Morgan Stanley 2015 Annual Report Download - page 36

Commercial Mortgage Related Matter.
On January 25, 2011, the Company was named as a defendant in The Bank of New York Mellon Trust, National Association
v. Morgan Stanley Mortgage Capital, Inc., a litigation pending in the SDNY. The suit, brought by the trustee of a series of
commercial mortgage pass-through certificates, alleges that the Company breached certain representations and warranties
with respect to an $81 million commercial mortgage loan that was originated and transferred to the trust by the Company.
The complaint seeks, among other things, to have the Company repurchase the loan and pay additional monetary damages.
On June 16, 2014, the court granted the Company’s supplemental motion for summary judgment. On July 16, 2014, the
plaintiff filed a notice of appeal.
Currency Related Matters.
Regulatory and Governmental Matters.
The Company is responding to a number of regulatory and governmental inquiries both in the United States and abroad
related to its foreign exchange business. In addition, on June 29, 2015, the Company and a number of other financial
institutions were named as respondents in a proceeding before Brazil’s Council for Economic Defense related to alleged
anticompetitive activity in the foreign exchange market for the Brazilian Real.
Class Action Litigation.
Beginning in December 2013, several foreign exchange dealers (including the Company and certain affiliates) were named as
defendants in multiple purported antitrust class actions most of which have now been consolidated into a single proceeding in
the United States District Court for the Southern District of New York styled In Re Foreign Exchange Benchmark Rates
Antitrust Litigation. On July 16, 2015, plaintiffs filed an amended complaint generally alleging that defendants engaged in a
conspiracy to fix, maintain or make artificial prices for key benchmark rates, to manipulate bid/ask spreads, and, by their
behavior in the over-the-counter market, to thereby cause corresponding manipulation in the foreign exchange futures
market. Plaintiffs seek declaratory relief as well as treble damages in an unspecified amount. Defendants filed a motion to
dismiss the amended complaint on November 30, 2015.
On September 11, 2015, several foreign exchange dealers (including the Company and an affiliate) were named as
defendants in a purported class action filed in the Ontario Superior Court of Justice styled Christopher Staines v. Royal Bank
of Canada, et al. The plaintiff has made allegations similar to those in the In Re Foreign Exchange Benchmark Rates
Antitrust Litigation and seeks C$1 billion as well as C$50 million in punitive damages. On September 16, 2015, a parallel
proceeding was initiated in Quebec Superior Court styled Christine Beland v. Royal Bank of Canada, et al. based on similar
allegations and seeking C$100 million as well as C$50 million in punitive damages.
Wealth Management Related Matters.
The Company is currently defending itself in an ongoing arbitration styled Lynnda L. Speer, as Personal Representative of
the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al., which is pending before a Financial Industry
Regulatory Authority arbitration panel in the state of Florida. Plaintiffs assert claims for excessive trading, unauthorized use
of discretion, undue influence, negligence and negligent supervision, constructive fraud, abuse of fiduciary duty, unjust
enrichment and violations of several Florida statutes in connection with brokerage accounts owned by a former high-net
worth wealth management client who is now deceased. Plaintiffs are seeking approximately $475 million in disgorgement,
compensatory damages, statutory damages, punitive damages and treble damages under various factual and legal theories.
The following matters were terminated during or following the quarter ended December 31, 2015:
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of NY, styled
Sealink Funding Limited v. Morgan Stanley, et al. A second amended complaint, filed on March 20, 2013, alleged that
defendants made untrue statements and material omissions in the sale of certain mortgage pass-through certificates backed by
securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company
and/or sold by the Company was approximately $507 million. On April 18, 2014, the court granted the Company’s motion to
dismiss the second amended complaint. The dismissal was affirmed on appeal on November 12, 2015.
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