BLOXHAM STOCKBROKERS has suffered a legal setback after a London court ruled that the broker must be added as a defendant in a case taken by a group of investors against Morgan Stanley.
Judge Elizabeth Gloster in London yesterday granted a request by Morgan Stanley’s lawyer, Laurence Rabinowitz, to add Bloxham as a defendant to the lawsuit. She separately declined the plaintiffs’ request to order the bank to hand over more evidence, saying it was “not right to put the onus on the defendants at this stage”.
While Bloxham Stockbrokers declined to comment, it is believed the broker has supported the case against Morgan Stanley taken by the group of investors in London.
A group of nuns, a veterinary fund and 85 other investors sued Morgan Stanley and Saturns Investments Europe, a special-purpose vehicle set up by the New York-based bank, in August 2010.
The investors bought almost €6 million of the notes through Bloxham in 2005 and 2006. According to the lawsuit, Morgan Stanley “deliberately or carelessly failed to redeem the notes” when they were downgraded to junk status in January 2009, allowing Morgan Stanley to reap a profit.
Morgan Stanley and Saturns waited until June 2009, after the price of underlying bonds had risen significantly, to redeem the notes in which the nuns invested, according to the suit.
Waiting secured for Morgan Stanley “a profit of at least $11.2 million on the sale of the notes by way of a termination payment”, lawyers for the investors said in the lawsuit. The notes were sold to “a related Morgan Stanley entity” at a profit.
Earlier this month two plaintiffs – the Solicitors’ Mutual Defence Fund, the main insurance body for solicitors, and Dublin legal firm LK Shields – told the commercial court in Dublin they were not proceeding with actions against Bloxham.
It is believed these cases related to the same fund at the centre of the London case with the defence fund and the legal firm claiming they were mis-sold a bond by Bloxham, which was provided by Morgan Stanley, and which subsequently collapsed in value. – (Additional reporting, Bloomberg)
