Morgan Stanley hides behind the “quiet period”

Tempers must be on the boil at Morgan Stanley today.  The lead business article in the New York Times reported on investor concerns about the firm’s exposure to European debt, its earnings power and its liquidity, which brought the stock down by 10.5% last week.

And to make matters worse, the piece noted – without attribution – that the firm has “never regained the prestige and power it had in the years before the 2008 crisis.”


So what did the firm say when asked about all this? A spokesperson declined to comment, “citing the quiet period before [the firm] reports third-quarter earnings.”

What nonsense. There is no such thing as a quiet period before earnings.

The “quiet period” applies to communications during an IPO, not earnings announcements by a public company.  It is the interval between the filing of a company’s offering prospectus and its approval by the Securities and Exchange Commission. But it’s commonly used by companies to avoid addressing a thorny issue.

Sure, companies need to be careful whenever they’re making public statements about their business. But citing a non-existent rule is cowardly and counterproductive.

If Morgan Stanley didn’t want to respond, it could have said “no comment” or “we do not comment on speculation.” Neither is terribly reassuring to clients, staff or shareholders, though.

In these situations there is a fine line to walk between saying nothing, which would leave the criticisms unchecked, and responding in detail, which would be impractical and could quickly lead to material disclosures that would need broad dissemination to the market, creating a whole new problem.

Though difficult, it is possible to offer a statement that responds to the issues and portrays the firm’s management as credible and engaged.  Here’s an example of what Morgan Stanley could have said:

“Rumors are as common as colds and just as difficult to shake. They’re a fact of life for financial firms during challenging markets. We believe in the strength of our franchise, both to serve clients and generate returns for shareholders. We’ll have more to say when we report earnings in a few weeks.”

At the very least, such a statement would but Morgan Stanley’s problems in context and remind people of the firm’s strengths.

It’s certainly better than hiding behind the “quiet period,” which might be a convenient way to brush off a reporter, but it isn’t effective communication.



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