IP Uh Oh

John Liu Is Wondering Whether a Certain Facebook Banker Should Give His Bonus Back

"Morgan Stanley should hold the responsible executive—and possibly his supervisors—financially accountable, or explain why not."
Grimes. (CNN Money)

Grimes. (CNN Money)

After the mostly closely-watched initial public offering in anyone’s memory transformed into a spectacle marred by malfunctioning trading systems and a plummeting stock price, people were bound to ask questions.

One person, Massachusetts securities regulator William F. Galvin, asked after the role Morgan Stanley  played in managing the distribution of information in the weeks leading up to Facebook’s May IPO, ultimately determining that a certain senior investment banker played an inappropriate role in Facebook’s communications with the research analysts covering the company.

Mr. Galvin didn’t name said banker in the consent order his office released on Monday as part of a $5 million settlement, but offered enough biographical details to identify the dealmaker as Michael Grimes, the Silicon Valley insider widely credited with winning Morgan Stanley the lead underwriter role in the Facebook offering.

That settlement led New York City Comptroller John Liu to ask another question, according to Fortune. Mr. Liu has made something of a pet issue out of strengthening policies that allow banks to claw back bonuses from employees who damage the firms’ reputation or bottom line.

And indeed, 2012 has seen JPMorgan take back compensation from the traders and managers responsible for the London Whale debacle, and Morgan Stanley reclaim pay from the executive who stabbed a cab driver in the hand.

So what about Mr. Grimes? Per Fortune:

“Morgan Stanley recently enforced its clawback policy against an executive whose misconduct caused financial or reputational harm,” says New York City comptroller John Lui, who was instrumental in getting Morgan Stanley to strengthen its clawback rules. “Now it’s paying a hefty fine for alleged securities violations. Morgan Stanley should hold the responsible executive—and possibly his supervisors—financially accountable, or explain why not.”

One explanation: Mr. Grimes landed Morgan Stanley the IPO of the century, and $5 million is chump change.

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