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Article Title:
The Conflict of Interest Game

Article Description:
Recent lawsuits allege the Morgan Stanley Technology fund was 
influenced to buy and hold stocks of companies that delivered 
huge investment banking fees – or could potentially bring big 
business – to the investment bank.

Additional Article Information:
355 Words; formatted to 65 Characters per Line
Distribution Date and Time: Fri Feb 17 02:03:27 EST 2006

Written By:     Ulli G. Niemann
Copyright:      2006
Contact Email:  mailto:[EMAIL PROTECTED]

Article URL: 

For more free-reprint articles by this Author, please visit:


The Conflict of Interest Game
Copyright © 2006 Ulli G. Niemann
Success Investment

Disgruntled investors are going after Wall Street once again, 
this time accusing one of investment bank Morgan-Stanley's 
high-tech mutual funds of making biased stock picks.

Recent lawsuits allege the Morgan Stanley Technology fund was 
influenced to buy and hold stocks of companies that delivered 
huge investment banking fees – or could potentially bring big 
business – to the investment bank.

According to the lawsuits, the Morgan Stanley fund followed the 
biased recommendations of the firm's analysts – decisions that 
have cost shareholders millions of dollars since the portfolio's 
October 2000 inception.

The fund lost 48 percent in 2001 and was down another 50 percent 
during the first nine months of 2002. While Morgan Stanley 
strongly denied the allegations, I fail to see how the management 
of the fund is somehow distinct from the other divisions of 
Morgan Stanley. Ultimately, they all work for the same boss.

The suits further claim that the tech fund failed to disclose 
that the firm had investment banking ties with a number of 
companies whose stocks were part of the portfolio. They also 
failed to reveal that those links could affect the fund's buy 
or sell calls.

Why bring all this up? For one thing, it is interesting to note 
that Morgan Stanley  offered four of these types of funds in 
October 2000. Just around the time when we sold all of our 
positions (Oct. 13, 2000) and it became clear, at least to those 
of us who were tracking long-term trends, that a major trend 
change had taken place.

More recently in the news it's been Merrill Lynch who had a 
questionable deal involving transactions with failed energy 
trader Enron. Of course, the financial services industry 
regulates itself so well, that an $80 million payment to the 
SEC is sufficient to wrap up this case without admitting or 
denying wrongdoing.

What's the moral of this story? While it is impossible to predict 
these alleged conflict of interest schemes, it is definitely 
possible to follow a disciplined approach and be on the "right" 
side of the market so you can avoid jumping aboard a sinking 

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing 
about objective, methodical approaches to investing for over 
10 years. He eluded the bear market of 2000 and has helped 
countless people make better investment decisions. To find out 
more about his approach and his FREE Newsletter, please visit:



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