The Conflict of Interest Game

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 ship.

About The Author

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 hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com

ulli@successful-investment.com

In The News:


pen paper and inkwell


cat break through


Is Starting A Business For Me? What To Consider Before Starting A Business

Do you have the right temperament?Starting a small business is... Read More

The Switzerland of Asia Shines

In many respects, Singapore is the Switzerland of Asia.Begun in... Read More

Waiting 20 Years Can Cost You Millions - Dont Wait Start Today

Many Young people live for Today. They really don't fully... Read More

Investing Offshore for Retirement

As an expatriate you are in a privileged savings and... Read More

June 2005: Weather Forecasts for Weather Traders

If Johannes Kepler, the renowned 17th century astronomer and discoverer... Read More

Invest To Make Money, Not To Get Rich

The technology boom of the '90s romanticized the "rags-to-riches" ideal... Read More

An Introduction to Offshore Investing

Once upon a time, offshore investment strategies were spoken of... Read More

Help with My Annuity

The cries are heard from the distance, "I need help... Read More

Brain Snappers and Other Wall Street Nonsense

The last time you spoke with your broker did he... Read More

Learn How to Lose and Risk Management

One of the leading traders on Chicago Mercantile Exchange, because... Read More

Trading Baskets Part I

Q. What is a basket?A basket is a group of... Read More

Making Your Investment Dollars Work for You

Investments are scary for some people, especially those who have... Read More

Have Analysts Gotten Honest?

It caught my attention when I heard an analyst on... Read More

Volatile Range

The stock market fell sharply Thu and Fri before and... Read More

DXPortfolio: A Great Passive Investment of 25% to $40% per month

First, I need to explain about e-currencies or digital currencies.... Read More

Stocks: Reduce Risk Yet Maximize Profits

It is important to note that every smart investor wants... Read More

Four Key Components To Building A Trading System

Need some insight on what you should really be striving... Read More

Why the Rich Keep Getting Richer

Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated,... Read More

Risk and Reward

If you are doing your own investing in the stock... Read More

Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart InvestorsThe move by China's central... Read More

Day Trading Strategy or Stock Trading Software? The Way You Pick Stocks Affects Your Results

The trading method you employ to approach the stock market... Read More

Investing & Online Stock & Share Trading: Money & Risk Management - Atkinson Portfolio Planner (1)

This article was originally featured in Daryl Guppy's 'Tutorials in... Read More

Is a SEP Plan Right For Your Business

A SEP is a special type of IRA. Under a... Read More

Preholiday Trading

The Light Crude Continuous Contract closed at $66.13 a barrel... Read More

Annuity Help

Many people today are looking for annuity help. The biggest... Read More

The Demise of Buy & Hold

Based on consistent results I think Buy & Hold should... Read More

Sitcom Investing

A fickle stock market encourages good-humored mockery.Recently, as I watched... Read More

The Dreaded Direct Question

(Please have a glass of water within reach before reading... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

Focus Your Investments on the Long Term

"All human power is a compound of time and patience!"... Read More

Six Principles of Successful Investing

1. Begin investing immediatelyProcrastination is the number one enemy of... Read More

Critical Options Investing Tip When Trading Naked Calls and Puts

An option is a derivative trading product that is best... Read More

Making It Second Nature

Not long ago I was laying on my son's floor... Read More