Morgan Stanley is in talks to pay $500 million to settle a probe by New York's attorney general, the Wall Street Journal (WSJ) reported late Sunday.
The office of New York Attorney General, Eric Schneiderman, has alleged that the bank misled investors in mortgage bonds which lost value during the financial crisis.
Citing people familiar with the matter, the WSJ said a deal with Schneiderman would likely include some cash from Morgan Stanley as well as consumer relief.
An agreement between the New York bank and Schneiderman's office isn't imminent, however, according to the report, and the terms under discussion have changed.
The firm is scheduled to report first-quarter results Monday and could update investors on its legal situation then. Morgan Stanley was not immediately available for comment when contacted by CNBC.