Morgan Stanley & Co. LLC (“Morgan Stanley”) entered into a December 17, 2012 Consent Order (“2012 Consent Order”) with the Massachusetts Securities Division in connection with its role as lead underwriter in the Facebook, Inc. initial public offering (“IPO”). According to the 2012 Consent Order, Massachusetts alleged that Morgan Stanley violated Massachusetts securities laws and failed to comply with a prior consent order.
In October 2003, Morgan Stanley entered into an Administrative Consent Order with Massachusetts (“2003 MSD Consent Order”) to settle allegations that, from 1999 to 2001, research analysts were subjected to inappropriate influence by investment banking employees at the firm. In the 2003 MSD Consent Order, Morgan Stanley agreed that it would ensure that its investment banking employees did not attempt to influence research analysts with the intent of obtaining or retaining investment banking business.
In the 2012 Consent Order, Massachusetts securities regulators alleged that a senior investment banker at Morgan Stanley drafted a script containing revised revenue estimates that was used by Facebook officials during private calls with research analysts on May 9, 2012. Massachusetts alleged that the information was not given to all investors and was not disclosed in a May 9 SEC filing. Massachusetts claimed that the revenue estimates prepared by the Morgan Stanley investment banker were lower than those disclosed to investors in the SEC filing.
In the 2012 Consent Order, Morgan Stanley neither admitted nor denied the allegations but agreed to pay a $5,000,000 penalty to settle the state’s claims.