Singapore investors agree to settle mis-selling claims against Morgan Stanley for $25 million

A four-year long legal battle between a group of Singapore Pinnacle Notes investors and Morgan Stanley over allegations it sold rigged products that were "designed to fail" has been settled for US$20 million (S$25 million). -- PHOTO: REUTERS
A four-year long legal battle between a group of Singapore Pinnacle Notes investors and Morgan Stanley over allegations it sold rigged products that were "designed to fail" has been settled for US$20 million (S$25 million). -- PHOTO: REUTERS

SINGAPORE - A four-year long legal battle between a group of Singapore Pinnacle Notes investors and Morgan Stanley over allegations it sold rigged products that were "designed to fail" has been settled for US$20 million (S$25 million).

The terms of the settlement was reached on Sept 9 but it was only last Friday when they were made public after lawyers for the Singapore investors sought approval for the agreement from the United States federal court in New York.

As the case has been certified as a class action, some 3,000 to 5,000 retail investors in Singapore who bought Pinnacle Performance Notes series 1,2,3,6,7,9 and 10 between Jan 1, 2006 and Dec 31, 2010, may be eligible for restitution.

They includes those who had received partial compensation through Singapore's Financial Industry Disputes Resolution Centre (Fidrec).

After the Notes were rendered near worthless when the underlying collaterals became insolvent, some investors received partial payments from the distributors and brokers in Singapore that had sold the Notes for Morgan Stanley.

The New York law firm of Kirby McInerney, which represents more than 200 Singapore investors, said the US$20 million settlement "represents a substantial portion of the remaining amount that could have been recovered for the class."

The plaintiffs, who had bought about US$129 million worth of Pinnacle Notes, alleged that Morgan Stanley, when structuring the Notes, concealed conflicts of interest and inherent risks in order to defraud them.

They claimed the notes were marketed as safe, conservative investments and "an attractive alternative to bonds" when in fact they were collateralised, among other things, by sub-prime mortgages and Icelandic banks that later failed.

While Morgan Stanley agreed to the settlement, it continues to deny the allegations and any wrongdoing.

Both sides say that the settlement is "advantageous, considering the risks and uncertainties to each side of continued litigation", and that it is "fair, reasonable, adequate and is in the best interests of the class members".

The plaintiffs had fended off multiple attempts by Morgan Stanley to dismiss the case in both New York and Singapore courts before obtaining class certification late last year.

"This settlement will provide meaningful compensation to those who were harmed by the Pinnacle Notes' collapse." said Kirby McInerney partner Daniel Hume.

"It also allows these investors, many of which are retirees on fixed incomes, to close a difficult chapter of their lives and move forward."