morgan Stanley managing directors – Ajay Khanna, Richard Sandulli and Richard Silva – will join Wachovia’s equity division, as well as six structured products professionals – Don Brudie, George George, David Haynes, Meghan Maloney, Scott Miller and William Threadgill.
Khanna, formerly an academic, was head of North America equity derivatives trading at Morgan Stanley; Sandulli was co-head of US institutional and retail structured derivatives, as well as head of equity products innovation, and Silva was co-head of US institutional and retail equity structured products.
Dozens of executives have left Morgan Stanley in recent months, including managing director Thomas Bruch, who left on June 6 for insurer AIG's financial products division. Bruch has worked in derivatives for 24 years, most recently selling execution products and customised financing to hedge funds.
But in a conference call on June 13, Purcell defended his record, saying: “The management will remain in place – I hope people will rally around the leaders they have. The trend on defections is not different from prior years for managing directors – the difference is that this year every person who leaves is in the newspapers.”
Purcell’s departure follows months of criticism, starting on March 3, with an open letter voicing concern about the company from eight former executives, who have since moved on to advocate the demerger of the bank’s institutional and retail arms – effectively reversing the 1997 merger between Morgan Stanley and Purcell’s Dean Witter Discover & Co, which brought Purcell to the top seat at the merged company.
The bank has also been forced to warn that its earnings in the second quarter of the year will be 15-20% lower than last year – 88-93.5 cents per share, rather than $1.10 per share.
No successor has been announced, and Purcell will stay on until one is found, although he will leave before Morgan Stanley’s next annual meeting in March 2006.
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