Finra Chief Says Morgan Stanley May Face Probe Over Facebook IPO

Morgan Stanley could face regulatory scrutiny over claims that an analyst shared negative news about Facebook Inc. (FB) with institutional investors before that firm’s initial public offering last week, according to the head of the Financial Industry Regulatory Authority.

“If true, the allegations are a matter of regulatory concern” to the industry-funded brokerage watchdog and the U.S. Securities and Exchange Commission, Finra Chairman and Chief Executive Officer Richard Ketchum said today in an e-mail.

Ketchum commented in response to a news report that an analyst for Morgan Stanley, lead underwriter for the IPO, lowered a Facebook revenue forecast after the social-networking company said growth in mobile products could hurt its business. Such a move could come under scrutiny from regulators if the warning was only provided to institutional investors.

Finra’s chief didn’t say whether his Washington-based agency is investigating Morgan Stanley. (MS) John Nester, a spokesman for the SEC, declined to comment.

To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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