Arbitration Case of Facebook Being Halted by Morgan Stanley

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By Industry Leaders Magazine | November 10, 2012 11:59 AM EST

Industry Leaders Magazine

Morgan Stanley according to the reports is continuing its efforts to halt the case of securities arbitration that was filed by one of the investors of Facebook Inc. The Facebook arbitration case holds Morgan Stanley and some other parties responsible for losses it had suffered during the initial part of the public offering of the biggest social network. Morgan Stanley wants to halt Facebook case in which damages amounting to $1.9 million are being charged.

The Report:

Morgan Stanley, which is a leading underwriter for the IPO, informed that the investor of Facebook Inc. was not its customer, and that the lawyers of the bank had filed a complaint in the federal court of Manhattan and had asked for an order to stop the Facebook arbitration case. The complaint, which has been filed in the District Court of US for the Southern District of New York, states that the investor is not a customer of the firm as the investor used the Vanguard Financial Group Inc. to order shares of Facebook Inc. On being called for a comment, the investor named Uma Swaminathan of East Brunswick, New Jersey, has chosen not to respond. The investor, according to the Facebook arbitration case that she filed, said that Morgan Stanley had not informed all the investors that it was degrading its outlook on Facebook Inc. prior to the IPO. She also stated in the complaint with the Financial Industry Regulatory Authority that as a result of this she could not have canceled her orders for shares. Regarding the Facebook shares case Swaminathan has also mentioned the names of Vanguard, NASDAQ MX Group Inc. and Facebook Inc. apart from Morgan Stanley.

The standpoint of the accused:

NASDAQ and Facebook Inc. do not hold FINRA licenses and are hence not required to arbitrate in its forum, but there are quite a few of Vanguard that have the FINRA license, that is the self regulator of the industry. Spokesmen of Vanguard, Facebook and NASDAQ were not available for comment on the Facebook shares case. While Morgan Stanley wants to halt Facebook case, lawyers and other authorities believe other successful outcomes for Morgan Stanley could be to hinder other investors from using the arbitration unit of FINRA in order to resolve the Facebook shares case. Swaminathan in her arbitration request said that Vanguard had failed to respond to her request for cancellation of her order for the shares in spite of the fact that the stock had failed to start its trading on time.

Morgan Stanley's point of view:

While Morgan Stanley wants to halt Facebook case, its primary argument is that Uma Swaminathan neither holds retail brokerage with their firm nor is she engaged in any sort of business or security dealings with it. Investors ,who are hold brokerage accounts, normally have documents by means of which they can resolve their disputes in the FINRA forum. But Swaminathan has no such contract with Morgan Stanley. Incidentally Swaminathan who is a widow and a retired teacher had put all her life savings in this investment as it is stated in her complaint in the Facebook shares case.

Industry Leaders Magazine

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