Fallout from its management of Facebook’s initial public offering continues to haunt Morgan Stanley. Today, Massachusetts Secretary of the Commonwealth William Galvin fined the investment bank $5 million for violating securities laws governing how investment research can be distributed.
Galvin accused Morgan Stanley – the lead underwriter for Facebook’s initial public offering – of improperly influencing the IPO process.
As reported Dec. 17 by the New York Times, a consent order alleges that an unnamed senior investment banker at Morgan Stanley coached Facebook on how to share information with stock analysts covering the social media company, a potential violation of a landmark Wall Street settlement in 2003. Those actions put ordinary investors who did not have access to the research at a disadvantage.
In agreeing to the $5 million fine, Morgan Stanley did not admit to any wrongdoing.
Facebook’s initial public offering was one of the most highly anticipated stock launches of the past decade. The tide quickly turned, however, with the stock’s first day of trading plagued with problems. Shares of Facebook fell below its $38 offering price and continued to struggle in the months that followed. At one point, the stock was as low as $17.55. It’s currently trading at $26.70.
Meanwhile, in a press statement, Galvin called Morgan Stanley’s “improper influence” “yet another example of an unlevel playing field, whereMain Street investors are put at a significant disadvantage to Wall Street.”