The trading arm of Morgan Stanley, which acts as financial adviser and broker to Isoft, has twice sold significant stakes in the struggling software developer shortly before sharp falls in Isoft’s share price.

Morgan Stanley Securities Limited built up a stake of 6.4 per cent on behalf of clients in the week following an Isoft profit warning in January, when it warned it faced a £55m revenue shortfall because of delays to the £6.2bn programme to upgrade the NHS computer system. The warning knocked 45 per cent off the share price in one day. Morgan Stanley consistently held stakes for clients of 4-6.2 per cent in Isoft from February 10 until March 23, when it told Isoft it no longer had a notifiable interest in the group’s shares – that is, it held less than 3 per cent.

On March 29, Accenture, Isoft’s partner on some of the NHS contracts, warned of a $450m (£246m) blow to its revenues, which it blamed on Isoft. That sent Isoft shares down 12 per cent.

On March 31, regulatory filings showed Morgan Stanley Securities had bought up a 7.9 per cent stake, again for clients, and held 6.8-7.4 per cent until April 20, when the broker again told Isoft that it no longer had a notifiable interest. Last Friday, Isoft again warned on profits on the last day of its financial year, knocking another 16 per cent of its shares.

Traders raised eyebrows at the sales, as Morgan Stanley continues to act as a joint financial adviser to Isoft. But the bank said there was no link between its trading arm and its corporate finance arm, and it had very strong Chinese walls between the two. “The two are completely separate businesses,” it said.

As a corporate broker to Isoft, Morgan Stanley also commands a large pool of stock in order to allow investors to trade shares more easily. Isoft shares closed up ¾p at 118¼p.

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