Morgan Stanley Fined by Massachusetts over Facebook IPO

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On Monday, William F. Galvin, the secretary of the commonwealth of Massachusetts, accused Morgan Stanley of improperly influencing the way stock was offered during the Facebook IPO. Morgan Stanley was fined $5 million for violating securities laws in relation to the initial public stock offering of Facebook.

Galvin said in an interview, “The broader message here is we are going to use any means possible to enforce the strict code in place about giving out information … We want to get the message across that if Wall Street wants to get confidence back, they can’t disadvantage Main Street.”

A Morgan Stanley spokeswoman said, “Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws.” Though Morgan Stanley neither denied nor admitted any wrongdoing, the consent order of Galvin asserted that a senior Morgan Stanley banker had coached Facebook on methods to share information with stock analysts, which is a potential violation of a legal settlement with Wall Street.

  

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Galvin, further asserted in his consent order that while the banker did not directly contact the analysts, his actions had put ordinary investors at a disadvantage. Mr. Galvin said in a statement, “Morgan Stanley’s senior investment banker did everything but make the phone calls himself … He not only rehearsed with Facebook’s treasurer who placed the calls to the research analysts, but he also drafted the majority of the script Facebook’s treasurer utilized.”

The order mentioned that just 12 minutes after filing the amended prospectus before the IPO on May 9, the Facebook treasurer had phoned Wall Street research analysts from her hotel. She had a 15-minute conversation with Morgan Stanley people, and then spoke with the other banks. The order mentioned that the calls gave additional information including “quantitative information regarding Facebook’s second-quarter 2012 projections,” that were not included in the amended prospectus.