Entries in Morgan Stanley (12)


Morgan Stanley Fined for Role in Facebook IPO

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley is the first major financial entity to be sanctioned in relation to Facebook's IPO.

Massachusetts officials are fining Morgan Stanley $5 million for not disclosing a revenue shortfall with the public ahead of the social network's troubled IPO in May.

Massachusetts' secretary of the commonwealth, William F. Galvin, accused the bank of coaching Facebook in how to share information with analysts, putting ordinary investors without access to such information at a disadvantage, according to DealBook, a financial news site published by the New York Times.

According to DealBook, Morgan Stanley has neither denied nor admitted guilt in the case.

Copyright 2012 ABC News Radio


Morgan Stanley CEO Says Banking Industry Is 'Overpaid'

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley CEO James Gorman has folks in the banking sector buzzing with his comments that the industry is "still overpaid."

"There's way too much capacity and compensation is way too high," Gorman told the Financial Times. "As a shareholder I'm sort of sympathetic to the shareholder view that the industry is still overpaid."

A spokeswoman for Morgan Stanley declined to elaborate or make Gorman available for comment. Gorman's doing pretty well though. He received a $10.5 million pay package in 2011, a pay cut of 25 percent from 2010. He's was the 23rd highest-paid CEO in America last year, according to Bloomberg Markets magazine.

Earlier this year, Deutsche Bank co-chief executives Anshu Jain and Juergen Fitschen said compensation reform was one of their three key objectives.

Gorman's comments come a week before the major U.S. banks report their third-quarter earnings. JPMorgan Chase and Wells Fargo will be the first with their earnings releases next Friday, Oct. 12.

Back in July, Morgan Stanley reported a 50 percent drop in its second-quarter earnings to $591 million. The company reported revenue had dropped to $6.95 billion from $9.21 billion the prior year.

Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y., said with little evidence in the financial markets that the tide has turned, Gorman's comments seem somewhat foreboding.

"My sense is that what's coming in the third quarter is likewise not going to be pretty or even uglier," he said.

Anthony Polini, analyst with investment firm Raymond James, said he agreed with Gorman that there are too many banks in the U.S., but he disagreed that the banking industry as a whole is underpaid.

"The banking industry is overregulated, not overcompensated," Polini said.

Although, Polini conceded, it depends which industry one uses as a comparison.

Comparing to professional athletes and film stars would make most bankers look like they got the short end of the stick, he said.

By international standards, Polini said executives at Bank of America, the second-largest U.S. bank measured by assets, are not overcompensated. Its CEO, Brian Moynihan, receives compensation of $8.1 million, which includes a salary of $950,000, $6.1 million in performance-based stock, $420,000 worth of tax and financial advice and use of the company's aircraft.

"It's all who you compare them to," he said. "I'll take a stand and say I think teachers should make a lot more money."

Polini also points out that the large number of U.S. banks, approximately 7,000 which are dominated by a handful of national corporations, could mean greater competition and choices for consumers.

"Excess capacity is a bad thing on one hand, but if you're looking for a low-interest bank or convenience, even if you live in the suburbs, you probably don't have to drive to a bank," he said. "You could probably walk to one."

Low interest rates have been negatively affecting banks, but Polini said he expects banks to report positive quarterly earnings in terms of commercial loan growth and mortgage banking.

"It doesn't mean that the outlook is going to get much better. We still have a weak economy and a low-interest rate environment," he said.

Copyright 2012 ABC News Radio


Morgan Stanley to Pay Back Investors over Facebook IPO?

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley, the lead investment bank in the Facebook IPO, might pay money to some retail investors who overpaid when they bought the stock.

Published reports say the firm is reviewing orders from Morgan Stanley Smith Barney clients. 

Technical problems at the Nasdaq stock market caused delays and confusion about Facebook trading last week.  There have also been many questions, even lawsuits, over tip-offs received by Wall Street insiders about negative reports on Facebook’s future profits and revenues.

Copyright 2012 ABC News Radio


Facebook Stock Jumps as Analysts Call for Better IPO Rules

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Facebook stock closed up for the second day in a row as Facebook's underwriters continued to face heat over whether they gave an unfair advantage to preferred clients. Many average investors lost thousands of dollars betting on Facebook's IPO.

