Articles Posted in Morgan Stanley

Wirehouses Struggle to Retain Their Share of the High-Net-Worth-Market

Published on: April 6, 2012 | by Shepherd Smith Edwards & Kantas, LLP

With their share of the high-net-worth-market expected to drop down to 42% in 2014 from the 56% peak it reached five years ago, wirehouses are looking to regain their grip. According to Cerulli Associates, Bank of America Merrill Lynch (BAC), Wells Fargo (WFC), Morgan Stanley Smith Barney (MS), and UBS (UBS)—essentially, the largest financial firms—will see their portion of the high-net-worth market continue to get smaller. Meantime, because private client groups can now be called the largest high-net-worth services provider, they can expect their hold to continue as they likely accumulate about $2.8 trillion in high-net-worth assets in two years—a 49% market share.

The Cerulli report says that the wirehouses’ reduced share of the market can be attributed to a number of factors, including the fact that high-net-worth investors are allocating their wealth to several advisors at a time. Also, during the economic crisis of 2008, many investors transferred some assets out of the wirehouses. There were also the wirehouse advisers that chose to go independent or enter another channel. In many cases, these advisors’ clients ended up going with them.

The private client groups are the ones that have benefited from this shift away from wirehouses. A main reason for this is that they are considered safer for both advisors that wanted a change and investors who were seeking lower risks.

Also, per the report, there has been healthy growth in the independent advisor industry. The registered investment advisor/multi-family offices grew their assets under management by 18% two years ago. Meantime, during this same time period, wirehouses assets only grew by 2%.

In other wirehouse-related news, beginning summer, ERISA Section 408(b)(2) ‘s new point-of-sale fee disclosure rules will make it harder for these firms to up the fees they charge investors. According to AdvisorOne, as a result, these firms are raising the fees that they charge mutual fund companies instead.

Wirehouses and mutual fund companies usually have a revenue sharing agreement. In exchange for investing their clients’ money in a mutual fund, a wirehouse charges the mutual fund company a fee (this is usually a percentage of every dollar that the client invests). However, in the wake of the upcoming disclosure changes, financial firms have started raising that fee.

For example, according to The Wall Street Journal, at the start of the year, UBS approximately doubled the rate that mutual funds must now pay. The financial firm is seeking up to $15 for every new $10,000 that a clients invests in a mutual fund. Moving forward, this will go up to $20 annually. Morgan Stanley’s new raised rate is $16 a year. It used to charge $13 for stock funds and $10 for bond funds.

Wirehouses are saying that since its the brokerage firms and not the individual financial adviser who gets the separate payment streams, the rate won’t impact the judgment of an adviser when it comes to selecting funds. Such fees paid by mutual funds can impact a financial firm’s bottom line. For example, last year, almost a third of Edward Jones’s $481.8 million in profits came from mutual fund company fees.

Wirehouses Battle to Keep Market Share, On Wall Street, March 28, 2012

FINRA Bars Registered Representatives Accused of Securities Misconduct and Negligence, Stockbroker Fraud Blog, April 5, 2012

Five Morgan Stanley Smith Barney Managed Future Funds Report $79.1M in Losses in 2011

Published on: March 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Stanley (MS) Smith Barney is reporting that five of its managed future funds sustained 9.5% in average losses—that’s $79.1 million—in the wake of client withdrawals last year. Only one of the funds was profitable. The largest fund by assets, Morgan Stanley Smith Barney Spectrum Select LP, faced $55.2 million in redemptions and lost $67.9 million.

Subsidiary Ceres Managed Futures LLC, the funds’ manager, had placed assets with outside trading advisers. In the wake of these losses, Ceres let go two underlying managers: John W. Henry & Co. and Sunrise Capital Partners. Spectrum Currency, which is the fund that they both managed, sustained losses of 9.8% in 2011. That fund is now called Spectrum Currency and Commodity.

Managed-future funds use futures or forwards contracts when betting on the declines or advance in securities, including bonds, commodities, stocks, and currencies. Some funds also invest in securities connected to certain events, such as changes in interest rates or the weather.

