Morgan Stanley (MS:US) was sued by Asset Management Fund for fraud in New York state court over the purchase of $122.4 million in residential mortgage-backed securities.
Allegations against the bank include fraud, fraudulent inducement and negligent misrepresentation over the sale of the securities, according to documents filed in New York State Supreme Court yesterday.
Morgan Stanley’s offering materials for the investments contained “material misrepresentations and omissions” on the loans underlying the securities, including the percentage of owner-occupied properties, the fund said in the court documents.
“Plaintiffs did not know the true facts regarding defendants’ misrepresentations and omissions in the offering materials, and justifiably relied on those misrepresentations and omissions,” the fund said.
Mark Lake, a spokesman for New York-based Morgan Stanley, didn’t immediately return a telephone message left at his office seeking comment on the lawsuit.
Asset Management Fund, based in Chicago, also sued JPMorgan Chase & Co. in the same court in February over $515.6 million in residential mortgage-backed securities, and sued Bank of America Corp. over $239.5 million worth of the investments in March.
Asset Management Fund does business as AMF Funds, according to the court documents. The firm, which is managed by Shay Assets Management Inc., had about $590 million in assets under management in 2011, according to its website.
Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.
The case is Asset Management Fund v. Morgan Stanley, 651466/2012, New York State Supreme Court (Manhattan).
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