Morgan Stanley is reportedly facing at least two lawsuits and a U.S. Senate Committee hearing, all stemming from the recent Facebook IPO debacle. The suits allege that analysts at Morgan Stanley (MS) had lowered their second-quarter and full-year forecasts for Facebook in the days ahead of the IPO and shared their findings via phone calls with certain institutional investors, but not with the small retail investors. Morgan Stanley’s CEO says, “we did nothing wrong.”
Why any investor would willingly do business with Morgan Stanley is hard to understand given their track record of governmental violations and questionable business operations. Could it be perhaps that investors’ opinion of MS is based primarily on the image projected through their not inconsiderable budget for public relations, marketing and advertising rather then these public facts?
Morgan Stanley’s governmental investment violations with fines and/or restitution or penalties
- 2002 Illegal rewards for selling affiliated mutual funds $2.25 million
- 2003 Conflicts of interest research analysts $75 million
- 2003 Inappropriate influence and improper “spinning” $400 million
- 2003 Censure and penalty for illegal marketing of IPOs $100 million
- 2004 Failure to deliver documents to investors $13 million
- 2005 IPO Violations $40 million
- 2005 Failure to disclose info to mutual fund clients $6.25 million
- 2005 Willful violation of the Advisors Act of 1940 $208 million
- 2005 Failure to supervise its sales force $5 million
- 2006 Failure to maintain and enforce policies $10 million
- 2007 Failures for best execution $7 million
- 2007 Failure to supervise sales peoples deceptive actions $15 million
- 2007 Provided false information to regulators $12 million
- 2007 Failure to provide customers with required information $17 million
- 2005 Improper sales of securities $8.5 million
- 2008 Inappropriate sales of auction rate securities $35 million
- 2008 Misled tens of thousands of investors $100 million
- 2009 Failed to supervise sales people $5.4 million
All of the above can be confirmed in greater detail here.
Other Illegal Practices
In addition to violations of governmental investment regulations, Morgan Stanley has a history of violating the rights of women, minorities, teachers and others.
Morgan Stanley was sued for having engaged in a pattern of discrimination against women. In one case, Morgan Stanley agreed to pay $54 million to settle a sex discrimination suit, while a second sex-discrimination lawsuit was settled for $46 million.
In a national, class-action race discrimination lawsuit, Morgan Stanley was charged with engaging in race discrimination and paid $16 million.
The Missouri Department of Insurance filed a lawsuit alleging that Morgan Stanley had conflicts of interest that damaged the value of an insurance holding company. Morgan Stanley agreed to pay $95 million to settle fraud charges from its role in the company’s collapse.
Morgan Stanly was accused of fraudulently inducing bond insurer MBIA Inc (MBI.N) to insure $223.2 million of risky mortgage debt. Morgan Stanley reached a settlement with MBIA to resolve the litigation between the two companies.
In another case, Morgan Stanley was charged with excessive fees to the Indiana State Teachers Association.
What to do if you invest with Morgan Stanley
If you are an investor with Morgan Stanley and are uncertain as to how you are or will be treated, print this oath and ask your Morgan Stanley sales associate to sign it. If he or she refuses, now you know why.