It’s been a tough time recently for Morgan Stanley. Last year, the financial firm had to give back approximately $700 million to investors in its flagship global real-estate fund. It also was forced to cut fees (both the fee charged on investments and management fees) to get them to stay. The fund’s size was also cut by $4 billion, resulting in investors getting some of their money back.

Over two-thirds of investors have consented to give Msref VII until June 2013 to invest rather than having billions of dollars returned to them sooner. Morgan Stanley’s earlier fund, which closed in 2007, suffered losses of 62% through March despite a 23% net return during that period’s last 12 months.

Also last December, media sources reported that Zynga stock purchased by Morgan Stanley’s mutual funds for $75 million in the late-stage round dropped in price from $14/share to $9/share, even as the financial firm cashed in two times: on private placement fees (if there were fees) and on fees for the IPO underwriting.

There was also the huge loss sustained by Morgan Stanley in the settlement it reached with bond insurance company MBIA. The two entities had sued one another over insurance sold on mortgage-backed securities. For a $1.1 billion payment by MBIA, Morgan Stanley agreed to give up insurance claims over guarantees on mortgage bonds. However, as a result, the financial firm took a pretax $1.8 billion charge in the fourth quarter of 2011. Morgan Stanley had purchased the insurance against bond defaults.

Meantime, MBIA dismissed its complaint against Morgan Stanley over the quality of the mortgage bonds. The insurer had accused the financial firm of misrepresenting these, which was what the insurance company was supposed to guarantee. (As MBIA’s credit-default swap bets started to falter at the start of the financial crisis, regulators were forced to divide the insurance company into a structured finance unit and a municipal guarantee business.)

Morgan Stanley Settles MBIA Suits, Will Take $1.8B Hit, Forbes, December 13, 2011

Morgan Stanley Brokerage Managed-Futures Funds Lose 9.5%, Bloomberg/Businessweek, March 28, 2012

MBIA and Morgan Stanley Settle Bond Fight, The Wall Street Journal, December 14, 2011

More Blog Posts:
Morgan Stanley Faces $1M FINRA Fine for Excessive Markups and Markdowns on Corporate and Municipal Bond Transactions, Institutional Investor Securities Fraud, September 17, 2011

Morgan Stanley Smith Barney Employee Fined and Suspended by FINRA Over Unauthorized Signatures, Stockbroker Fraud Blog, September 19, 2011

Morgan Stanley Investment Management Settles SEC Charges Over Allegedly Inappropriate Fee Deal for Over $3.3M

Published on: November 17, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission says Morgan Stanley Investment Management (MSIM) set up a fee arrangement that charged a fund (as well as its investors) for services that they weren’t actually getting from another party. MSIM has agreed to pay over $3.3M to settle the charges that it violated securities laws.

As the main investment adviser to The Malaysia Fund, MSIM told the fund’s board of directors and investors that a sub-adviser, an AM Bank Group subsidiary, had been contracted to provide research, advice, and support even though according to the SEC, the sub-adviser did not actually provide these services. Rather, AMMB issued just two monthly reports stemming from information that was available to the public. MSIM did not ask for the reports nor did it use the data provided to manage the fund. Still, the fund’s board renewed the contract with this sub-adviser each year from 1996 to 2007 and this cost investors $1.845 million.

The SEC contends that MSIM failed in its obligation to let board members know information that could help them properly assess the terms of the fund’s contract with the sub-adviser. The Commission also says that MSIM’s involvement and oversight with AMMB was inappropriate. Not only did the investment adviser lack the written procedures to properly oversee its sub-advisers, but also, it lacked the procedures to review the work that AMMB did.

The SEC also claims that since no advisory services were actually provided by AMMB, MSIM ended up submitting false information in its semi-yearly and yearly reports. Per the Commission’s order, MSIM violated sections of the Investment Company Act and Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

By agreeing to settle, MSIM isn’t denying or agreeing to the SEC’s findings. It has, however, agreed to a cease and desist from future violations of both acts and Rule 206(4)-7 thereunder. Of the $3.3 million settlement, $1.5 million is a penalty.

Background:
The Malaysia Fund is a closed-end company belonging to Morgan Stanley’s funds complex. MSIM and the Fund entered into a written advisory agreement in 1987. MSIM gives the Fund investment management services, as well as serves as Fund administrator.

