NEW YORK — Morgan Stanley Chief Legal Officer Gary Lynch is stepping down from the position as the firm retools its legal department to better confront regulatory uncertainty facing Wall Street.
Lynch, a former Securities and Exchange Commission enforcement officer who joined Morgan Stanley in 2005, had been doing the job based out of London since May. The 59-year-old will retain the position of vice chairman and now focus on relations with European regulators, according to a memo reviewed by Dow Jones Newswires.
The move comes as James P. Gorman, who took over as chief executive in January, continues to put his stamp on the firm. He wanted Morgan Stanley's chief legal officer to be located in the U.S., complimenting the efforts of Chief Operating Officer Thomas R. Nides, who lives in Washington and commutes to New York, according to a person familiar with the matter.
Leading a pack of internal and external contenders to replace Lynch is Eric F. Grossman, who is currently Morgan Stanley's head of global litigation and general counsel of the Americas, according to a person familiar with the situation. Grossman, 43 years old, joined the firm in 2006 after serving as a senior partner with law firm Davis Polk and Wardwell.
Wall Street's biggest banks are facing unrelenting anger over the financial crisis and government bailouts, and that anger has intensified efforts on Capital Hill to overhaul the banking system. Legislators have outlined a number of financial industry proposals, including a tax on big banks, limits to how large they can grow, and a push to excise proprietary trading and private equity from banks.
The industry is also facing similar scrutiny in Europe, as well as an investigation in Washington by the Financial Crisis Inquiry Commission over what led to the industry's meltdown in 2008. Morgan Stanley converted into a bank holding company during the financial crisis, and also moved to broaden its revenue stream through a joint venture with Citigroup Inc.'s Smith Barney brokerage unit.
Gorman, who took over from John Mack as CEO, has been shuffling the firm's top ranks to face potential hurdles this year. He announced senior management changes, including bringing on Gregory Fleming as Morgan Stanley's new investment management and global research chief.
On Monday, Morgan Stanley announced that Jeffrey Shames, 54, a former CEO of MFS Investment Management, will be a senior adviser to Fleming. Edmond Moriarty, 49, a former senior vice president at Merrill Lynch, becomes the chief operating officer of Morgan Stanley Investment Management and the global research division. Both report to Fleming.