Morgan Stanley has settled a sex discrimination lawsuit before a trial began, agreeing on Monday to pay US$54 million, and adopt changes to its diversity practices.

The firm was sued by the U.S. Equal Employment Opportunity Commission, in a suit filed back on Sept. 10, 2001. It alleged that the firm discriminated against Allison Schieffelin, a former convertible bond sales rep, and as many as 100 other women in the company’s Institutional Equity Division on the basis of their sex. The suit also alleged that Morgan Stanley retaliated against Schieffelin, and ultimately fired her, after she voiced her opposition to discriminatory practices at the firm.

Testimony was set to start Monday, with Schieffelin as one of the first witnesses. However, it all went away with the large settlement agreement. Bloomberg reports that Schieffelin will get US$12 million. “All I want to say is I’m so happy that there’s a great settlement that’s good for everybody,” Schieffelin told reporters.

The firm denied that it had engaged in any discrimination. Still, along with the financial penalty it also agreed to hire an ombudsman to ensure diversity, and to engage an external party to oversee its performance.

EEOC lawyer Elizabeth Grossman said the agreement may spur other women who work in the financial services industry, as well as members of racial minorities, to come forward with claims, Bloomberg says. “Discrimination is very much a problem on Wall Street,” she said.

The EEOC charged Morgan Stanley with having engaged in a pattern or practice of discrimination against women in the Institutional Equity Division who held positions as associate, vice president, principal, and managing director by compensating them less than their male colleagues and by limiting their opportunities for professional advancement.

According to Spencer Lewis, Jr., director of the agency’s New York District Office, which investigated and attempted to settle the case prior to filing suit, “Morgan Stanley systematically denied opportunities for equal compensation and advancement to a class of professional women. By filing this pattern or practice case the EEOC seeks to remedy these illegal practices and send a message that discrimination will not be tolerated in this or any other industry.”