A group of Singapore investors who
lost money on $154.7 million in credit-linked notes were allowed
by a U.S. judge to pursue their lawsuit against Morgan Stanley (MS)
as a group.
U.S. District Judge Jesse Furman in Manhattan said
yesterday the 18 plaintiffs may represent a class of all
investors who bought any of seven series of Pinnacle Notes
issued in 2006 and 2007. The investors including the Singapore
Government Staff Credit Cooperative Society Ltd. sued in 2010,
claiming the notes were a “bait and switch” scheme designed to
benefit Morgan Stanley at the expense of customers.
They claim New York-based Morgan Stanley invested their
principal in high-risk collateralized debt obligations, against
which Morgan Stanley made short bets. Morgan Stanley didn’t
disclose that it was a counter-party to the agreements, meaning
that for every dollar the investors lost, the bank gained a
dollar, the investors claim.
Mark Lake, a Morgan Stanley spokesman, declined to comment
on the ruling. The firm has denied all wrongdoing in connection
with the Pinnacle notes.
In 2011 Morgan Stanley failed to win a Singapore court
order blocking the investors from suing outside the Asian city.
The bank is facing a separate lawsuit in New York by
Singapore’s Hong Leong Finance Ltd. (HLF) over claims it deceptively
sold the Pinnacle notes. Hong Leong had a distribution agreement
with Morgan Stanley to sell about $72.4 million of the notes.
Singapore’s financial regulator in 2009 banned 10 firms
from selling structured investments such as Pinnacle Notes after
investors claimed they were misled about products tied to Lehman
Brothers Holdings Inc. The ban was lifted in 2010 after the
institutions boosted internal procedures of their advisory
services across all investment products.
The case is Dandong v. Pinnacle Performance Ltd., 10-cv-08086, U.S. District Court, Southern District of New York
(Manhattan).
To contact the reporters on this story:
Bob Van Voris in federal court in Manhattan at
rvanvoris@bloomberg.net;
Andrea Tan in Singapore at
atan17@bloomberg.net
To contact the editors responsible for this story:
Michael Hytha at
mhytha@bloomberg.net;
Douglas Wong at
dwong19@bloomberg.net
Morgan Stanley headquarters
Victor J. Blue/Bloomberg
A group of investors claim New York-based Morgan Stanley invested their principal in high-risk collateralized debt obligations, against which Morgan Stanley made short bets.
A group of investors claim New York-based Morgan Stanley invested their principal in high-risk collateralized debt obligations, against which Morgan Stanley made short bets. Photographer: Victor J. Blue/Bloomberg
Morgan Stanley to Face Group Suit by Singapore Investors
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