WASHINGTON -- A West Virginia county court ruling against Morgan Stanley & Co. could have "serious adverse consequences" for broker-dealers and their institutional investor clients, the Public Securities Association has told an appeals court.

The ruling by the Circuit Court of Kanawha County that Morgan Stanley is liable for losses from state investments improperly shifts responsibility for investment losses to securities dealers and wrongly makes the dealers insurers of profit for clients, the PSA said in a friend-of-the-court brief filed last week with the Supreme Court of Appeals of West Virginia.

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