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Carnival of the Ignorant

Bear with me, folks. I'm feeling way more snarky than usual. Why? Yesterday, the chief of enforcement for the New York Stock Exchange said that a number of Wall Street's biggest brokerages have admitted that they didn't send prospectuses to investors who put money into new stock offerings.

Though we don't have a list of firms involved, we know for sure that Morgan Stanley (NYSE: MWD  ) expects to be implicated. The firm revealed recently in a Securities and Exchange Commission (SEC) filing that it has set aside roughly $95 million to cover penalties associated with failing to provide information to clients before they invested. That total includes a $19 million fine levied by the NYSE.

Sadly, the investigation of Morgan Stanley isn't new. According to a report from the Associated Press, the NYSE's regulatory arm has been investigating the firm for months. Its findings may have prompted the NYSE to demand that the top 25 Wall Street brokerages provide details about their performance in supplying information to investors. Firms had until Nov. 19 to respond, prompting the admissions that led to yesterday's announcement.

Maybe I should just chalk all this up to more of the same and move on, but I can't. This is worse than the mutual fund scandal. And its implications reach farther than the insurance investigation being conducted by New York State Attorney General Eliot Spitzer's office. Why? Because any investor who puts down money on a new stock offering without first reading a prospectus to understand the risks is begging to lose money. Yeah, Morgan and others failed to comply with SEC and NYSE regulations, but investors failed to comply with their brains when they handed over hard-earned moolah on blind faith.

And this is where it gets even more interesting. Because of the regulations, which state that brokerages must send prospectuses to potential investors before stock offerings are made, or at least around the same time the securities are bought, the NYSE says it could seek to force brokers who failed to comply to offer refunds.

Are you kidding me!?

Sorry, folks, but when you invest, you take a risk. Was it wrong for Morgan and others to fail to supply proper disclosure? Undoubtedly. Should they be penalized? No question. But did any individual investor have to go forward with buying even one share without documentation? Of course not. So if you count yourself among the so-called victims of this latest financial fiasco, take a look in the mirror. You've got no one to blame but yourself.

For related Foolishness:

What do you think? How much should the brokerages have to pay? Should anyone go to jail? Is the NYSE overreaching? Should investors get their money back? All this and more at the Initial Public Offerings discussion board. Only at

Fool contributor Tim Beyers has made investments without looking through proper documentation, but he's never asked for a refund. He has no position in any of the companies mentioned. You can view Tim's Fool profile and other stock holdings here.

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