A week after the company had the biggest tech IPO in U.S. history, Facebook stock closed up 3.2 percent to $33.03 on the NASDAQ Thursday.

Reports that large clients, such as mutual funds and wealthy investors, received a warning about Facebook's muted revenue prospects have attracted the attention of lawmakers and securities regulators.

Capital Research and Management, an investment firm based in Los Angeles, may be one of the preferred investors that received a warning from an underwriter about Facebook's lower-than-expected revenue days before the IPO, the Wall Street Journal reported.

"We, like other investment management firms, had access to publicly available information and we made an investment decision based on publicly available information," Chuck Freadhoff, a spokesman for Capital Research and Management, told ABC News.

Jim Krapfel, an IPO analyst with the investment firm Morningstar, said that activity may first sound "legal and common."

"Clearly, though, the rules need to be changed to put all investors on a more even playing field," Krapfel said.

Three investors filed a class-action lawsuit in a Manhattan federal court on Wednesday against Facebook's board and its underwriters, saying its filings with the Securities and Exchange Commission were "false and misleading." The Senate banking committee and the Securities and Exchange Commission said they are looking into the issues related to Facebook's IPO.

Jacob Zamansky, a securities attorney in New York who is not involved with that suit, said that it appears Morgan Stanley may have violated securities rules.

He said the underwriters' alleged actions fly in the face of a $1.4 billion settlement in 2003 with 10 banks. The settlement came after an investigation by Eliot Spitzer, then New York state's attorney general. That agreement settled charges of corruption against analysts after the so-called dotcom bubble burst and provided that issuers would follow "fair disclosure" rules and provide the same information to all clients.

Morgan Stanley has said the bank "followed the same procedures for the Facebook offering that it follows for all IPOs."

"After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS's institutional and retail investors and the amendment was widely publicized in the press at the time," Morgan Stanley said in a statement.

A spokesman for the New York Stock Exchange denied reports that Facebook was considering shifting from the NASDAQ after technical glitches delayed trading in Facebook stock last Friday by over 30 minutes.

"There have been no discussions with Facebook regarding switching their listing in light of the events of the last week, nor do we think a discussion along those lines would be appropriate at this time," NYSE spokesman Richard Adamonis told ABC News.

Copyright 2012 ABC News Radio


Facebook Sued, Subpoenaed About IPO

Zef Nikolla/Facebook(WASHINGTON) -- Facebook and its IPO underwriters are being sued and face pointed questions from lawmakers about whether they misled some investors before the largest initial public offering by a tech company in U.S. history.

Facebook investors have filed a class action lawsuit against the company and its underwriters, saying the registration statement and prospectus filed with the Securities and Exchange Commission ahead of the IPO were "false and misleading."

The class action lawsuit was filed on Wednesday in a New York District Court on behalf of Facebook stock purchasers against Facebook's board, including CEO Mark Zuckerberg and CFO David Ebersman, Morgan Stanley and the other underwriters.

The suit alleges that Facebook failed to disclose that the company told the lead underwriters to reduce their 2012 performance estimates because more users are using its mobile apps, which don't generate advertising revenue.

Facebook stock moved higher on Wednesday after two days of declines. Shares of the tech company are up about 2.5 percent to $31.76 in mid-day trading.

But while the company's stock sees a slight jump, regulators have directed pointed questions at the tech company after its muted IPO on Friday.

On Tuesday, there was a report that Morgan Stanley and Goldman Sachs -- investment bank underwriters supporting the IPO -- told clients earlier this month that they were reducing their earnings forecasts for Facebook.

The Senate Banking Committee is conducting staff briefings with Facebook, regulators and other stakeholders to learn more about issues raised in the news regarding Facebook's IPO, a committee aide told ABC News on Wednesday.

Facebook did not immediately respond to a request for comment.

Meanwhile, Massachusetts Secretary of State William Galvin has subpoenaed the tech company, investigating whether Morgan Stanley, the main IPO underwriter, told preferred investors that an analyst cut his revenue estimate based on the company's S-1 filing before the IPO.

"If it turns out you have a pattern of conduct where preferred investors are getting special treatment that's devastating to rebuilding confidence in the market," Galvin told ABC News.

His office issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook's IPO.

"It is so important that we not allow this situation to go uninvestigated," Galvin said. "Given the breadth and size of the issue and the losses that are out there it's important that we move rapidly."

