The US financial regulator has launched an investigation into work carried out at Morgan Stanley’s Budapest office after concerns emerged that analysts in Hungary may have performed tasks for the London and New York teams that would normally have required separate licences.

According to Wall Street Journal, the US Financial Industry Regulatory Authority (FINRA) is examining Morgan Stanley’s investment banking analyst programme launched in Budapest two years ago.

The suspicion is that junior analysts working in the Hungarian office may have worked on transactions involving US and European clients without the financial licences typically required for such work in the United States or the United Kingdom.

Scandal surrounding Morgan Stanley’s Budapest office

Morgan Stanley launched its Budapest investment banking analyst programme in 2024, recruiting young European professionals to support the bank’s London and New York investment banking teams from Hungary.

This allowed the company to carry out back-office tasks, which are usually handled by expensive entry-level bankers in major Western financial centres, at a much lower cost in Budapest.

The original seven-member analyst team in Budapest has since grown to around 40 employees. Their work included building financial models, preparing presentations and assisting with transactions.

According to the Wall Street Journal, a former employee claims that these junior bankers in Hungary worked on deals involving American and European clients without the appropriate licences.

The newspaper reports that an internal Morgan Stanley document from 2024 clearly stated that Budapest-based employees were not allowed to carry out regulated financial activities. This reportedly included direct communication with clients and participation in customer due diligence procedures.

Despite this, sources cited by the Wall Street Journal claim that some analysts regularly received tasks linked to customer due diligence. One employee allegedly even received a copy of a hedge fund manager’s passport during a transaction. The report also says that Budapest-based employees were at times presented as members of the New York and London teams in presentations.

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Low salaries, night shifts and uncertain promises

One of the main attractions of Morgan Stanley’s analyst position in Budapest was the possibility that high-performing employees could later relocate to London or New York. Many young professionals were reportedly willing to accept the role despite salaries being far lower than those offered in Western financial centres.

Initially, employees earned around EUR 1,500 per month, which later rose to approximately EUR 1,700. Additionally, the prospect of a transfer to London or New York was also promoted to successful staff members.

At the same time, dissatisfaction grew over working conditions. Analysts supporting the New York teams often worked from the afternoon until the early hours of the morning Budapest time, while disputes also emerged over overtime pay. According to the Wall Street Journal, the bank eventually reclassified the analyst role as a managerial position, meaning employees lost their entitlement to overtime pay.

For many workers, the final straw came when it became clear that the previously suggested transfers to London or New York were far from guaranteed. According to the report, the mandatory period employees had to spend in Budapest was extended from two years to three, and even those who eventually made it to one of the major financial centres would have to start again from the very bottom of the career ladder. Following this, 20% of the analysts working there reportedly resigned.

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