Morgan Stanley, which served as one of the lead underwriters for Facebook’s much-hyped initial public offering, is coming under scrutiny by the state of Massachusetts. The state fined Morgan Stanley $5 million, claiming that the financial firm helped Facebook leak sensitive information to select companies, creating an unfair playing field for investors.
As first reported by Bloomberg on Twitter, Massachusetts Secretary of State William Galvin criticized Morgan Stanley for unfairly releasing privileged information to select Wall Street investors. His office put out a full consent order, outlining the relationship Morgan Stanley has with the social network.
According to Reuters, a Morgan Stanley banker helped a Facebook executive release new information and then told the executive how to discuss it with Wall Street analysts. The banker, Galvin said, “was not allowed to call research analysts himself, so he did everything he could to ensure that research analysts received new revenue numbers, which they then provided to institutional investors.”
In a press release, Galvin claimed that Facebook’s initial outcast was optimistic, but later changed to reflect a downward stance. The secretary of state said that Morgan Stanley shared the updated revenue forecast with institutional investors, but not others, creating an unfair advantage.
Galvin addressed his claims in a statement:
The improper influence of Morgan Stanley’s investment bankers over research analysts is yet another example of an unlevel playing field, where Main Street investors were put at a significant disadvantage to Wall Street.
Readers: Do you feel that “Main Street” investors were unfairly left out?