Morgan Stanley Will Pay $95 Million to Settle RMBS Suit

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Morgan Stanley agreed to pay $95 million to settle a lawsuit by buyers of residential mortgage-backed securities who accused the bank of making false and misleading claims about the underlying loans.

Resolution of the class action in Manhattan federal court comes as Chief Executive Officer James Gorman’s firm has been settling cases tied to mortgage-linked securities sold before the financial crisis as he seeks to boost returns by next year. The bank agreed this year to pay more than $1.5 billion to settle related claims brought by the Securities and Exchange Commission and the Federal Housing Finance Agency.

The lawsuit was filed by retirement funds including the Public Employees’ Retirement System of Mississippi. If all members of the class participate, the average distribution will be $2.63 per $1,000 in original face value of the securities at issue, according to the filing.

This case stemmed from the sale of mortgage-backed securities by Morgan Stanley entities during 2006 and 2007. Plaintiffs claimed the offering documents for the securities contained false and misleading statements about the underlying borrowers and collateral, according to the filing.

New York-based Morgan Stanley, owner of the world’s biggest brokerage, denies all claims of wrongdoing, according to the filing.

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