Morgan Stanley Hit With Lawsuit for Stock Plunge

Diversify, diversify, diversify. And never bet your entire nest egg on company stock. It's investing 101. But six Morgan Stanley employees who paid dearly for not going that route aren't taking their losses quietly.

According to an Investment News report, the employees sued Morgan Stanley for losses sustained in the 2008 market collapse. Towards the end of 2007, Morgan Stanley's stock option and retirement savings plans held about $2.2 billion of the firm's stock. But following the global economic collapse, those values fell to around $673 million by the end of 2008.

But the plaintiffs contend Morgan Stanley broke its fiduciary duty by not providing accurate information or managing the plan's assets effectively.

From InvestmentNews Daily: "Morgan Stanley and its stock were exposed to extraordinary risk as a result of the financial perils of the entire banking sector," the plaintiffs said. "Company stock was an imprudent, inappropriate and exceedingly risky investment."