$5 Million Fine on Morgan Stanley over facebook IPO – C

by Tom Carlson | Wednesday, Dec 19, 2012 | 616 views

Morgan Stanley who is handling Initial Public Offering of Facebook Inc (NASDAQ:FB) has come up with a deal that cost investors billions of dollars. The bank has been fined with a penalty worth $5 million by Massachusetts regulators. According to a document with William Galvin who is the Secretary of the Commonwealth, Facebook Inc (NASDAQ:FB) previous treasurer used to provide the latest information about the revenue outlooks of the company to various research analysts before the release of the IPO. Charges of dishonesty, violations of ethics and lack of supervision of employees have been framed against Morgan Stanley.

Morgan Stanley in 2003 agreed to revamp internal control after finding out that a few firms allow investment bankers to influence an analyst research. The Massachusetts through a consent order gave a detailed description of how Facebook Inc (NASDAQ:FB) on the advice of Morgan Stanley alerted investors about negative revenue trends in terms of mobile advertisement. Facebook Inc(NASDAQ:FB) treasurer spoke to research analysts and explained that how this will have a huge impact on revenue of second quarter.

As per the order Morgan, Stanley has been found guilty about the violations of securities law by indulging in unethical practices. Galvin, announced the settlement and even criticized the Morgan Stanley for helping Facebook Inc (NASDAQ:FB) in providing the analysts with more-detailed information compared to the information received by the investors.

Specific numbers were given to the analysts in contrast to the retail investors who were left in vague; Galvin commented in a statement. Morgan Stanley neither admits nor deny the claims made by Galvin. The investment banker involved has not been named in the consent order. However, the order clearly states that he worked for Morgan Stanley since May 1995. According to the records of the Financial Industry Regulatory Authority, the investment banking technology co-head, Michael Grimes helped lead the IPO. The records clearly tell that he joined the firm in May 1995. Michael Grimes is not responding to any message for a comment. Mary Claire Delaney, of Morgan Stanley, refused whether or not Grimes is the banker.

Delaney revealed in an email that they are very pleased to have reached a ground for settling this issue with the Secretary Galvin and The Massachusetts Securities Division. He further wrote: “Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable laws and regulations”. Ashley Zendy from Facebook Inc (NASDAQ:FB) IPO, Citigroup Inc. (NYSE:C) was imposed with a fine of $2 million by Massachusetts in October because a junior analyst disclosed confidential information. The U.S. Securities and Exchange Commission are keeping an eye on the IPO, a source close to the matter revealed.

The shares of Facebook Inc (NASDAQ:FB) were up by 3.59% to close at $27.71
The shares of Citigroup Inc. (NYSE:C) were up by 0.79% to close at $39.46.
The shares of Morgan Stanley. (NYSE:MS) were up by 3.18% to close at $19.12.

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