Federal prosecutors are investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against, people familiar with the matter say, in a step that intensifies Washington's scrutiny of Wall Street in the wake of the financial crisis.

Morgan Stanley arranged and marketed to investors pools of bond-related investments called "collateralised debt obligations," or CDOs, and its trading desk at times placed bets that their value would fall, traders say. Investigators are examining, among other things, whether Morgan Stanley disclosed its twin roles.