Written Complaint Against Morgan Stanley. Securities and Exchange Commission Chairman William Donaldson fired off a written complaint to Morgan Stanley (MWD) Chairman and Chief Executive Philip Purcell for suggesting a $1.4 billion Wall Street settlement shouldn’t concern retail investors.
In a letter released by the SEC Thursday, Mr. Donaldson told Mr. Purcell he is “deeply troubled” by his comments on the landmark settlement announced Monday.
‘Morgan Stanley’ was one of 10 Wall Street firms to settle with the SEC, states and self-regulatory organizations, ending investigations into allegations that analysts issued biased research reports to please investment-banking clients.
“The allegations in the Commission’s complaint against ‘Morgan Stanley’ are extremely serious,” Mr. Donaldson wrote. He said Mr. Purcell’s reported comments show “a troubling lack of contrition” and raise questions about Morgan Stanley’s commitment to investors.
Mr. Donaldson also reminded Mr. Purcell that under the terms of the settlement, Morgan Stanley agreed it wouldn’t admit to or deny the allegations raised in the settled civil lawsuit.
“I caution you that the Commission would regard a violation of that obligation as seriously as a failure to comply with any other term of the settlement,” Mr. Donaldson wrote.
A Morgan Stanley spokeswoman declined to comment.
An SEC spokesman declined to elaborate on Mr. Donaldson’s concerns about ‘Morgan Stanley’. A spokesman for New York State Attorney General Eliot Spitzer wasn’t immediately available to comment.
Mr. Purcell spoke to an institutional investors’ conference and his comments were published in the New York Times on Wednesday.
According to the newspaper, Mr. Purcell said, “I don’t see anything in the settlement that will concern the retail investor about Morgan Stanley.”
‘Morgan Stanley’ is paying $50 million to federal and state regulators to settle allegations of analyst conflicts, and will pay $75 million over five years to provide independent research to clients.
The SEC claims Morgan Stanley’s investment bankers had an inappropriate influence over the company’s analysts. It also charged that the company failed to disclose paying $2.7 million to other firms for issuing research on Morgan Stanley’s investment banking clients.
‘Morgan Stanley’ paid more than two dozen banks altogether, forking over $816,000 to seven firms for research on Agile Software Corp. (AGIL), and making $670,000 of payments to three banks that issued research on Veritas Software Corp. (VRTS), the SEC said.
Although offering documents identified the banks as having received payments, they didn’t specify that payments were made for research, the SEC said.
In a letter to Mr. Donaldson, Morgan Stanley’s CEO backed off his earlier remarks.
“I deeply regret any public impression that the Commission’s complaint was not a matter of concern to retail investors,” Mr. Purcell wrote Thursday.
No one at ‘Morgan Stanley’ will violate the terms of the settlement by denying the allegations, Mr. Purcell assured the SEC chairman, adding, “We fully endorse the settlement.”
Need Legal Help Regarding Morgan Stanley?
New York | Brooklyn | Queens | Long Island | New Jersey | Florida