Morgan Stanley Subpoenaed In Facebook Overcharging Case

[travelin cat]

Massachusetts' top securities regulator has subpoenaed Morgan Stanley related to allegations that it gave some clients negative information about Facebook before last week's initial public offering.

[huffingtonpost.com...]

[johnhh]

or a real hit - makes you cry [independent.co.uk...]

or told you so [english humour]

[Leosghost]

it gave some clients negative information about Facebook

How could they do otherwise..

[Marshall]

And this should surprise the public why?

Again, let me check my crystal ball. Ah yes, there it is.

Marshall

[jimbeetle]

it gave some clients negative information about Facebook

How could they do otherwise..

The keyword here is some. Some it did, some it did not.

[travelin cat]

The problems here are that they (allegedly) not only gave inside info, but they were selective on who they gave the information to.

So Morgan Stanley has two major issues, first, did they break any rules/regulations and second, messing with some of your clients by not giving them heads-up would seriously derail relationships with some of their client base.

[Strapworks]

From what I have heard it doesn't actually break any rules because of how the SEC has it set up.
But, morally, they legitimately held back information so as to sell more stock at a higher price. They shared the information with those they didn't want to piss off and loose as customers, everyone else was just a nice commission.
Common Sense says the only reason Facebook got the investors they did in the first place was because those companies knew they would eventually screw someone else for a profit. IPO FTW!

[lexipixel]

But, morally, they legitimately held back information so as to sell more stock at a higher price.

...they also "propped up" the price by buying shares when FB was tanking below the opening price. But that news didn't come out until after the closing bell, after other people who didn't have the luxury of a $175M underwriter's fee to work with had already overpaid.

[graeme_p]

@travelin cat, it is not inside info.If it was, the analysts should not have had it anyway and that would be more serious.

What happened is that they changed their minds about Facebook's future prospects (i.e. faced reality) and told favoured clients, while deliberately not telling other clients so as not to spook the market.

The implication is that the analysts were told/pressurised by the investment bankers doing the IPO to publish optimistic forecasts until the IPO was done, but at the same time they had their own big clients to look after, so they looked after important clients and let the plebs buy the junk. Try proving it. The inevitable consequence of a few big banks dominating sell-side research and big deals (IPOs, M & A etc.).

[Kendo]

ROFL

It's like sex. Everyone wants it because it's fun and free. But you don't see anyone trying to float it on the stock exchange.

Now why is that?

[Demaestro]

From what I have heard it doesn't actually break any rules because of how the SEC has it set up.

That may be true but that won't protect them from the civil lawsuits where they breached the contracts they had with their own clients.

It would be the same thing if any salesmen lied to you about the features of a product and you bought that product based on their misrepresentation. It may not be illegal in some places, but that won't save the company who told their sales team to outright lie to consumers about a products' worth to sell it at an inflated cost.

This is basic consumer protection and in any other sector almost anywhere it would be a crime. The only difference here is this is the financial sector where lobbyists have paid off policy makers to remove those protections so they can lie and steal from their own customers and point to laws they wrote to show they did nothing wrong.

[graeme_p]

It's like sex. Everyone wants it because it's fun and free. But you don't see anyone trying to float it on the stock exchange.

IT cannot be floated as long as its free: a brothel was floated in Australia some years ago.