Morgan Stanley tries to halt investor's Facebook arbitration
By Suzanne Barlyn | November 7, 2012 7:42 AM EST
Lawyers for Morgan Stanley, a lead underwriter for the IPO, filed a complaint in federal court in Manhattan on Monday seeking an order to stop the arbitration as it relates to the brokerage, because Morgan Stanley says the investor is not its customer.
The complaint, filed in U.S. District Court for the Southern District of New York, alleges the investor ordered the Facebook shares through Vanguard Financial Group Inc, and is, therefore, not a Morgan Stanley customer.
The investor, Uma Swaminathan of East Brunswick, New Jersey, did not return a call requesting comment.
Swaminathan filed a claim in the arbitration unit of Financial Industry Regulatory Authority in July, according to Morgan Stanley's complaint. Spokespeople for Vanguard, Nasdaq and Facebook did not immediately respond to requests for comment.
Reuters was not able to immediately review the arbitration claim because FINRA, the securities industry's self-regulator, does not make them publicly available.
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, said Steven Caruso, a New York-based securities arbitration lawyer.
Pushback from firms involved in the IPO could leave investors who seek arbitration with only costly, longer court cases as a way to resolve any disputes, Caruso said.
In addition to Morgan Stanley, Swaminathan also named Vanguard, Facebook, NASDAQ OMX Group Inc
Facebook's May 18 debut was marred by trading glitches and confusion. The IPO also became mired in controversy as shareholders, in more than a dozen lawsuits, accused Facebook and its underwriters of obscuring the company's weakened growth forecasts ahead of the stock offering.
Other lead underwriters were JP Morgan Chase & Co
Nasdaq OMX Group has also been sued in court by investors who claimed the exchange operator was negligent in handling orders for Facebook shares.
Morgan Stanley's main argument for putting a stop to the arbitration is that Swaminathan does not have a retail brokerage account with the firm and "has not engaged in any securities or business dealings with the firm," according to the complaint.
Investors who have brokerage accounts typically agree, when signing account opening documents, to resolve legal disputes in FINRA's forum. Swaminathan, however, does not have such an agreement with Morgan Stanley, according to the complaint.
(Reporting By Suzanne Barlyn; Editing by Leslie Adler)
Most Popular Slideshows
- Jennifer Lawrence & Nicholas Hoult Allegedly Split: Mad Max Actor Cheats with Kristen Stewart & Riley Keough - Reports
- Taylor Swift Named Forbes' Second Highest Paid Country Musician [PHOTOS]
- Forever Lost: Indescribable Anguish for Malaysia Airlines MH17 Families, Remains of Some Victims May Never Be Found (PHOTOS)
- Lunch with the Gods: Pope Francis Eats with Vatican Workers in Cafeteria
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Google Nexus 6, 8 with Android L on Release Date Promises Killer Mobile Device Experience
- iPhone 6 Release Date Relevance to iOS Newbies: Specs Meaning, Price Considerations
- Killer Whales Gobble Japanese Whaling Crew
- HTC One M8 Android 4.4.3 KitKat Update Roll Out, Introducing the HTC One Remix
- 12-inch MacBook Apple Retina and 2014 MacBook Pro to Feature Liquid Sensors, Release in October
- The Pirate Bay Releases ‘The Mobile Bay’: Mobile Torrent Download Made Easier but Remains Illegal
- 5 Marketing Nuggets We Can All Learn From Lady Gaga