As part of the proposed settlement, the New York firm agreed to institute programs designed to improve employee diversity, The Wall Street Journal reported Tuesday. Morgan Stanley also agreed to significantly change its power ranking system, which ranks brokers on performance factors to determine how departing brokers' accounts are distributed.

In the suit, about 1,000 class-action claimants alleged Morgan Stanley discriminated against black and Latino brokers and broker trainees in business, compensation and other employment opportunities on the basis of race and ethnicity. Originally filed as a gender discrimination case by a white female broker, the suit later was amended into a race-and-gender bias case after a black broker claimed the firm discriminated against him on the basis of color.

The document outlining the settlement was filed Monday at the U.S. District Court at the Northern District of California. The court must approve the proposed settlement terms, and is expected to reach its decision in late November.