Handbags at ten paces as Morgan Stanley given hefty fine
(15th January 2004 – Europe) Morgan Stanley has been ordered to pay a fine of 30 million euros (A$49 million) after the American bank was found guilty of deliberately talking down the share price of one luxury goods company in order to boost the price of one of its clients.
The Paris commercial court ruled that Morgan Stanley had published negative investment advice on Louis Vuitton Moet Hennessy (LVMH) to increase the stock price of client, Gucci.
The court said Morgan Stanley had caused "considerable moral and material damage" to LVMH and could yet order the bank to compensate the company for issuing misleading information.
In building its case, LVMH said Morgan Stanley’s behaviour towards it was systemic given similar legal action taken against the bank in the US. There has also been heated debate in the US with investment banks accused of a conflict of interest with the blurring of lines between objective stock analysis and promotion of the bank’s interests.
Morgan Stanley said it will appeal the verdict to protect both its reputation and the rights of analysts to make negative pronouncements on companies.
The court said Morgan Stanley had caused "considerable moral and material damage" to LVMH and could yet order the bank to compensate the company for issuing misleading information.
In building its case, LVMH said Morgan Stanley’s behaviour towards it was systemic given similar legal action taken against the bank in the US. There has also been heated debate in the US with investment banks accused of a conflict of interest with the blurring of lines between objective stock analysis and promotion of the bank’s interests.
Morgan Stanley said it will appeal the verdict to protect both its reputation and the rights of analysts to make negative pronouncements on companies.
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