Compliance & Regulation

Mitsubishi UFJ-Morgan Stanley Joint Venture Faces Lawsuit Over Credit Suisse Bond Sales

The Japanese brokerage collaboration between Mitsubishi UFJ Financial Group and Morgan Stanley, known as Mitsubishi UFJ Morgan Stanley Securities Co., is in legal hot water.

The partnership is being taken to court over its sale of Credit Suisse’s Additional Tier 1 (AT1) bonds.

A report from Bloomberg, referencing a Tokyo court filing from Yamazaki Marunouchi Law Office, reveals that the lawsuit was initiated on behalf of 66 investors. These plaintiffs are seeking 5.2 billion yen (approximately $36 million) as compensation for the losses they suffered from the AT1 bonds. They assert their combined investments had a nominal value of $41 million.

Central to the plaintiff's grievances is the claim that the joint venture disregarded regulatory suitability rules. They argue that these AT1 bonds, designed for professional institutional entities, were improperly sold to regular investors. Furthermore, they contend that they weren't adequately informed about the associated risks, including potential conditions that might initiate a write-down.

Japan's Financial Services Agency indicates that investors nationwide purchased Credit Suisse's AT1 bonds worth around 140 billion yen. Of this, the majority of sales were handled by the Mitsubishi UFJ-Morgan Stanley partnership. In a related case, online brokerage Monex, based in Tokyo, was also sued in July. An investor alleged that the firm failed to sufficiently clarify the risks tied to the AT1 bonds.