Morgan Stanley Admits it Mismarketed Auction-Rate Securities to Massachusetts’ Municipalities


Today Morgan Stanley agreed to buy-back, at face value, $1.5 million in auction-rate securities from the city of New Bedford, Massachusetts and the town of Hopkinton, Massachusetts. This buy-back is tantamount to an admission that the auction-rate securities were improperly sold to the municipalities.

Morgan Stanley is the third major brokerage firm to repurchase auction-rate securities sold to municipalities in the Commonwealth of Massachusetts. In January, 2008 Merrill Lynch agreed to repurchase $13.7 million of auction-rate securities from Springfield, Massachusetts. Last month, UBS agreed to buy back $3.4 million in auction-rate securities from various municipalities and state agencies in Massachusetts.

Such repurchases have obviously been the result of pressures brought on Wall Street firms by the Massachusetts Secretary of State and other regulatory agencies over the past six months. At present, Morgan Stanley remains under regulatory scrutiny from a state auction-rate securities task force and the SEC concerning its activities. It remains to be seen whether Morgan Stanley will attempt to negotiate a settlement similar to that entered into today by Citigroup.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and individual investors in auction-rate securities cases. For further information, please contact us.