Morgan Stanley & Company LLC has agreed to settle its alleged role in the failure of three federally insured banks that closed between 2009 and 2011.
The New York-based financial services firm is accused of misrepresentations in offering documents for 14 residential mortgage-backed securities transactions.
Investors in the RMBS included Colonial Bank and Security Savings Bank, both of which failed in 2009, and United Western Bank, which failed in 2011.
The Federal Deposit Insurance Corp., which acted as receiver for all three failed institutions, filed four lawsuits from 2012 through 2014 seeking damages from Morgan Stanley and other defendants.
The FDIC alleged
violations of federal and state securities laws in connection with the sale of the RMBS to the trio of banks.
Although it denied all liability tied to the failed banks, Morgan Stanley agreed to settle.
“The parties deem it in their best interests to enter in to this agreement to avoid the uncertainty, trouble and expense of further litigation of the RMBS actions,” a statement from the FDIC said.
As part of the settlement, Morgan Stanley will pay $62.95 million. The amount will be distributed among the three failed banks.
In return,
the FDIC will dismiss claims in the lawsuit asserted against Morgan Stanley and release and discharge the firm and its affiliates from all claims, demands, actions, causes of action and liabilities of any type related to the failed banks’ RMBS investments.
Morgan Stanley agreed in 2015 to settle with the FDIC RMBS claims
tied to the failure of Franklin Bank SSB, which failed in 2008. That cost the investment banker $24 million.
The FDIC noted that it has filed 19 RMBS lawsuits in all on behalf of eight failed banks as of the end of last year.