Per Section 15(a) of the Investment Company Act, no person can act as a registered investment company’s investment adviser without a written contract that meets certain requirements and has been approved by most voting securities. The original contract can continue to be renewed as long as the Board or most of the outstanding voting securities approves it.

SEC Charges Morgan Stanley Investment Management for Improper Fee Arrangement, SEC, November 16, 2011

More Blog Posts:
Retirement Fund’s CDO Lawsuit Against Morgan Stanley is Dismissed by District Court, Institutional Investor Securities Fraud, October 27, 2011

Morgan Stanley Faces $1M FINRA Fine for Excessive Markups and Markdowns on Corporate and Municipal Bond Transactions, Institutional Investor Securities Fraud, September 17, 2011

Morgan Stanley Smith Barney Employee Fined and Suspended by FINRA Over Unauthorized Signatures, Stockbroker Fraud Blog, September 19, 2011

Retirement Fund’s CDO Lawsuit Against Morgan Stanley is Dismissed by District Court

Published on: October 27, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A district court judge has dismissed a securities fraud lawsuit filed by the Employees’ Retirement System of the Government of the Virgin Islands against Morgan Stanley (MS). The investor complaint, submitted in 2009, accused the financial firm of defrauding investors.

The pension fund had purchased the notes as part of a CDO that was marketed and set up by Morgan Stanley. The plaintiffs believe that the financial firm worked with Standard & Poor’s and Moody’s Investor Services to set up “false and misleading Triple-A credit ratings” for the notes. Because the high ratings, the plaintiffs bought the notes at a price that was inflated. The fund contends that the financial firm knew that in fact Morgan Stanley had insider information that the MBS underlying the notes were a lot riskier than they were led to believe and came from lenders that employed flawed underwriting standards. Many of notes were downgraded to junk by the end of 2007. The plaintiffs said the firm purposely got investors to get behind the CDO because it was taking a short position on underlying assets.

The portfolio, which was 92% residential mortgage-backed securities and was backed by $1.2 billion in assets, was exposed to $100 million from New Century Mortgage Corp. and over $130 million in loans from Option One Mortgage Corp. According to the retirement fund, the two homebuyers had poor credit scores. The Libertas collateralized debt obligation went into credit-default swaps, which referenced specific residential MBS.

Per U.S. District Court for the Southern District of New York, the Virgin Islands government pension fund did not adequately plead that Morgan Stanley misled it about the quality of the MBS that were underlying the Libertas CDO. Judge Barbara S. Jones, said the plaintiffs failed to state a fraud claim because its pleadings were not successful in alleging that Morgan Stanley made misstatements about the credit ratings of notes based on the underlying mortgage-backed securities. Also, the court noted that it wasn’t Morgan Stanley that issued the ratings or the statements in the CDO’s operating memorandum disclosures. Because of this, the court said that the plaintiff could not allege that Morgan Stanley had issued to it a materially false statement.

Shepherd Smith Edwards and Kantas founder and securities fraud attorney William Shepherd said, “Our law firm has been successful in maintaining similar cases in arbitration or state courts. I am curious as to just how and why this case was filed, or otherwise ended-up, in a federal court. Pleading requirements under federal securities laws are problematic, and there are a number of other hurdles one must overcome in federal court proceedings. There is no private right of action available under New York’s securities statute (The Martin Act). Other types of claims may be pursued under NY state law.”

Morgan Stanley Wins Dismissal of Virgin Islands Pension Fund’s CDO Lawsuit, Bloomberg, September 30, 2011

More Blog Posts:

Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts, Stockbroker Fraud Blog, August 10, 2011

Morgan Stanley Smith Barney Employee Fined and Suspended by FINRA Over Unauthorized Signatures

Published on: September 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has imposed a 60-day suspension on Carmela L. Knieriem, a former Morgan Stanley Smith Barney female employee over allegations that while employed by the financial firm, she signed other employees’ signatures without obtaining the required approvals and authorizations. FINRA is also fining Knierem $5,000. While she has submitted a Letter of Acceptance, Waiver and Consent to settle the charges, Knierem is not denying or admitting to the findings.

