Last week’s Facebook IPO, said to have created up to 970 millionaires, continued to cause controversy after Reuters reported that Massachusetts Secretary of Commonwealth William Galvin has issued a subpoena to Morgan Stanley over an analyst's discussions with investors.

Morgan Stanley was lead underwriter on the Facebook share float; however, the social media company’s stock has since fallen. Shares in Facebook, originally offered at $38 per share, closed at $31 yesterday, an 18 per cent drop.

The saga could dent expectations, as reported here, that the IPO was set to create a large new cohort of millionaires and multi-millionaires and be a welcome shot in the arm for the US wealth management industry, particularly in California's Silicon Valley. 

"The Securities Division has put out a subpoena to Morgan Stanley in connection with the analyst's discussion with certain institutional investors about the revenue prospects for Facebook," the news service quoted a spokesperson for Galvin's office as saying yesterday.

In response, the Wall Street firm replied in an emailed statement to Family Wealth Report: “Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations."

"After Facebook released a revised S-1 filing on 9 May providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS’s institutional and retail investors and the amendment was widely publicized in the press at the time. In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO," Morgan Stanley said.

There have been problems with the social media site’s stock float since shares began trading last Friday; there was a Nasdaq glitch that delayed trading by half an hour. Meanwhile, it was reported on Monday that an analyst at Morgan Stanley cut his revenue forecasts for Facebook in the days before the IPO, a fact of which investors may have been unaware.

Rick Ketchum, head of the Financial Industry Regulatory Authority, said yesterday that the IPO was "a matter of regulatory concern" for his organization and the Securities and Exchange Commission.