Facebook stock lost nearly 20 percent of its value in its first three days of trading on the NASDAQ.

"So many investors have lost so rapidly so much," said Galvin. "We intend to move quickly. We need to get answers for average American investors."

A spokesman for Morgan Stanley provided a statement regarding some of the allegations put forward against the investment bank, saying it "followed the same procedures for the Facebook offering that it follows for all IPOs."

"After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS's institutional and retail investors and the amendment was widely publicized in the press at the time."

In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO. "

A spokeswoman for JP Morgan Chase declined to comment about the lawsuits.

Copyright 2012 ABC News Radio


Regulators to Review Morgan Stanley's Role in Facebook IPO

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Since its debut on NASDAQ last Friday, Facebook's stock has been sliding, dropping from an initial public offering price of $38 to just under $32 by Tuesday's close.

Co-founder Mark Zuckerberg has already lost several billion dollars, considering he owns more than 500 million shares in the company.

Most felt that Facebook was widely overvalued at $38 share.  And now, a potential scandal is brewing as the Financial Industry Regulatory Authority might investigate reports that as bankers were building up the IPO to the public, they were privately lowering revenue forecasts and perhaps sharing their predictions with integral investors.

Massachusetts' Secretary of State William Galvin's office has issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook’s IPO.  Galvin wants to know if the bank secretly revealed to clients that its analysts had cut its revenue estimate for Facebook

"It is so important that we not allow this situation to go uninvestigated," Galvin told ABC News.  "Given the breadth and size of the issue and the losses that are out there it’s important that we move rapidly."

"So many investors have lost so rapidly so much," he added.  "We intend to move quickly.  We need to get answers for average American investors."

Meanwhile, one investor is considering a class action lawsuit against the NASDAQ for computer glitches last Friday that prevented many from purchasing Facebook stock.

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Copyright 2012 ABC News Radio


First 3 Big Banks to Report Compensation Show Drop

STAN HONDA/AFP/Getty Images(NEW YORK) -- The top executives at three large investment banks received stock award pay cuts of 15 to 25 percent after their shares took a beating in 2011. But their pay packages are still eye-popping for an industry that required a massive government bailout a few years ago.

JPMorgan Chase, whose profits filled 23 percent in the fourth quarter, saw stock bonuses fall for its top executives, though the pay of CEO Jamie Dimon remained about the same.

The top 13 executives at JPMorgan Chase had a 15-percent cut in stock awarded, which is only a portion of executive compensation. Those executives received $60.9 million in restricted shares plus stock options, Bloomberg reported. Dimon's pay package was about $23 million.

In November, Dimon said he understood the frustration of the Occupy Wall Street protesters, who had camped outside where he was giving a speech. But he said large corporations contribute to the U.S. economy because they "pay their people more, are more diverse, with health benefits. It isn't like they're the bad actors here."

Figures from Equilar, an executive compensation data firm, show the executive stock awards at JPMorgan Chase, Morgan Stanley and Citigroup were lower this year. Goldman Sachs has yet to file compensation figures.

The total compensation of Morgan Stanley's CEO James Gorman fell 25 percent from 2010 to about $10.5 million, Dow Jones reported.

Morgan Stanley reported a loss of $275 million on Thursday, the bank's first quarterly loss since early 2009. The company's shares fell 44 percent last year, leading to a drop in pay for senior investment bankers and traders by 20 to 30 percent, Bloomberg reported.

Citigroup's full-year profit increased 6.4 percent in 2011, the second year the company was profitable under CEO Vikram Pandit. Last year, when the bank's shares fell 44 percent, Pandit had a base salary of $1.75 million and a retention plan valued at more than $40 million, Bloomberg BusinessWeek reported. In July, he received the remaining $80 million of the $165 million from Citigroup's buyout in 2007 of his hedge fund, Old Lane Partners LP.

In December, Pandit announced Citigroup will lay off 4,500 employees, about 1.5 percent of its 267,000 employees, for which the bank took a $400 million charge in the fourth quarter.

Overall compensation for employees of the biggest Wall Street banks were predicted to sink 27 to 30 percent from a year ago to the lowest level since the 2008 financial crisis, executive consulting firm Options Group reported.

