The 10 Biggest Morgan Stanley Lawsuits in Company History
Morgan Stanley is a financial services company and investment bank that resulted from a merger of the Dean Witter Discover & Co. and the Morgan Stanley company. It operates as a company that provides global financial services offering investment banking services and products to governments, individuals, corporations, and financial institutions. It’s among the leaders in the financial industry, serving millions of customers worldwide, but the firm has had its share of legal problems. Morgan Stanley has settled billions of dollars in lawsuits since its inception in 1997. Here are the ten biggest Morgan Stanley lawsuits in company history for your consideration.
10. Morgan Stanley sued in data breach Settlement amount: $60 million
ZD Net confirms that Morgan Stanley was accused of exposing sensitive customer information on two occasions. The plaintiffs filed a class-action lawsuit claiming damages based on the incidents that affected about fifteen million former and current clients of Morgan Stanley. Investigations into the claims revealed that legacy equipment decommissioned in 2016, then more equipment in 2019, was not wiped. The equipment still contained the personal and sensitive information of clients. The equipment sold contained client information that made them personally identifiable. it was sensitive information that became available to the buyers of the equipment. The datasets may have been exposed as they were not encrypted. The data was in full view and available to the parties that purchased the equipment. The two incidences of data breaches were combined into one class-action lawsuit. The retired equipment further included old servers along with other technology from the decommissioned data center. Morgan Stanley was contacted by one of the parties who disclosed that they had access to sensitive client information in 2017. Morgan Stanley did not begin distributing letters of notice about the data breach until July 2020. The Office of the Comptroller of Currency found Morgan Stanley liable for failures in its data protection measures. It penalized the company $60 million in fines.
9. Morgan Stanley faces a lawsuit in case of reopening Lawsuit amount: $100 million
Stock Attorneys confirms that a class action litigation so9ught a case reopening under the direction of a Florida law firm suing Morgan Stanley from the Wall Street firm. It alleges that Morgan Stanley failed to provide unhappy clients with evidence relevant to hundreds of past cases in arbitration. The lawsuit came after Morgan Stanley acknowledged electronic takes containing documents of interest to plaintiffs receiving faulty stock research and investment advice from the firm. The lawsuit was filed in a Florida court alleging it violated contracts with clients by denying access to the documents discovered. The suit covers claims that go back to 1999. It seeks $100 million in unspecified punitive damages and compensatory damages.
8. Morgan Stanley accused of financial offenses Settlement amount: $225 million
The National Credit Union Administration filed a civil action in a federal court against Morgan Stanley for accusations of financial offenses. Claims that Morgan Stanley misled corporate credit unions about residential mortgage-backed securities to market, sell, and issue them with full knowledge that the RMBSs were faulty securities. The National Credit Union Administration investigated the claims and then returned with a penalty of $225 million, to which Morgan Stanley agreed to settle the claims that arose from the losses related to the faulty RMBS purchases made by corporate credit unions. Their actions resulted in toxic securities abuses. The case was settled on December 10, 2015, but it would not be the last legal action taken for the offense against Morgan Stanley.
7. Morgan Stanley was accused of consumer protection-related offenses in 2013 Settlement amount: $227 million
Morgan Stanley was accused of committing consumer protection-related offenses with the primary claim of mortgage abuse. Morgan Stanley and Goldman Sachs agreed with the Federal Reserve Board on their assessment that each company should pay $557 million to help mortgage borrowers. The payments could be made in cash, or with other types of financial assistance. An equal split of $227 million from each company satisfied the terms of the settlement. The lawsuit was filed in a federal court under the direction of the Federal Reserve agency in a civil suit. Morgan Stanley agreed to the $227 million penalties in an agreement approved on January 16, 2013. Morgan Stanley and Goldman Sachs were investigated for claims of wrongdoing. Investigators found evidence of deficient practices in mortgage loan servicing and foreclosure processing that resulted in the Federal Reserve Board’s issuance of penalties to provide restitution for the consumers that were wronged in the poor business dealings, and further to provide the needed assistance for those who were in mortgages that were in jeopardy of foreclosure. Both financial firms were held accountable for their actions by the Feds.
6. Morgan Stanley accused of Toxic Securities Abuses Penalty amount: $275 million
Morgan Stanley was accused of committing financial offenses in the form of toxic securities abuses and investor protection violations in a 2014 lawsuit filed in a civil lawsuit in federal court. The Securities and Exchange Commission investigated claims that Morgan Stanley misled investors in more than one residential mortgage-backed securities securitizations underwritten by the firms. This was one of many lawsuits for toxic securities abuses filed against Morgan Stanley. The financial firm agreed to pay a penalty of $275 million in an agreement reached on July 24, 2014. This is just one more example of Morgan Stanley being accused of misleading investors in subprime RMBS offerings to reap the benefits at the expense of the investors. Those who received financial harm for the deceptions were compensated for the misleading statements made by Morgan Stanley about the mortgages. The firm faced dozens of lawsuits alleging wrongdoing and deceptive, even fraudulent practices to encourage investors to buy its products and services, only to suffer financial harm for the transactions. This is one of the reasons why you should consult an attorney if you feel that you’ve been treated unfairly by any investment brokerage or firm.
