Morgan Stanley agreed to pay $275 million in fines to settle the investigation, according to a regulatory filing made late Tuesday. The SEC's commissioners have not agreed to the settlement yet, and the bank said it had no assurances that the deal would be approved.
The bank reached the preliminary agreement on Jan. 30, it said, and would not admit or deny wrongdoing as part of the deal.
The SEC has been investigating Morgan Stanley, like many other Wall St. firms, for their practices leading up to the subprime mortgage crisis. The products in question, in Morgan Stanley's case, are residential mortgage bond products that were sponsored and underwritten by Morgan Stanley in 2007.
The $275 million would be a combination of giving up profits that were earned on the sale of the bonds as well as fines and penalties, the bank said in the filing.
Like many other banks, Morgan Stanley's legal expenses ballooned last year because of settlements related to the financial crisis. Morgan Stanley paid $1.95 billion in litigation expenses in 2013, more than triple what it paid in 2012. In 2011 it had $151 million in legal expenses.
In the regulatory filing, the company said its future litigation expenses will be "elevated" for the foreseeable future as it continues to reach settlements with state and federal agencies as well as private investors.
Morgan Stanley said the $275 million payment would be charged to the firm's 2013 results, and would not impact the company's results this year.
An SEC spokesman declined to comment.
AP Business Writer Marcy Gordon contributed to this report from Washington, D.C.