Morgan Stanley, the main underwriter for Facebook's initial public offering (IPO), Monday agreed to pay $5 million to Massachusetts' securities regulators as it was accused of disclosing downgraded revenue
forecast only to certain analysts but not main street investors.
According to the consent order of the securities division of the Commonwealth of Massachusetts, a Morgan Stanley banker arranged phone calls between Facebook's treasurer and the analysts of major underwriters to disclose detailed negative trends which would impact Facebook's revenue for 2012 a week before its IPO.
The revised figures were lower than many analysts had expected and led them to cut their annual revenue forecast for 2012. The renewed forecast was only passed to investment banks but not individual investors who have lost billions of dollars since the IPO.
Facebook shares were priced at $38 for IPO, but the shares were trading around 27 dollars in Tuesday's midday trading, about 30 percent below the IPO price. The disappointing stock price has led to a series of government probes and more than 40 lawsuits.
Morgan Stanley didn't admit or deny the charges of violating relative securities laws. Spokesman Wesley McDade said in a statement that the company was pleased "to have put this matter behind us."
Massachusetts securities regulators also fined Citigroup $2 million in October as an analyst of the bank leaked confidential information before Facebook's IPO.
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