According to Forbes.com, Between November 2009 and October 14, 2010, Knieriem was associated with the financial firm’s Rancho Bernardo Branch, where she was tasked with providing branch managers, financial advisers, and other employees with administrative support. Part of her job was to prepare specific internal administrative forms related to the processing and documenting of verbal requests, known as “Verbal Forms,” that were made by customers.

FINRA says that when Knieriem made the unauthorized signatures when preparing these Verbal Forms she violated FINRA Rule 2010 10 times. The SRO contends that in six instances, at the request of the financial advisor EP, she prepared an instruction form documenting a client’s verbal request for journal funds between the client’s accounts, the transfer of money from a client’s account, the release of account statements to a third party, and the issuance of a $75,397.22 check from the customer’s account. Knieriem also is said to have followed a financial advisor GT’s request to prepare an instruction form for a client’s verbal request that a stop payment be placed on one of his checks. She also followed the request of a financial adviser CL, who asked her to prepare an instruction form to issue a $95.62 for a client. Also, FINRA says that branch manager RL asked her to prepare an instruction form to journal funds between accounts.

Morgan Stanley Faces $1M FINRA Fine for Excessive Markups and Markdowns on Corporate and Municipal Bond Transactions

Published on: September 17, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has fined Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. Inc. $1 million for charging excessive markdowns and markups to corporate and municipal bond transactions clients. The SRO has also ordered that the financial firm pay $371,000 plus interest in restitution to these investors. By agreeing to settle, Morgan Stanley has not denied or admitted to the securities charges.

According to FINRA, the markdowns and markups that Morgan Stanley charged ranged from under 5% to 13.8%. Considering how much it costs to execute transactions, market conditions, and the services valued, these charge were too much.

The SRO also determined that the financial firm had an inadequate supervisory system for overseeing markups and markdowns of corporate and municipal bonds. Morgan Stanley must now modify its written supervisory procedures dealing with markups and markdowns involving fixed income transactions.

FINRA Market Regulation Executive Vice President Thomas Gira has said that Morgan Stanley violated fair pricing standards. He noted is important for financial firms that sell and purchase securities to make sure that clients are given reasonable and fair prices whether/not a markdown or markup exceeds or is lower than 5%.

A Markup is what is charged above market value. It is usually charged on principal transactions involving NASDAQ and other OTC equity securities. Markups on principal transactions usually factor in the type of security, its availability, price, order size, disclosure before the transaction is effected, the type of business involved, and the general markups pattern at a firm.

A markup on an equities security that is over 5% is seldom considered reasonable or fair. Regulators have rules in place for how much registered representatives can charge customers for services rendered. Not only do the charges have to be reasonable, but also they must be fair and not show particular preferences to any clients.

The 5% policy also applies to agency transactions. Commissions for such transactions also must be “fair and reasonable.” Commissions that go above that must be justified and are often closely examined by regulators.
While most securities professionals are committed to doing their jobs fairly and ethically, there are those determined to take advantage of the system to defraud investors. There are also honest mistakes that can occur that also can result in investor losses.

Financial firms and their representatives are responsible for protecting investors and their money from unnecessary losses resulting from securities fraud or other negligence.

Morgan Stanley Fined $1M Over Muni-Bond Markups, Bloomberg, November 10, 2011

More Blog Posts:
Whistleblower Claims SEC is Illegally Destroying Records of Closed Enforcement Cases, Institutional Investor Securities Blog, August 31, 2011

Ex-Bank of America Employee Pleads Guilty to Mortgage Fraud Scam Using Stolen Identities to Buy Homes Not For Sale, Institutional Investor Securities Blog, August 30, 2011

Securities Lawsuits Expected to Reach Record High in ’11, Says Advisen Ltd. Report, Institutional Investor Securities Blog, April 23, 2011

**This blog has been backdated.

$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm

Published on: August 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Once again, Western and Southern Life Insurance Co. is suing Bank of America Corporation for the alleged misrepresentation of mortgage-backed securities that the financial firm sold to the insurer. This time, the plaintiff is seeking $63 million. Western and Southern Life’s first MBS lawsuit against BofA sought $225 million in losses over securities it bought through Countrywide Financial Corp. (Bank of America acquired Countrywide in 2008.)

