Morgan Stanley poked by a $5m fine for Facebook deal influence

City A.M. Reporter
MORGAN Stanley, the lead underwriter for Facebook’s initial public offering (IPO), will pay a $5m (£3m) fine to settle charges that its bankers improperly influenced its research analysts when the internet company went public.

Massachusetts’ top securities regulator, William Galvin, charged yesterday that Morgan Stanley helped Facebook disclose sensitive financial information selectively, perpetuating what he calls “an unlevel playing field” between Wall Street and Main Street.
Morgan Stanley has been criticised since the social media company went public in May for having revealed revised earnings and revenue forecasts to select clients before the media company’s $16bn IPO. A Morgan Stanley spokeswoman did not immediately return a call seeking comment.

Galvin, who has been aggressive in policing how research is distributed on Wall Street ever since investment banks reached a global settlement in 2003, said the bank violated that settlement. He fined Citigroup $2m over similar charges in late October.

Massachusetts says that a senior Morgan Stanley banker helped a Facebook executive release new information and then guided the executive on how to speak with Wall Street analysts about it.

The banker “was not allowed to call research analysts himself, so he did everything he could to ensure research analysts received new revenue numbers which they then provided to institutional investors,” Galvin said in a statement.

Retail investors were not given any similar information, Galvin said, saying this case illustrates how institutional investors often have an edge over retail investors.