Morgan Stanley Sued Over Possible Fund Fraud

February 27, 2003 ( - A class action lawsuit has been brought against Morgan Stanley in connection with sales of Class B shares of its mutual funds.

The suit, filed in the US District Court for the Middle District of Tennessee, alleges that investors ended up paying excessive fees because the brokerage firm engaged in fraudulent and deceptive practices in the sale of Class B shares of its mutual funds, according to a Dow Jones report.

Attorneys for the plaintiffs are now seeking certification of a class that consists of all investors who invested in Class B shares in a Morgan Stanley mutual fund since February 24, 1998.   Additionally, the law firm is seeking a subclass consisting of all investors who invested $50,000 or more in a single or combined transaction, on or after that date, in Class B shares of one or more Morgan Stanley mutual funds

The latest action against Morgan Stanley comes after the US Securities and Exchange Commission (SEC) hinted it might file civil charges against the firm.   The SEC claims that Morgan Stanley handed out shares to investors based partly on their commitments to buy additional stock after trading began.