British retailer Frasers Group Plc asked a US judge to order Morgan Stanley Chief Executive Officer James Gorman to produce evidence for its UK lawsuit against the bank over an almost $1 billion margin call.
(Bloomberg) — British retailer Frasers Group Plc asked a US judge to order Morgan Stanley Chief Executive Officer James Gorman to produce evidence for its UK lawsuit against the bank over an almost $1 billion margin call.
Frasers claimed in its 2021 lawsuit that the New York bank acted unreasonably by trying to force the retailer to close options positions it had built in fashion brand Hugo Boss.
In a filing Wednesday in a Manhattan federal court, Frasers asked a judge to enforce a request for documents and testimony from Gorman in connection with the UK case, which is scheduled to go to trial in February.
Morgan Stanley imposed a $995 million call in respect of certain put and call options in Hugo Boss shares in May 2021. Frasers says the call was “out of all proportion to any risk to which Morgan Stanley was exposed,” while the US bank said the “highly concentrated” position required an urgent stress test that warned of steep losses.
Morgan Stanley declined to comment on the filing Wednesday.
Morgan Stanley officials conducted the review after the UK Financial Conduct Authority asked banks to describe their approach to risk management in the wake of the collapse of Archegos Capital Management, which cost banks $10 billion and exposed huge problems in how risk is managed.
“Part of the explanation for Morgan Stanley’s actions lies in the fallout from the Archegos collapse,” and the bank’s belief that one reason for the losses was because Archegos was a family office, Frasers said Wednesday. The bank incorrectly viewed Frasers as a similar entity because it has a majority shareholder, according to the filing.
After the Archegos collapse, Gorman and Morgan Stanley senior management directed the bank’s prime brokerage to investigate and remove “family-office type” businesses, Frasers said, and that was one of the reasons that the firm “took an unusually hostile attitude” to the Hugo Boss position.
The case is in re application of Frasers Group Plc, 23-mc-348, US District Court, Southern District of New York.
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