A second insider trading scandal linked to Morgan Stanley, the investment banking giant, has erupted in the US.

A husband and wife were arrested and charged yesterday after allegedly netting nearly $600,000 (£300,000) of illicit profits from shares they bought in a takeover target.

The wife, Xujia “Jennifer” Wang, 31, was a former vice-president in the valuation review group of Morgan Stanley’s finance department.

The husband, Ruopian "Rubin" Chen, was a senior hedge-fund analyst at ING's New York office.

Their arrest came only hours after Randi Collota, a former Morgan Stanley rules compliance officer, and her husband pleaded guilty in a federal court in Manhattan for their role in a $15 million insider trading ring, which prosecutors say is the biggest since the deal boom of the 1980s.

The couple received kickbacks of $9,000 a time for handing out tips about pending mergers and acquisitions.

Announcing the case this year Michael Garcia, a US attorney, said that the scam reached not only into Morgan Stanley but also the offices of UBS.

Federal authorities have stepped up their investigations into insider trading given the surge in multimillion-dollar takeovers in the past year.

So far most of the cases have involved junior Wall Street staff, in stark contrast to the notorious schemes of the 1980s involving Ivan Boesky and Dennis Levine.

Mr Boesky was handed a three-and-a-half-year prison sentence and a $100 million fine in the mid-1980s.

According to a complaint filed yesterday against Ms Wang and Mr Chen, the couple set up an account in the name of Zhiling Feng, Ms Wang’s mother.

In December 2006 Ms Wang learnt that Morgan Stanley had been hired to consult on the potential acquisition of Genesis HealthCare, a nursing home business.

In a two-week spell over the new year, $47,705 of Genesis call options were purchased in the Zhiling Feng account.

On January 16 Genesis announced a takeover by two private equity firms. Less than a day later the options were sold for a $572,575 profit.

Linda Chatman Thomsen, the director of the enforcement division of the US Securities and Exchange Commission, said in a statement that yesterday’s arrests reflected the regulator’s “continuing crackdown”.

She added: “The commission simply will not allow industry professionals to illegally profit from their access to non-public information.”

A spokesman for Morgan Stanley said: “The alleged wrongdoing by a former employee of our firm is an egregious violation of Morgan Stanley’s values and policies.”

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