Morgan Stanley investigated over pre-Facebook IPO actions

Regulators are investigating a report that Morgan Stanley, the lead underwriter for Facebook’s initial public offering last week, shared a negative assessment of Facebook with major clients before the IPO. Statements from Rick Ketchum, head of the Financial Industry Regulatory Authority, an independent regulatory body, came after an article from Reuters stated that a Morgan Stanley analyst reduced his revenue projections for Facebook shortly before the IPO and shared this with institutional investors.

In a statement through a spokeswoman, Ketchum said, “If true, the allegations are a matter of regulatory concern to FINRA and the [Securities and Exchange Commission].” The SEC declined to comment, however, Reuters reported that an SEC chairwoman, Mary Schapiro, told reporters on Tuesday that there are “issues that we need to look at specifically with respect to Facebook.” The news agency also reported the Massachusetts Secretary of the Commonwealth has issued a subpoena to Morgan Stanley. Since the debut of Facebook on the Nasdaq on Friday, shares have fallen 18 percent from the offering price of $38 amid criticisms that the social network is overvalued.