Morgan Stanley admits trying to suppress reports

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The Independent Online
MORGAN STANLEY, the Wall Street securities firm, conceded yesterday that its investment bankers had tried to suppress negative research reports about their clients, in violation of the so- called Chinese wall that is meant to separate the firm's 'buy' and 'sell' functions.

Half a dozen former Morgan Stanley analysts were quoted in yesterday's Wall Street Journal, complaining that investment bankers, anxious to win new underwriting business, had brought pressure on them to drop negative comments and ratings of prospective clients.

A number were replaced, transferred or quit after run-ins with the firm's investment banking department.

Morgan Stanley blamed any past conflicts on weak management in the research and investment banking departments. But Richard Fisher, chairman, said in a statement that controversial policies banning negative comments and punishing unco-operative research analysts financially had never been implemented, and insisted that those responsible had been reprimanded.

A spokeswoman for the firm said the conflict never compromised the quality or integrity of Morgan Stanley's research. In all cases the negative comments about clients were published.

Securities firms routinely publish reports recommending that investment clients buy or sell certain shares.

But these recommendations often cause problems for the firms' underwriting, corporate finance and merger specialists, who do business with corporations named in the reports.

The tension is common to most Wall Street firms, executives say, and the conflict at Morgan Stanley is no worse than that of many rivals.

First Boston, for one, is famous for issuing 'buy' recommendations on shares of companies it had advised on public offerings, only weeks after the flotation took place, Perrin Long, an analyst with First of Michigan in Detroit, said.

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