Morgan Stanley will offer to swallow some losses incurred by customers who bought mutual funds after failing to make the fund prospectuses accessible online.
Brokerage clients who elected electronic delivery of documents can rescind purchases of mutual funds they bought from Nov. 8, 2013, through Aug. 14, New York-based Morgan Stanley said in a letter addressed to fund companies and obtained by Bloomberg News. Customers who have already sold such holdings at a loss can be made whole, the bank said.
Morgan Stanley's brokerage, the world's largest by financial advisors, has 4 million clients with $2 trillion in assets. While the bank didn't provide an estimate of what it would cost to cover client losses, doing so may shield the company from litigation, according to the letter.
"By conducting the rescission offer, clients should be precluded in the future from requiring us to repurchase fund shares or maintaining an action against Morgan Stanley," the bank wrote.
A "system issue," which was fixed as of Aug. 15, caused a failure to deliver the prospectuses in a timely manner, Morgan Stanley said. The bank said it has notified the Securities and Exchange Commission and the Financial Industry Regulatory Authority about the mishap.
