Morgan Stanley, which was the lead underwriter for the
hugely messed-up initial public offering of Facebook Inc(NASDAQ:FB) in May this
year, is trying to squash arbitration proceedings by an aggrieved investor who
had blamed the firm for the losses she suffered in the issue.
According to the complaint filed by the investor, Uma
Swaminathan, with the Financial Industry Regulatory Authority, Morgan Stanley
as the lead underwriter had not informed all investors concerned that it
planned to downgrade its outlook on Facebook prior to its IPO.
Swaminathan who resides in New Jersey has also named
other companies such as Vanguard, Facebook, Nasdaq OMX Group and the Nasdaq
stock exchanges in her complaint.
Swaminathan's is not the only complaint filed against
Morgan Stanley, which is facing litigations from several investors who have
more or less alleged the same things as Swaminathan.
However according to a Reuters report, a successful
outcome for Morgan Stanley could be precedent for preventing other investors
from using FINRA's arbitration unit as a path to resolve Facebook-related legal
disputes with certain entities.
This means that it is vital for Morgan Stanley to get
this case halted at the outset so that it does not become a precedent for other
aggrieved investors as well.
Facebook's IPO was mired in a trading glitch with the
Nasdaq stock exchange due to which investors orders could not be executed for
some time.
With Facebook shares failing to hold on to its debut
price of $38 a share subsequently, more investors have filed suits accusing the
investment bankers involved in the issue and the company itself of hiding vital
information especially with regard to its outlook.
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