Morgan Stanley to Cut Jobs, More Pain Ahead

Morgan Stanley plans to slash 1,600 jobs in what may be just the beginning of a new round of layoffs at large investment banks, this time driven by a deeper reassessment of Wall Street businesses in the face of new regulations and capital standards.

Morgan Stanley, the sixth-largest U.S. bank by assets, plans to begin letting go of the employees, many of whom work in its securities unit, starting this week, More...

Morgan Stanley Cut Facebook Estimates Just Before IPO?

When I posted last week that the Facebook IPO was an opportunity for fraud, and quoted Jim Sallah, the well-known Boca Raton securities attorney, I was talking about stock scammers, not major brokerage firms.
Reuters is reporting, under a headline Morgan Stanley Cut Facebook Estimates Just Before IPO that in the run-up to Facebook's $16 billion IPO, Morgan Stanley the lead underwriter on the deal, unexpectedly  told some of its clients that the firm was reducing its revenue forecasts for the company.

It remains to be seen whether that was fraudulent conduct, but that information, if true, is certainly going to attract the interest of regulators and customer attorneys. The impact of such a statement, in particular coming from the lead underwriter might have contributed to the weak performance of Facebook shares, which sank on Monday and Tuesday - their second and third days of trading - to end more than 18 percent below the IPO price.

Institutions and major clients generally enjoy quick access to investment bank research, while retail clients in many cases only get it later. According to the article, it is unclear whether Morgan Stanley only told its top clients about the revised view or spread the word more broadly. The company declined to comment when asked who was told about the research.

FINRA Fines Citi, Morgan, UBS and Wells $9.1 Million for ETFs

FINRA announced that it has fined Citigroup Global Markets, Inc; Morgan Stanley & Co., LLC; UBS Financial Services; and Wells Fargo Advisors, LLC a total of more than $9.1 million for selling leveraged and inverse exchange-traded funds (ETFs) without reasonable supervision and for not having a reasonable basis for recommending the securities. The firms were fined more than $7.3 million and are required to pay a total of $1.8 million in restitution to certain customers who made unsuitable leveraged and inverse ETF purchases.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "The added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers. Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products."

We have represented investors who lost significant sums of money in leveraged ETFs, which are securities which seek to deliver multiples of the performance of the index or benchmark they track. Inverse ETFs seek to deliver the opposite of the performance of the index or benchmark they track, profiting from short positions in derivatives in a falling market.

FINRA found that from January 2008 through June 2009, the firms did not have adequate supervisory systems in place to monitor the sale of leveraged and inverse ETFs, and failed to conduct adequate due diligence regarding the risks and features of the ETFs. As a result, the firms did not have a reasonable basis to recommend the ETFs to their retail customers. The firms' registered representatives also made unsuitable recommendations of leveraged and inverse ETFs to some customers with conservative investment objectives and/or risk profiles. Each of the four firms sold billions of dollars of these ETFs to customers, some of whom held them for extended periods when the markets were volatile.

 More...

SEC Charges Morgan Stanley Investment Management for Improper Fee Arrangement

The SEC charged Morgan Stanley Investment Management (MSIM) with violating securities laws. This occurred in a fee arrangement that repeatedly charged a fund and its investors for advisory services from a third party that they weren’t actually receiving.

The SEC’s investigation found that MSIM represented to investors and the fund’s board of directors that it contracted a Malaysian-based sub-adviser to provide advice, research and assistance to MSIM. In reality, the sub-adviser did not provide these purported advisory services, yet the fund’s board annually renewed the contract based on these ghost services for more than a decade. The total cost was $1.845 million to investors.

MSIM has agreed to pay more than $3.3 million to settle the charges.

“We want to take the advisory fee setting process out of the shadows by scrutinizing the role of investment advisers and fund board members in vetting fee arrangements with registered funds,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

SEC Charges Morgan Stanley Investment Management for Improper Fee Arrangement

Mack to Leave Morgan Stanley

Shakeups in the wirehouse world are becoming an every-day occurance. The WSJ is reporting that John Mack will resign as Chairman of Morgan Stanley at the end of the year. The last couple of years have been turmoil at Morgan Stanley, with infighting among the various factions at the firm from the Mack camp vs. the Purcell camp.

That infighting resulted in terminations, early resignations and huge distractions to the firm and its management. Add to that the mortgage trading which almost closed the firm, and the firm's involvement in the auction rate securities debacle, and it is no wonder why the firm's stock price has been crushed.

But all will be well for Mr. Mack. The article also mentions that Mack is going to write a book about his career, and is considering a goverment career, perhaps as Treasury Secretary.

Morgan Stanley's Mack to Leave at Year's End - WSJ.com

Mack to Leave Morgan Stanley

Shakeups in the wirehouse world are becoming an every-day occurance. The WSJ is reporting that John Mack will resign as Chairman of Morgan Stanley at the end of the year. The last couple of years have been turmoil at Morgan Stanley, with infighting among the various factions at the firm from the Mack camp vs. the Purcell camp.

That infighting resulted in terminations, early resignations and huge distractions to the firm and its management. Add to that the mortgage trading which almost closed the firm, and the firm's involvement in the auction rate securities debacle, and it is no wonder why the firm's stock price has been crushed.

But all will be well for Mr. Mack. The article also mentions that Mack is going to write a book about his career, and is considering a goverment career, perhaps as Treasury Secretary.

Morgan Stanley's Mack to Leave at Year's End - WSJ.com

Morgan Stanley Plans to Double High Net Worth Advisors

Morgan Stanley Smith Barney announced the integration of Smith Barney’s Citi Family Office into its own ultra-high-net-worth division, which will now be called Morgan Stanley Private Wealth Management. Unlike the old family office, the newly combined unit will exclusively serve clients with a minimum of $20 million in assets. Morgan said it plans to add more advisors to PWM through a combination of “organic growth and selective acquisitions.” More>>>

Morgan Stanley Smith Barney

The joint venture between Morgan Stanley and Smith Barney closed today, creating a massive brokerage firm with over 18,000 financial advisors and 1,000 branch offices.

According to press reports, the joint venture will handle each firm's retail operations, which each firm's institutional business will remain separate, although institutional will execute is orders through the joint venture.

What remains to be seen is the effect of the joint venture, if any, on existing relationships between brokers and their respective firms.