Morgan Stanley has announced it is conducting an in-house conflict-of-interest probe. The firm’s chief executive officer Philip Purcell, speaking at the Securities Industry Association’s national conference in Florida this past week, said Eric Dinallo, a former aide to Eliot Spitzer, would be leading the “conflicts examination effort…with the support of every business leader in our firm.”

Separately, Merrill Lynch engaged in some house cleaning of its own, fining two senior executives responsible for supervising a trio of brokers fired for allowing hedge funds to engage in late trading.

Dinallo, who joined Morgan Stanley in September, was instrumental in Spitzer’s investigations into the research and investment banking malpractices at brokerage firms.

Spitzer’s investigation accused firms, including Morgan Stanley, Merrill Lynch and Citigroup, of allowing investment-banking concerns to corrupt the research of their analysts. The firms settled in April for $1.4 billion and a package of reforms intended to prevent these abuses in the future. Morgan Stanley agreed to pay $125 million for its part.

Separately (and more recently), the NASD fined the firm $2 million for encouraging managers and brokers to compete over the sale of in-house mutual funds. When it announced the fines in September the NASD said Morgan Stanley “failed to have any supervisory systems or procedures in place to detect and prevent this widespread misconduct.”

In his speech to the SIA, Purcell referred to a “conflicts crisis” on Wall Street and said there is no easy way to fix the problem. “The conflicts are not always readily apparent,” said Purcell. “So the first step in disclosure is disclosure to ourselves.”

Morgan Stanley did not wish to comment further on the probe. Brokers at the firm were either unaware of the probe or tightlipped about its progress.