A group of investors from Singapore who had lost money on credit linked notes worth a total of USD154.7 million were given authority by a US judge to pursue their lawsuit against the Morgan Stanley as a class.
The US District Judge Jesse Furman said yesterday that the 18 complainants are proper representatives of the class of investors who purchased the seven series of Pinnacle Notes issued back in 2006 and 2007. Other investors include the Singapore Government Staff Credit Cooperative Society Ltd, who filed suit in 2010. The cooperative alleged the notes was a 'bait and switch' scheme designed for the benefit of Morgan Stanley at the expense of its client base.
The plaintiffs claim Morgan Stanley invested their principal funds in high risk collateralized debt obligations where Morgan Stanley had made short term bets. Morgan Stanley did not disclose it was a counter party to the said agreements. Being a counter party meant that for every dollar the investor had lost, the bank had gained the same amount.
Morgan Stanley spokesperson Mark Lake declined to make a comment on the ruling. The firm had denied all wrongdoing in relation to the said controversial Pinnacle Notes. Previously, Morgan Stanley failed to obtain a Singapore court order in 2011 to block investors from suing in other jurisdictions except in Singapore.
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