Morgan Stanley Ordered to Yield Data

SAN FRANCISCO -- A federal appeals court has ruled that the Morgan Stanley Group Inc. must disclose to Capital Bank of California confidential research data it had available on junk bonds while the Los Angeles bank was a client.

Capital Bank of California sued Morgan this year, claiming breach of contract and negligence in handling its investment accounts.

Claim to Confidentiality Argued

Morgan Stanley argued that some of the material sought in the lawsuit's discovery phase was confidential and should not be disclosed.

Lawyers said, however, that the U.S. Circuit Court of Appeals for the Ninth Circuit has ordered Morgan Stanley to turn over data that the investment bank had argued could be kept confidential under the so-called "Chinese Wall" provision of federal securities law.

That law bars departments of full-service securities companies from sharing certain information with other departments.

The appeals court upheld a lower court decision that Morgan Stanley must surrender files for all investment banking clients that issued junk bonds bought by Capital Bank, which has $286 million in assets.

Capital Bank |Intends to Go All the Way'

"We think the court reached the correct decision," said Jay Rakow, an attorney for Capital Bank. His client "intends to go all the way with this matter," he said.

In its suit, Capital Bank said it became a client of Morgan Stanley based on representations that it had an outstanding research capability in highyield bonds.

Capital Bank said that it suffered losses because it did not get adequate investment advice and support.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.