This is taking stock with Gadley Hay and pim Box on Bloomberg Radio. Morgan Stanley was hit with a class action suit today, filed on behalf of sixty thousand workers. The suit claims that the company mismanaged its own employees retirement plans by offering poorly performing funds and charging excessive fees. Here to tell us more is Andrew Harris, legal reporter for Bloomberg News, joining us from Washington, d C. Of course, home to Bloomberg one and one oh five point seven
h D two. Andrew, thanks for being with me, so tell us the details of this lawsuit. Well. The lawsuit was filed this morning by Robert Patterson, a former Morgan Stanley employee, who claims that the company was um not serving its own employees, well at least those that participated. And it's for one K plan by putting them in poor performing funds and as you noted, soaking them with excessive fees. It's not the first time a lawsuit like this has been filed, but you don't usually see them
again companies whose business it is to manage investments. Indeed, and one of the examples that is given in the lawsuit is the Morgan Stanley Institutional Small Cap Growth Fund, the I S class that performed worse than of all other small cap growth funds in fourteen, worse than of them in twenty. And I understand that this fund carried a ninety eight basis point cost. Compare that to a similar fund from Vanguard, and we're talking about seven basis points.
Is that correct? That is correct? These were These are costly, UH poor performing funds, at least for the people that were in them. And UM that wasn't the only fund that was low rated to the Chicago based investment advisory for a morning Star had given UH its lowest rating to Morgan Stanley's Institutional MidCap Growth fund, and UM that was the only MidCap fund that was being offered to Morgan Stanley planted participants, So they didn't have a lot
of choice in that matter except not to participate. What are some of the potential future actions that could happen, I mean it could be classified, what it's like a class action suit and what would happen? Yes, he sued on behalf of employees that were UH plan participants between UH. That question of class certification, of course, goes before a judge and the company gets to oppose that. So that's that's not a certainty. Um. Oftentimes cases like this get settled,
sometimes just on the eve of trial. UM. How much are they seeking. They're seeing a hundred and fifty million dollars and damages. Um. Obviously, if there's going to be assilement, there will be somewhere between that number and zero pick number. And there are new rules, aren't there coming from the Labor Department about employee retirement income security. There there are trying to codify obligations for financial advisors to put their
clients interest first. In fact, there's a case pending here in Washington, Ryme based where UM one of the opponents of that new regulation is going to court to see if they can get it blocked as a prelude to getting it struck down now, Andrew, this is as you mentioned earlier, this is not the first time that there have been lawsuits alleging excessive fees charged to employees of
four oh one k plants. Correct. I mean, just recently some top us colleges and universities have been hit with lawsuits not just for their four oh one K but also their four oh three B retirement plans. Yeah, there was recent spate of filings in the past two weeks. In fact, the law firm the file today's lawsuit also suit Columbia Adversity a couple of days ago, making just those allegations. And previously we have seen litigation against Caterpillar,
We've seen litigation against Lockheed. UM. You know, a lot of these cases are become very, very fact fact specific, so it's difficult to predict how any one of them will turn out based upon prior performance, if you will, right, I mean, it's and it's not just about to be clear, it is not just about the performance of the investments that are offered. It is the fees that are associated with making the investments in the first place. That that's correct.
In fact, one of the core allegations in the Lockheed case was that UH employees who were in the company's stock plant, we're paying more in fees and as a result, getting a worse return on investment than if they head simply bought the stock on the street like anybody else. Well, thank you very much for sharing this detail with us.
Andrew Howard Harris, our legal reporter for Bloomberg News in Washington, d c home to Bloomberg nine one FM and one oh five point seven h D two shares of Morgan Stanley basically unchanged right now at thirty dollars and fifty five cents