Morgan Stanley had intended to spin-off hedge fund manager FrontPoint Partners in late 2010, but an insider investigation disrupted these plans.  Now, after months of uncertainty, the spin-off has been completed:

"As of March 1, 2011, the FrontPoint portfolio managers and senior management team will collectively own a majority of the equity ownership interest in FrontPoint.  Morgan Stanley will retain a minority equity ownership."   -- Co-CEOs Dan Waters and Mike Kelly.

One of the firm's most well known managers, Steve Eisman, had considered leaving FrontPoint to start his own fund, but now he reportedly will stay.  Mr. Eisman is best known for his bet against the subprime mortgage market, which earned him hundreds of millions and a key role in the best-seller, The Big Short, by financial writer Michael Lewis. 

    Intervening Insider Investigation.   Near the end of 2010, a French doctor was arrested - allegedly for leaking inside information to a hedge fund - later revealed to be FrontPoint.  The firm quickly put a portfolio manager for the health care team on leave.  The whiff of the scandal - neither FrontPoint nor its managers were accused of wrongdoing - wreaked havoc on the firm, and investors pulled $3.5 billion, more than half of the assets under management.   [NYT Dealbook, 3/1]