Singapore investors have settled a legal battle for S$26m ($20m) with US-based investment bank Morgan Stanley over alleged fraud of the latter selling rigged financial products that were designed to fail.
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The $129m case has been certified as a class action, under which about 3,000 to 5,000 retail investors in Singapore who bought Pinnacle Performance Notes series 1, 2, 3, 6, 7, 9 and 10 between 1 January 2006 and 31 December 2010, may be eligible for restitution, reports The Straits Times.
This includes those investors who got partial compensation through the Singapore-administered Financial Industry Disputes Resolution Centre.
In October 2010, the bank along with its various affiliates were sued in New York over allegations of cheating investors of $129m through products which were allegedly collateralized by subprime mortgages and Icelandic banks that later failed.
The investors, which included Singapore Government Staff Credit Cooperative Society, indicted the lender of structuring the Notes to raise the risk of loss, and yet marketing them as safe investments and a better alternative to bonds.
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By GlobalDataMorgan Stanley however denied the accusations, though it consented to the settlement.
After the Notes were found to be nearly futile following the insolvency of the underlying collateral, some investors secured partial payments from the distributors and brokers in Singapore that sold the Notes for Morgan Stanley.
Kirby McInerney, a US law firm comprising over 200 Singapore investors, said that the settlement "represents a substantial portion of the remaining amount that could have been recovered for the class".
As part of the settlement, the average distribution will be 28 US cents for every $1 invested, before deduction of court-approved fees and expenses.
However, amount each eligible investor gets will differ based on the number of Notes bought, the amount of compensation previously paid from other sources, as well as the amount of valid claims submitted.
