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Regulators looking into Morgan Stanley role in Facebook IPO

May 22, 2012|By Andrew Tangel and Jim Puzzanghera

NEW YORK -- Securities regulators are amping up their interest in Facebook's lackluster initial public offering.

Morgan Stanley may have shared an analyst's negative reports with some institutional investors but not others ahead of the social networking firm's high-profile IPO last week, according to news reports.

"If true, the allegations are a matter of regulatory concern to FINRA and the SEC," Rick Ketchum, chairman and chief executive officer of the Financial Industry Regulatory Authority, said in an emailed statement. FINRA is the securities industry's self-regulatory body.

In Washington, SEC Chairwoman Mary Schapiro told reporters the agency needed to examine issues raised by Facebook's IPO as well was a a recent $2-billion trading loss at JPMorgan Chase & Co.

“I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook and, as we just testified to, we’re also looking closely at the JPMorgan trading," Schapiro said after a congressional committee hearing.

Meanwhile, securities regulators in Massachusetts subpoenaed Morgan Stanley "in connection with the discussions by their analyst with certain institutional investors about the revenue prospects for Facebook prior to that company's initial public offering last week," according to a press release from the Massachusetts secretary of state's office.

A Morgan Stanley spokesman did not immediately respond to a request for comment.

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