Post by jcline on Dec 5, 2006 15:43:02 GMT -4
13 Securities Firms Named in Short-Selling Suit
www.bloomberg.com/apps/news?pid=20601082&sid=aoEMR3y4q9w8&refer=canada
Goldman, 12 Other Firms Named in Short-Seller Suit (Update3)
By David Glovin
Dec. 4 (Bloomberg) -- Morgan Stanley, Goldman Sachs Group Inc. and 11 other securities firms have been accused in a lawsuit of conspiring to rig the fees charged to short sellers.
Short sellers borrow securities and then sell them in anticipation of making a profit by buying the securities back after their price has fallen. Short sellers must pay fees to cover the cost of borrowing the shares.
In a class action filed in federal court New York on Dec. 1, two short sellers claimed that the 13 firms conspired to charge excessive fees for certain ``hard-to-borrow'' stocks, in violation of antitrust laws. The defendants locate, borrow and deliver stocks involved in most short sales, the complaint said.
The firms ``orchestrated a massive scheme whereby they have combined and conspired to raise, fix, and maintain, at artificially inflated levels, the fees paid by plaintiffs,'' the complaint said.
Plaintiffs Forza Capital Management LLC of Bend, Oregon, and BHL Capital Partners LP of Westport, Connecticut, who are represented by Milberg Weiss Bershad & Schulman, are seeking unspecified damages.
``We never comment on pending litigation,'' said Peter Rose, a spokesman for New York-based Goldman Sachs, the biggest U.S. securities firm by market value. Morgan Stanley spokeswoman Mary Claire Delaney declined to comment.
`Hard to Borrow'
According to the complaint, the banks conspired since 2000 to fix borrowing fees above what would have been charged absent the alleged conspiracy and have arbitrarily designated certain securities as ``hard to borrow.''
The plaintiffs also claimed that the firms don't require one another to deliver ``hard-to-borrow'' securities, enabling them to charge borrowing fees for securities that never actually change hands.
The suit also names Merrill Lynch & Co. and JPMorgan Chase & Co. Merrill spokesman Mark Herr declined to comment. Merrill is a passive minority investor in Bloomberg LP, the parent of Bloomberg News. JPMorgan spokeswoman Brooke Harlow declined to comment.
Rob McLeod, a spokesman for defendant Canadian Imperial Bank of Commerce, had no comment. Defendant Credit Suisse Group's spokeswoman Victoria Harmon declined to comment. Torie Pennington von Alt, a spokeswoman for defendant Lehman Brothers Holdings Inc., also declined to comment on the suit.
Elizabeth Ventura, a spokeswoman for Bear Stearns Cos., declined to comment.
``We haven't seen the lawsuit yet,'' said Shirley Norton, a spokeswoman for defendant Bank of America Corp.
The case is Forza v. Morgan Stanley, 06-cv-13676, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: David Glovin in U.S. district court in New York at 2587 or dglovin@bloomberg.net .
Last Updated: December 4, 2006 17:11 EST
www.bloomberg.com/apps/news?pid=20601082&sid=aoEMR3y4q9w8&refer=canada
Goldman, 12 Other Firms Named in Short-Seller Suit (Update3)
By David Glovin
Dec. 4 (Bloomberg) -- Morgan Stanley, Goldman Sachs Group Inc. and 11 other securities firms have been accused in a lawsuit of conspiring to rig the fees charged to short sellers.
Short sellers borrow securities and then sell them in anticipation of making a profit by buying the securities back after their price has fallen. Short sellers must pay fees to cover the cost of borrowing the shares.
In a class action filed in federal court New York on Dec. 1, two short sellers claimed that the 13 firms conspired to charge excessive fees for certain ``hard-to-borrow'' stocks, in violation of antitrust laws. The defendants locate, borrow and deliver stocks involved in most short sales, the complaint said.
The firms ``orchestrated a massive scheme whereby they have combined and conspired to raise, fix, and maintain, at artificially inflated levels, the fees paid by plaintiffs,'' the complaint said.
Plaintiffs Forza Capital Management LLC of Bend, Oregon, and BHL Capital Partners LP of Westport, Connecticut, who are represented by Milberg Weiss Bershad & Schulman, are seeking unspecified damages.
``We never comment on pending litigation,'' said Peter Rose, a spokesman for New York-based Goldman Sachs, the biggest U.S. securities firm by market value. Morgan Stanley spokeswoman Mary Claire Delaney declined to comment.
`Hard to Borrow'
According to the complaint, the banks conspired since 2000 to fix borrowing fees above what would have been charged absent the alleged conspiracy and have arbitrarily designated certain securities as ``hard to borrow.''
The plaintiffs also claimed that the firms don't require one another to deliver ``hard-to-borrow'' securities, enabling them to charge borrowing fees for securities that never actually change hands.
The suit also names Merrill Lynch & Co. and JPMorgan Chase & Co. Merrill spokesman Mark Herr declined to comment. Merrill is a passive minority investor in Bloomberg LP, the parent of Bloomberg News. JPMorgan spokeswoman Brooke Harlow declined to comment.
Rob McLeod, a spokesman for defendant Canadian Imperial Bank of Commerce, had no comment. Defendant Credit Suisse Group's spokeswoman Victoria Harmon declined to comment. Torie Pennington von Alt, a spokeswoman for defendant Lehman Brothers Holdings Inc., also declined to comment on the suit.
Elizabeth Ventura, a spokeswoman for Bear Stearns Cos., declined to comment.
``We haven't seen the lawsuit yet,'' said Shirley Norton, a spokeswoman for defendant Bank of America Corp.
The case is Forza v. Morgan Stanley, 06-cv-13676, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: David Glovin in U.S. district court in New York at 2587 or dglovin@bloomberg.net .
Last Updated: December 4, 2006 17:11 EST