Morgan Stanley has agreed to pay about $3.2 billion to settle charges that it misled investors in residential mortgage-backed securities. The charges come from an investigation by the Residential Mortgage-Backed Securities Group that serves to prove potential misconduct from the financial crisis. $2.6 billion of the settlement will go towards resolving the claims by the US Department of Justice, while another $550 million will go to New York and another $22.5 million will go to Illinois. Morgan Stanley is accused of misleading investors on the quality of the residential mortgages it was selling. As part of the settlement agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical information about the quality of the mortgage loans underlying its residential mortgage-backed securities and about its due diligence practices.