Did Morgan Stanley err in hiring Goldman Sachs exec?

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Morgan Stanley's top bond trader, Glenn Hadden, once again finds himself under a regulatory and compliance cloud.

DealBook reports that regulatory officials are probing the trader over his trading in Treasury futures while at Goldman Sachs, where Hadden was a partner until joining Morgan Stanley last year.

"Specifically, regulators at the CME Group, which runs commodity and futures exchanges, are investigating whether Mr. Hadden's purchases or sales of Treasury futures late in the trading day manipulated closing prices in the market and, in turn, made other of his trades more profitable…Mr. Hadden, who is now the head of the global interest rates desk at Morgan Stanley, has been given formal notice by the CME that an inquiry is under way, meaning that it is at an advanced stage," Dealbook noted.

Hadden has long been known for his aggressive ways apparently. There's nothing to suggest that Morgan Stanley knew about any CME investigations when it brought Hadden on board. But it quite likely knew that Hadden has been on paid leave at Goldman Sachs since October 2009, the result of an inquiry by the New York Fed about some his trading activities.

"Traders at the Fed, according to people briefed on the matter, suspected that Goldman was trying to improperly profit from one of the federal government's bond-buying programs, which are aimed at stimulating economic growth," according to the Dealbook report.

No charges ever resulted. In bringing on such a controversial trader, the bank may end up with some explaining to do. Still, the situation is fluid and as of now, no charges have been filed.

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