The group predicted the average global compensation would decline 33 percent in the investment banking sectors of fixed income, currencies and commodities, a 29-percent drop in the equities sector and a 14-percent fall in investment banking. According to a report released in late November the only sectors that were forecasted to have increases in the single digits were private wealth management and electronic trading, the report stated.

Bankers' counterparts in East Asia took a hit, but not as deep as in the U.S. and Europe. Options Group forecasted compensation to decline 18 percent in Japan. In Asian countries other than Japan, compensation was forecasted to decline 19 percent.

Total equity grants value of three highest paid executives at JPMorgan Chase, Morgan Stanley and Citigroup since Jan. 1, compared with a year ago:

JPMorgan Chase

1. James Dimon, Chairman & CEO: $20.4 million

Previous: $17.0 million

2. James Staley, Managing Director: $11.4 million

Previous: $14.5 million

3. Mary Erdoes, Managing Director: $10.5 million

Previous: $13.3 million

Morgan Stanley

1. James Gorman, CEO: $5.1 million

Previous: $7.4 million

2. Gregory Fleming, President, Asset Management: $3.4 million

Previous: $4.0 million

3. Paul Taubman, Co-President of International Securities: $3.4 million

Previous: $5.6 million


1. Vikram Pandit, CEO: $3.7 million

Previous: 2011-2012 incentive award yet to be determined

2. John Havens, President & COO: $3.5 million

Previous: $4.8 million

3. Manuel Media-Mora, CEO, Global Consumer Banking: $2.6 million

Previous: $4.0 million

Copyright 2012 ABC News Radio


Morgan Stanley Reports $2.2 Billion Profit

Scott Eells/Bloomberg via Getty Images (WASHINGTON) -- Morgan Stanley reported a profit of $2.2 billion for the third quarter on Wednesday, in part from an accounting gain, beating analysts' expectations, compared to profit of $131 million a year ago.

Morgan Stanley's investment banking business had $864 million in revenue, down 14 percent from a year ago. Its wealth management made pretax income of $362 million, an increase from $281 million a year ago.

Goldman Sachs reported its second loss since its IPO in May 1999, missing estimates for the second consecutive quarter. The company reported a loss of $393 million in the third quarter on Tuesday, compared with a $1.9 billion profit one year ago.

Copyright 2011 ABC News Radio


Goldman Sachs Experiences First Quarterly Loss Since 2008

in Lee/Bloomberg via Getty Images(NEW YORK) -- Just after the Occupy Wall Street protest celebrated its one-month anniversary, third quarter earnings season continued with Goldman Sachs, which reported its second quarterly loss in its history as a public company.

This loss was greater than expected and marks the company’s first quarterly loss since its fourth quarter in 2008.

It is unclear how the Volcker rule, which proposes to ban banks with insured deposits from "high-risk," short-term trading with its own funds, will affect banks' financial results. David Hilder, analyst with Susquehanna International Group, said Goldman Sachs and Morgan Stanley may exit the banking business if compliance regulations of the Volcker rule are implemented.

The rule is expected to be implemented next year.

Hilder said those two banks are less dependent on deposits as a source of funding than other banks.
Investment banking client activity may have slowed due to uncertainty in the global economy, especially in Europe, which has led to lower profit expectations for banks more heavily invested in the capital markets.

Meanwhile, Bank of America reported a six percent increase in profit. Citigroup also reported increased earnings Monday, and Morgan Stanley will release its quarterly report Wednesday.

Copyright 2011 ABC News Radio


NY Attorney General Investigating Banks over Mortgage Crisis

Comstock/Thinkstock(NEW YORK) -- New York's attorney general has launched a new investigation into the role that some of the biggest names on Wall Street had during the credit boom that preceded the 2008 financial crisis.

Eric Schneiderman is targeting three banks -- Morgan Stanley, Goldman Sachs and Bank of America -- and looking into how they may have contributed to the mortgage crisis.  Among the questions being raised are whether the banks misled investors about the quality of their loans, dramatically adding onto the financial cost of the mortgage meltdown.

The banks bundled their mortgages into securities which were given top ratings by credit rating agencies and backed by AIG.  They were then sold to investors, masking, some would say, the true risks involved.

Other prosecutors have been negotiating with the banks over their mortgage practices but sources familiar with this investigation say it's a "distinct and broader inquiry."

Copyright 2011 ABC News Radio

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