Morgan Stanley confirms lawsuit settlement

<p>A $1.25 billion lawsuit has been settled by Morgan Stanley.</p>

US bank Morgan Stanley has confirmed it has settled a major lawsuit relating to the sale of mortgage-backed securities.

The company revealed that it will pay $1.25 billion (£765.5 million) in order to settle the issue, with this money to be paid to the sector's regulator.

Morgan Stanley said its legal costs were "specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis" and rivals such as Citigroup and JP Morgan have also been affected by this in recent weeks.

Despite the massive lawsuit being settled by the company, its share price rose slightly over the course of yesterday's trading session in the US. By the end of the session on the New York Stock Exchange, stocks were selling for 0.24 per cent higher than at the start of the day.

Latest deals

JP Morgan Chase and Deutsche Bank have already confirmed their own settlements with the Federal Housing Finance Agency in the last few weeks and as a result of the latest deal, Morgan Stanley revealed that it will be adding a further $150 million to its legal reserves.

Deutsche Bank said it would pay $1.9 billion to settle similar claims to those made against Morgan Stanley, while Citigroup paid $250 million when its case was finalised in December.

In November, JP Morgan Chase confirmed that it would be paying a record settlement to regulators in the US due to its role in misleading investors during the country's housing crisis.

"We are pleased to have concluded this extensive agreement," said JP Morgan boss Jamie Dimon, with $13 billion to be paid, which was the biggest ever settlement between a corporation and the government.

"The conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," said Attorney General Eric Holder in a statement. JP Morgan has also confirmed that it is paying $4.5 billion in settlements over the mortgage securities scandal.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.