Morgan Stanley Thwarted In Attempt To Block Singapore Lawsuits

By: EW News Desk Team   Date: 13 December 2011

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13 December 2011

A US district judge in New York has blocked an attempt by Morgan Stanley to seek a Singapore High Court order that would have prevented Singaporean investors from suing the global financial services firm for over $154.7 million in losses due to synthetic collateralised debt obligations outside the country.

The New York-based bank’s attempt is vexatious, claimed US District Judge Leonard Sand, as cited by Bloomberg, who had been compelled to make a ruling after a request from the 18 investors including the Singapore Government Staff Credit Cooperative Society Ltd.

Morgan Stanley though has insisted that they had done anything wrong in its dealings in Singapore, and have disputed the ruling in New York.

“This dispute involved plaintiffs who are all based in Singapore, who purchased notes in Singapore, and who contractually agreed to the exclusive jurisdiction of the Singapore courts,” said its Hong Kong-based spokesman Nick Footitt in an interview with Bloomberg BusinessWeek.

In October 2010, several Morgan Stanley units in Singapore were accused of creating a “classic bait and switch scheme secretly designed to benefit Morgan Stanley”. The investors claimed that Morgan Stanley had not informed them that the financial firm had been a counter-party to the agreements, meaning that for each dollar the investors lost, the bank gained a dollar.

Morgan Stanley however counter-claimed, in its filing to the Manhattan Court last week, that the bank had acted in good faith and thus shouldn’t be liable for losses suffered by the investors as they were caused by events beyond its control.

The filing added that any alleged misstatements by Morgan Stanley on its notes to investors “were mere puffery or were vague statements of optimism.”

The “defendants (Morgan Stanley) had no duty to disclose the allegedly omitted information,” said the filing.

While District Judge Sand had previously, in October last year, dismissed some of the investor’s claims in their lawsuits in New York, he stopped short of allow Morgan Stanley from blocking the case in Singapore.

“Rather than availing themselves of the remedies available here, defendants are attempting to require the plaintiffs to begin anew in Singapore,” said Sand yesterday in his ruling. He also denied the financial firm’s request to certify his October decision for pre-trial appeal.


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