In this latest ARS lawsuit, Western and Southern Life says that it purchased $134 million in MBS from Bank of America between 2006 and 2008. The company contends that the securities would go on to lose 47% of their value. Western and Southern Life claims that the financial firm disregarded its own underwriting procedures and that a lot of the loans, which had AAA-ratings when they were purchased, have since foreclosed or defaulted. The insurer is also accusing Bank of America of failing to properly examine documents pertaining to the loans, which it says were based on erroneous information (including inflated appraisals, overstated incomes, and false employment verifications).

It was just last month that Western and Southern Life filed two other MBS lawsuits. In its securities case against Morgan Stanley & Co., the insurer is seeking $68.1 million for losses it claims it sustained because the financial firm allegedly misrepresented the MBS. The insurer says that in 2006 and 2007 it bought $179 million in mortgage-backed securities from Morgan Stanley.

Also in July, Western and Southern Life sued Credit Suisse Securities over the alleged loss of $107 million in MBS that the financial firm underwrote and one of its units sold. As with its securities cases against Bank of America, Western and Southern Life claims that Credit Suisse and Morgan Stanley disregarded their standards when accepting the loans. The insurer says that between 2005 and 2008 it bought $276 million in MBS from Credit Suisse.

Although Bank of America’s agreement to settle mortgage-back securities claims by 22 private investors that purchased 530 MBS valued at $424 billion covers Countrywide loans, Western and Southern Life was not part of this arrangement. Among the institutional investors to benefit from the settlement are BlackRock, Inc., PIMCO, Metlife, Inc., the Federal Reserve Bank of New York, and Goldman Sachs.

Per that settlement, Bank of America will give $8.5 billion to Bank of New York Mellon, which, as bondholder trustee, will distribute the funds to investors. However, if the court approves this settlement, investors will still be at a disadvantage because only some 2 or 3 centers on the dollar would be represented for those that suffered financial losses.

Bank of America agrees to $8.5B Countrywide settlement, Biz Journals, June 29, 2011

Western & Southern sues over investments, Business Courier, July 29, 2011

Ex-Morgan Stanley Trader’s $25k Settlement Over Alleged Concealment of Proprietary Trades is Inadequate, Says SEC Commissioner Aguilar

Published on: July 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Jennifer Kim, an ex-Morgan Stanley (MS) trader, has consented to a $25,000 settlement to resolve SEC allegations that she hid proprietary trades that that went above and beyond the financial firm’s risk limits. The alleged misconduct resulted in approximately $24.5m in losses for Morgan Stanley. SEC Commissioner Luis Aguilar, however, is calling the terms of her settlement “inadequate.” In his written dissent, he said that Kim also should have been charged with committing antifraud provisions violations.

Kim and Larry Feinblum, who was her supervisor, are accused of employing “fake” swap orders a minimum of 32 times to conceal their risks. The swap orders they entered into were ones that they intended to cancel soon after. This let them trick the monitoring systems, which recorded lower net risk positions. This alleged maneuvering allowed them to employ a trading strategy that would let them profit from the difference in prices between foreign and US markets.

In December 2009, Feinblum, who lost $7m in a day, told his supervisor about how he and Kim had concealed their positions and went above risk limits. Feinblum, who no longer works for Morgan Stanley, has settled the related securities claims against him for $150,000.

As part of her settlement, Kim agreed to a minimum three-year bar from the brokerage industry. She also consented to cease and desist from future records and books violations.

Even in settling, Feinblum and Kim are not denying or admitting wrongdoing.

Ex-Morgan Stanley Trader Settles SEC Claims Over Hiding Risk, Bloomberg, July 12, 2011
Ex-Broker to Pay $25K Over Risky Trades; Aguilar Objects to Penalty as ‘Inadequate’, BNA Securities Law Daily, July 14, 2011
SEC Order Against Kim (PDF)

SEC Commissioner Aguilar’s Dissent (PDF)

More Blog Posts:
Ex-Morgan Stanley Trader to Settle SEC Unauthorized Swaps Trading Claims for $150,000, Stockbrroker Fraud Blog, June 13, 2011
Morgan Stanley to Pay $500,000 to Resolve SEC Charges that it Recommended Unapproved Money Managers to Clients, Stockbroker Fraud Blog, July 27, 2009
Broker Settles SEC Charges He Defrauded Elderly Nuns, Stockbroker Fraud Blog, January 13, 2011 Continue Reading ›

