Morgan Stanley Said to Tell Brokers It Will Fix Facebook Orders

Morgan Stanley Smith Barney, the world’s biggest brokerage, told its financial advisers yesterday that it will adjust prices on a few thousand client trades of Facebook Inc. (FB), according to a person on the conference call.

The company also told brokers that limit orders to sell shares for at least $43 each after the social network’s initial public offering won’t be filled because of low volume at that price range on May 18, said the person, who requested anonymity because the call was private. Morgan Stanley Smith Barney told brokers May 23 it was reviewing pricing and execution of orders, according to a memo obtained by Bloomberg.

Nasdaq Stock Market trade confirmations were delayed and some orders may have been mishandled by the exchange. The IPO was marred on the first trading day when Nasdaq OMX Group Inc. was overwhelmed by order cancellations and updates that delayed trading in Facebook shares. The U.S. Securities and Exchange Commission said it will conduct a review.

Facebook’s underwriters had gains of about $100 million through their work to stabilize the share price since the IPO, a person familiar with the matter said May 23. Morgan Stanley (MS) will use some of the gains to reimburse clients who lost money because of glitches in trade execution, the person said.

Morgan Stanley Smith Barney, which is owned by Morgan Stanley and Citigroup Inc. (C), had more than 17,000 advisers and $1.74 trillion of client assets as of March 31.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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