Wednesday, February 13, 2008

J.P. Morgan Chase

Morgan Stanley is one of the largest investment banking firms in USA. The global securities market is one of Morgan Stanley’s primary business arenas. The firm serves both individual and institutional investors. Along with several other high-profile firms, Morgan Stanley has recently endured a number of questions about conflicts of interest and potential fraud.

When was the possible fraud discovered ?
Top Wall Street firms have recently been required to pay large fines to regulators for alleged partiality in their stock reports to investors. In December 2002, a preliminary agreement was reached with 12 U.S. investment banks in which they agreed to pay a combined total of over 1 billion dollars. The Securities and Exchange Commission (SEC) and state regulators brought accusations against the banks in the preceding months, alleging that investment banks had let conflicts of interest color their stock reports.

Morgan Stanley has also been individually targeted by the world’s leading luxury item maker, LVMH. The leadership at LVMH has accused Morgan Stanley of allowing a conflict of interest to interfere with its research reporting. Gucci, a long-time rival of LVMH, has close ties with Morgan Stanley. While LVMH claims that this relationship caused Morgan Stanley to unfairly spin its stock reports to investors, Morgan Stanley is vehemently denying any accusation of fraud. The lawsuit by LVMH was filed in a French court in November.

What type of fraud is alleged to have been committed ?
The charges filed by the SEC and state regulators against a host of investment banks are roughly synonymous to the accusations against Morgan Stanley by LVMH. Both claim that conflicts of interest have contributed to dishonest stock reports to investors. If LVMH wins its case against Morgan Stanley, it will be because it shows convincing evidence that the securities firm put its interest in Gucci ahead of its duty to present investors with an accurate picture of stocks’ value.