Morgan Stanley, Barclays, and Merrill Lynch Lose ‘Hot News’ Misappropriation Case Against Theflyonthewall.com Inc. in Appeals Court

Published on: June 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Court of Appeals for the Second Circuit has reversed a lower court’s ruling and decided that under New York law, Theflyonthewall.com Inc., an online financial news service, may not be held liable for disseminating the equity research recommendations found in reports of plaintiffs Barclays Capital Inc., Morgan Stanley & Co. Inc., and Merrill Lynch Pierce Fenner & Smith Inc. The appeals court’s Judge Robert D. Sack concluded that federal copyright law preempts the ‘Hot News’ misappropriation claim.

The financial firms’ reports contain research about public companies, their securities and business prospects, and their respective industries. The reports summarize these findings, which often include recommendations about holding, selling, and buying the subjects’ securities. The firms give clients and prospective ones these reports before the US securities markets open daily as an “informational advantage.”

The plaintiffs accused Fly, which has managed to get a hold of these recommendations and issue them before the brokerage firms had given them to the public or before the exchanges that the securities are traded have opened, of copyright infringement. Concurring with the plaintiffs, a lower court then barred the news service from both infringing on the copyrighted aspects of the brokerage firms’ research reports and publishing their recommendations until after the New York Stock Exchange opened.

Now, however, the appeals court is saying that “a firm’s ability to make news… does not give rise to a right for it to control who breaks the news and how.” The court reversed and remanded the earlier claim and told the district court to dismiss the brokerage firms’ misappropriation claim under New York law.

Related Web Resources:
Theflyonthewall.com Inc.

Read the district court’s opinion (PDF)

Brokerages Lose in Appeals Court On N.Y. ‘Hot News’ Misappropriation Claim, BNA Securities Law Daily, June 20, 2011

More Blog Posts:
Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011
China-Based Hackers Broke into Morgan Stanley Network, Reports Bloomberg, Stockbroker Fraud Blog, February 28, 2011
Dismissal of Lone Star’s $60 Mortgage-Backed Securities Texas Fraud Action Against Barclays is Affirmed by Federal Appeals Court, Stockbroker Fraud Blog, January 17, 2010 Continue Reading ›

Federal Law Preempts Claims that Morgan Stanley Smith Barney LLC’s Insider Trading Detection Policies are Unlawful Under California Statutes, Says District Court

Published on: June 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to the U.S. District Court for the Central District of California, federal law preempts would-be class claims accusing Morgan Stanley Smith Barney LLC of having insider trading detection and deterrent policies that are illegal under California labor and unfair competition statutes. The court says that “conflict preemption” precludes the claims and that letting the plaintiffs move forward with them would create an obstacle to Congress’ objectives in enacting federal securities laws.

Per the court, Morgan Stanley set up employee trading policies to prevent and monitor insider trading. Under the ETPs, employees who had certain kinds of brokerage accounts had to either keep them in-house or disclose and get approval for the accounts to be housed at another firm. However, in 2008, because of possible “state law implications” regarding its policy, Morgan Stanley put into practice granting California employees that asked for an exeption approval as long as they gave the financial firm duplicate brokerage account confirmations and statements.

The plaintiffs of this lawsuit, who are all ex-Morgan Stanley employees, contended that under California labor statute, the firm’s policy was unlawful. Morgan Stanley’s lawyer responded by arguing that federal law preempts the plaintiffs’ claims.

The plaintiffs intend to bring their case to the U.S. Court of Appeals for the Ninth Circuit. Their lead lawyer has said that the brokerage firm’s plan forced the securities traders to pay “huge fees for their own advice.”

Related Web Resources:

Marcia Bloemendaal, et al v. Morgan Stanley Smith Barney, Justia, June 14, 2011

More Blog Posts:
MBIA Can Sue Morgan Stanley Over Alleged Misrepresentation of MBS Risks, Says US New York Supreme Court, Institutional Investor Securities Blog, June 14, 2011

Ex-Morgan Stanley Trader to Settle SEC Unauthorized Swaps Trading Claims for $150,000, Stockbroker Fraud Blog, June 13, 2011