Morgan Stanley, Other Banks Probed Over Facebook IPO

Massachusetts officials said Friday they have unearthed violations committed by Citigroup's research department surrounding Facebook's IPO and its coverage of Google — the results of which have cost two Citi analysts their jobs.

Morgan Stanley, Other Banks Probed Over Facebook IPO

They may not be the only ones on watch.

The office of Secretary of the Commonwealth Bill Galvin said it is also probing Facebook's lead IPO underwriters Morgan Stanley, JPMorgan Chase and Goldman Sachs.

All of those banks have received information requests (in some cases subpoenas) from the office — investigations that could lead to sanctions.

None of those banks has been accused of any wrongdoing.

Earlier in the day, Galvin's office, the state's top securities regulator, disclosed a $2 million fine against Citigroup tied to improper behavior by two members of the bank's Internet research department. As a result of the investigation, junior analyst Eric Jacobs and senior analyst Mark Mahaney have been let go, a source familiar with the situation told CNBC.

Citigroup won a prized role as one of Facebook's trusted advisers when the social giant came to market in May. It was the largest Internet IPO in history. Morgan Stanley , Goldman Sachs and JPMorgan ran point on the deal.

Following the fine, a Citi official said, "We are pleased to have this matter resolved. We take our internal policies and procedures very seriously and have taken the appropriate actions."

Goldman Sachs and Morgan Stanley declined to comment.

A representative of JPMorgan was not immediately available for comment.

— Written by CNBC's Jesse Bergman and Kayla Tausche. Margaret Popper contributed reporting for this story.