Irish brokers Bloxham to defend lawsuit filed by nuns

IRISH brokerage firm Bloxham must defend a lawsuit filed by nuns, a veterinary fund and 85 other investors claiming they lost money when Morgan Stanley failed to sell notes soon enough after they were downgraded.

Judge Elizabeth Gloster in London yesterday granted a request by Morgan Stanley’s lawyer, Laurence Rabinowitz, to add Bloxham as a defendant to the lawsuit. She separately declined the plaintiffs’ request to order the bank to hand over more evidence, saying it was “not right to put the onus on the defendants at this stage”.

The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters, the Irish Veterinary Benevolent Fund and other individual investors sued Morgan Stanley and Saturns Investments Europe Plc, a special-purpose vehicle set up by the New York-based bank, in August.

The investors bought €5.88 million of the notes through Bloxham in 2005 and 2006, according to the lawsuit. The claimants said Morgan Stanley “deliberately or carelessly failed to redeem the notes” when they were downgraded to junk status in January 2009, allowing Morgan Stanley to reap a profit for itself.

Morgan Stanley and Saturns waited until June 2009, after the price of underlying bonds had risen significantly, to redeem the notes in which the nuns invested, according to the suit.

Waiting secured for “Morgan Stanley a profit of at least $11.2m on the sale of the notes by way of a termination payment,” lawyers for the nuns said in the lawsuit. The notes were sold to “a related Morgan Stanley entity” at a profit. A call and e-mail to Bloxham seeking comment weren’t immediately returned.

The case is: The Sisters of Charity of Jesus and Mary & ors v Morgan Stanley & Co, case 2010/960, High Court of Justice, Queen’s Bench Division (London).