Filing errors in Canada flummox Morgan

Morgan Stanley, the second-largest securities firm in the world, has had some trouble lately keeping track of its Canadian investments.

The Wall Street investment bank disclosed this week that it has "inadvertently" failed to file notice with Canadian regulators that it holds more than a 10-per-cent interest in three Canadian companies, two of which are currently in play.

The companies in question are Sunrise Senior Living Real Estate Investment Trust, Legacy Hotels Real Estate Investment Trust and Torstar Corp.

In one instance, the failure to report has spanned several years. In the case of Torstar, Morgan Stanley Investment Management Inc. disclosed that it has exceeded the 10-per-cent threshold for disclosure of an investment since April 29, 2005. As of this week, it holds or has control over 10.59 per cent of Torstar class B shares, it said.

It also revealed that it holds an 11.51-per-cent stake in Legacy REIT and passed the 10-per-cent mark in January of this year. Legacy announced a strategic review earlier this year and is involved in a bidding process.

In the case of Sunrise, Morgan Stanley has close to a 13-per-cent interest and has held more than 10 per cent since May, 2006.

In all cases, Morgan Stanley said the investments were made in the ordinary course of business as passive investments and indicated it is taking steps to fulfill filing requirements.

A spokeswoman for the investment bank declined to provide any details of how the oversight occurred or how it was discovered.

But at least one executive at the companies in question said the disclosure came as no surprise to him.

"It didn't come as a shock at all. As a matter of fact, I was always shocked that they had never reported before," said Doug MacLatchy, chief executive officer of Sunrise REIT, a Toronto seniors housing company that is the subject of a takeover battle.

"I knew they were big, I didn't know they were over the 10 [per cent]. I have been meeting with them for a long, long time."