Morgan Stanley seeks to halt Facebook arbitration case

Tue Nov 6, 2012 8:33pm EST
 

By Suzanne Barlyn

(Reuters) - Morgan Stanley is trying to halt a securities arbitration case filed by a Facebook investor who blames the firm and other companies for losses she suffered in the social media giant's botched initial public offering and is seeking $1.9 million in damages.

Morgan Stanley, a lead underwriter for the IPO, says the investor is not its customer, and lawyers for the bank filed a complaint in federal court in Manhattan on Monday seeking an order to stop the arbitration as it relates to its firm.

The complaint, filed in U.S. District Court for the Southern District of New York, alleges the investor is not a Morgan Stanley customer because she ordered the Facebook shares through Vanguard Financial Group Inc.

The investor, Uma Swaminathan of East Brunswick, New Jersey, did not return a call requesting comment.

Swaminathan, according to an arbitration complaint she filed with the Financial Industry Regulatory Authority, said Morgan Stanley did not inform all investors that it was downgrading its outlook on Facebook just before the IPO and said she was unable to cancel her order for shares.

In addition to Morgan Stanley, Swaminathan also named Vanguard, Facebook, NASDAQ OMX Group Inc and the NASDAQ stock exchange in her arbitration request.

Facebook and NASDAQ do not have FINRA licenses, and therefore are not required to arbitrate in its forum. Several units of Vanguard are licensed through FINRA, the securities industry's self-regulator.

A Facebook spokesman did not respond to a requests for comment. Spokesmen for Vanguard and Nasdaq declined to comment.   Continued...

 
The headquarters of Morgan Stanley is pictured in New York June 1, 2012. REUTERS/Eric Thayer