Morgan Stanley fined $5M in Facebook IPO

  • Article by: SUSANNE CRAIG AND , BEN PROTESS
  • Updated: December 17, 2012 - 8:38 PM

Investment bank was accused of improper contact with executives.

Morgan Stanley continues to deal with the fallout from the troubled debut of Facebook.

On Monday, Massachusetts' top financial regulator fined Morgan Stanley $5 million for violating securities laws, the first action against the investment bank stemming from its management of Facebook's initial public offering.

The regulator, William Galvin, the Massachusetts secretary of the commonwealth, accused the bank of improperly influencing the IPO process. A consent order alleges that a senior Morgan Stanley banker coached Facebook executives on how to share information with stock analysts who cover the social media company, a potential violation of a landmark Wall Street settlement in 2003.

Those actions, Galvin said, put ordinary investors who did not have access to the research at a disadvantage.

The consent order did not name the Morgan Stanley banker, referring to him only as "senior investment banker." But personal information detailed in the regulator's order indicated that it was Michael Grimes, one of the country's most influential technology bankers.

A Morgan Stanley spokeswoman said the company was pleased to put the matter behind it.

"Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws," she said.

Morgan Stanley, in settling the case, neither admitted nor denied guilt. Grimes, through the firm spokeswoman, declined to comment.

The Facebook public offering was one of the most highly anticipated stock launches of the past decade.

But it quickly turned into a debacle for Morgan Stanley. The stock's first day of trading was plagued with problems, and shares of Facebook quickly fell below its offering price of $38. The stock has continued to struggle, dropping as low as $17.55 a share. The shares closed at $26.75 on Monday.

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