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Facebook Flotation: Morgan Stanley Fined

(c) Sky News 2012

Morgan Stanley (Xetra: 885836 - news) , the lead underwriter for Facebook (NasdaqGS: FB - news) 's initial public offering in May, has been fined $5m (£3.08m) by Massachusetts' securities regulators.

The officials accused the bank of having "improper influence" over the research analysts covering the social media website at the time of its $16bn (£9.87bn) stock market flotation.

The bank has come under criticism for revealing revised financial information to investment banks - but not individual investors – ahead of the company's initial public offering of stock

Wall Street research analysts were warned that less robust mobile revenues had hit earnings and revenue forecasts - information that was not included in new documents Facebook filed with US securities authorities around a week before the flotation.

Massachusetts officials said these lower figures caused analysts to revise their annual revenue estimates down around 3% below the $5bn (£3.08bn) Facebook had forecast for this year.

Regulator William Galvin said a top Morgan Stanley banker taught Facebook executives how to disclose this sensitive financial information and organised phone calls with key analysts.

"Main Street investors were put at a significant disadvantage to Wall Street," Mr Galvin added.

In relation to the fine, he said: "With it we will get their attention and begin to take steps in restoring some confidence for retail investors to invest."

A spokeswoman for Morgan Stanley, which has not admitted or denied doing anything wrong, said it is "pleased to have reached a settlement".

She added that the company is "committed to robust compliance with both the letter and the spirit of all applicable regulations and laws".

Mr Galvin said his investigation into the Facebook listing is not over and he is continuing to review other banks involved, including Goldman Sachs (NYSE: GS-PB - news) and JP Morgan.

He has already overseen a fine of $2m (£1.2m) for Citigroup over its analysts’ "improper disclosures" of information during the deal.

The fee for all of the event's underwriters was reported to be $176m (£108.5m) at the time.

Facebook priced its initial public offering at $38 (£23.44) a share, but they finished the first day of trading at just $38.23 (£23.58).

Since then, shares have fallen by around 30% below the IPO price.

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