Bloomberg News

Morgan Stanley Ordered to Halt Singapore Suit Against CDO Claim

December 13, 2011

Dec. 13 (Bloomberg) -- Morgan Stanley can’t ask a court in Singapore to block investors there from suing over their losses on $154.7 million in synthetic collateralized debt obligations outside the country, a judge in New York ruled.

The New York-based bank’s attempt is vexatious, U.S. District Judge Leonard Sand said yesterday, granting a request by investors including the Singapore Government Staff Credit Cooperative Society Ltd. to stop Morgan Stanley from seeking a Singapore High Court order.

Several Morgan Stanley units created a “classic bait and switch scheme secretly designed to benefit Morgan Stanley” at customers’ expense, according to the lawsuit filed in October 2010. The investors claim Morgan Stanley didn’t tell them it was a counter-party to the agreements, meaning that for each dollar the investors lost, the bank gained a dollar.

Morgan Stanley disagrees with the ruling and its Singapore court action was entirely appropriate, Hong Kong-based spokesman Nick Footitt said today.

“This dispute involved plaintiffs who are all based in Singapore, who purchased notes in Singapore, and who contractually agreed to the exclusive jurisdiction of the Singapore courts,” he said.

Morgan Stanley, which had sought to have the investors’ lawsuit thrown out because the Monetary Authority of Singapore investigated the sale of structured financial products and created a resolution system, this month denied any wrongdoing.

‘Mere Puffery’

Any alleged misstatements by Morgan Stanley on the notes “were mere puffery or were vague statements of optimism,” the bank said in a court filing. “Defendants had no duty to disclose the allegedly omitted information.”

In October, Sand dismissed some of the investors’ claims and permitted the rest of the case to go forward. One month later, Morgan Stanley asked the Singapore court for an order blocking the investors from pursuing the case.

“Rather than availing themselves of the remedies available here, defendants are attempting to require the plaintiffs to begin anew in Singapore,” Sand said yesterday in his ruling. He also denied the New York-based bank’s request that he certify his October decision for pretrial appeal.

The plaintiffs seek to represent a class of all investors who bought the Pinnacle Notes from Aug. 1, 2006, to the end of 2007.

The case is Dandong v. Pinnacle Performance Ltd., 10-cv- 08086, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Andrea Tan in Singapore. Editors: Douglas Wong, Mike Hytha

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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