Morgan Stanley Unveils $15m 'Agreement In Principle' With SEC

by Glen Shapiro, LawAndTax-News.com, New York

23 February 2006

Morgan Stanley revealed this week that it has reached an "agreement in principle" with the US Securities and Exchange Commission over failures in the investment bank's document retention regime.

In its annual report, filed with the securities regulator this week, Morgan Stanley unveiled plans for a $15 million penalty payment for violating US securities laws.

The allegations stem from the bank's repeated failure to produce documents in a case involving the sale of Coleman Co. to Sunbeam Corp. in 1998.

Morgan Stanley was Sunbeam's advisory firm and lead underwriter during the transaction, and when the firm's stock price collapsed following allegations of fraud, was accused by Coleman Co.'s former owner, Ronald Perelman, of conspiring with Sunbeam to defraud him.

Following the investment bank's continued failure to produce documents requested by the court, the jury in the case was instructed by the judge to assume that this had been the case unless proven otherwise, thereby reversing the burden of proof.

Although Morgan Stanley is appealing that decision, the SEC and the National Association of Securities Dealers launched their own investigations into its e-mail retention policies, and it is these matters that the bank now hopes to settle.

The proposed settlement agreement must now be approved by the full SEC panel.

Recommended