5. Morgan Stanley’s Salomon Smith Barney Inc. penalized for an investor protection violation Settlement amount: $400 million
Salomon Smith Barsney Inc. is a subsidiary company under the Morgan Stanley umbrella. The company was accused of committing financial offenses with the primary offense of investor protection violation. Morgan Stanley was one of ten brokerage houses that signed agreements to take measures to address identified conflicts of interest in the research of securities work. They also agreed to spay $11.3 billion in penalties in multistate litigation. The United States Securities and Exchange Commission approved the settlement proposals and agreed to them for Salomon Smith Barney Inc. Its share of the penalties and settlement amounted to $400 million. The allegations were resolved with the agreement on December 20, 2022. The agencies involved in the litigious action included Attorneys Generals from multiple states in a civil suit. Several state attorney generals worked together to hold the massive financial firm accountable for its illegal actions. Other agencies involved in the action include the United States Securities and Exchange Commission, the NASD, NASAA, the New York Stock Exchange, and state regulators. These agencies worked together to form agreements to reform investment practices.
4. Morgan Stanley sued for toxic security abuses Settlement amount: $550 million
The New York Attorney General’s Office confirms that Morgan Stanley got sued for yet another offense that resulted in violations of financial laws and toxic security abuses. This litigation was one of many lawsuits brought against the financial firm for the same charges. The New York Attorney General filed a civil lawsuit in state court alleging that Morgan Stanley participated in deceptive practices in the issuance, marketing, and sale of residential mortgage-backed securities before the 2007 to 2008 financial crisis. The lawsuit announcement was made when Morgan Stanley agreed to a settlement of $2.6 billion for the same violations. The case was resolved on February 11, 2016, with Morgan Stanley agreeing to a settlement of $550 million to resolve the allegations. This is one more lawsuit and settlement for toxic security abuses that appear on the long rap sheet for the financial firm. They’ve spent billions in settlement dollars, penalties, restitution, and legal fees, but they don’t seem to learn. It’s becoming a habit with Morgan Stanley.
3. Morgan Stanley penalized for 2014 toxic securities abuses Penalty amount: $1.25 billion
The Federal Housing Finance Agency reports that Morgan Stanley was accused of committing federal and state securities laws violations along with common law fraud in its dealings with Fannie Mae and Freddie Mac private-label mortgage-backed securities between the years of 2005 through 2007. the agency found Morgan Stanley in violation of laws and guilty of financial offenses including toxic securities abuses and fraudulent activities in a civil suit filed in federal court. Morgan Stanley agreed to a settlement of $1.25 billion to settle the claims. Under the agreement, Morgan Stanley consented to payments of $625 million each to Freddie Mac and Fannie Mae. All injured parties and agencies involved agreed to release some claims against Morgan Stanley regarding the securities named in the lawsuit. The agreement for settlement was made on February 7, 2014. Morgan Stanley had been involved with seven similar litigations before this lawsuit was filed against them. Hopefully, they learned a lesson from the expensive venture.
2. Morgan Stanley penalized for RMBS Penalty: $2.6 billion
The United States Department of Justice reports that Morgan Stanley was accused of misleading its investors about subprime mortgage loans involved with securities it marketed and sold. The RMBS or Residential Mortgage-Backed Securities it issued in 2006 and 2007 were the investments in question. It was further accused of forsaking due diligence practices. Investors lost billions of dollars by investing in the RMBS. Investors included federally insured financial institutions who were not going to let it slide. Investigators found evidence of deceptive practices on the part of Morgan Stanley. The company was held accountable for its knowing engagement in improper investment practices. The actions of Morgan Stanley helped contribute to the economic crisis from 2007 through 2008. As part of the settlement agreement, Morgan Stanley agreed to a penalty of $2.6 billion and further agreed to admit to the deceptive actions and unfair means of seeking financial gains. Morgan Stanley provided a detailed statement of the facts as they occurred. Settlement of the civil monetary penalty satisfied claims under the FIRREA, but it did not release any persons from the potential of prosecution for criminal activity or civil liability.
1. Morgan Stanley fined billions for financial offenses Penalty amount: $3.535 billion
The Office of the Attorney General confirms that Morgan Stanley was held responsible for committing financial offenses of investor protection violation in 2008. JPMorgan Chase and Morgan Stanley agreed to buy back securities for $7 billion in a lawsuit resolution involving multiple states, alleging that each of the financial institutions misled their customers through auction-rate securities they marketed and sold to them. On top of the restitution, Morgan Stanley was also fined an additional $35 million in civil penalties in the settlement settled on August 14, 2008. The action was led by multistate Attorneys Generals in the civil case. The civil penalties were paid to the state of New York and the North American Securities Administrators Association.
Final thoughts
Morgan Stanley has been sued by multiple agencies, states, and individuals for practices that are illegal in most states. In some cases, a condition of the settlement requires Morgan Stanley to admit wrongdoing, but in others, the financial giant opted to refute claims made against them. Morgan Stanley has paid several billions of dollars to settle the claims made in courts against it, but it’s such a large firm that the settlements have not caused harm because of the wealth the firm generates annually.
