A group of 18 Singaporean investors have filed a lawsuit in the US alleging that Morgan Stanley & Co Inc had sold rigged Pinnacle Notes as safe and conservative products even though they were not the case. One of the investor is Singapore’s oldest credit cooperative, the Singapore Government Staff Credit Cooperative Society.
The US District Court for the Southern District of New York will decide on the 28th September 2011 whether the case can proceed in the US or whether it should be dismissed and heard in Singapore.
According to the complaint, Morgan Stanley had designed the synthetic collateralised debt obligations (CDOs) to fail as each dollar the investor lost would be a dollar of profits for them.
Morgan Stanley has argued against the allegations and referred to a Monetary Authority of Singapore (MAS) report in July 2009 discussing Pinnacle Notes that mentioned investors had been warned of this risk, and that they had ‘acknowledged these risks at the time of purchase’.
If the case is approved to be held in US, the Singaporean investors will seek class action suit which means that all the affected Pinnacle investors might stand a chance to recover some of their money. These would include investors of Pinnacle Performance Ltd series 1, 2, 3, 5, 6, 7, 9 and 10 notes.
While this new turn of developments now offers a glimmer of hope to Singaporean retail investors, some of whom lost 99% of their money, it is a pity that this has come about only because there happened to be big time investors who were willing to pursue the case all the way to the US.
Small time retail investors often have their hands tied when things go wrong.
S’pore investors sue in US over doomed Pinnacle Notes (Business Times)