AIG may sue Morgan Stanley over mortgage securities: SEC filing

NEW YORK (Reuters) - American International Group Inc may file a lawsuit against Morgan Stanley related to $3.7 billion worth of mortgage securities that the investment bank sponsored or underwrote from 2005 to 2007, and which AIG purchased, according to a regulatory filing on Monday. AIG has terminated a "tolling agreement" with Morgan Stanley, which allowed the companies to try to settle their dispute out of court. The termination will be effective Thursday, according to Morgan Stanley's 10-Q filing with the U.S. Securities and Exchange Commission. A Morgan Stanley spokesman declined to comment. A spokesman for AIG did not immediately respond to requests for comment. In August 2011, the insurer filed a $10 billion lawsuit against Bank of America Corp, accusing the bank of "massive" mortgage fraud. Bank of America has denied any wrongdoing. The lawsuit is working its way through multiple jurisdictions. Although Morgan Stanley set aside less money last quarter for legal expenses, so far this yet it has accrued an additional $549 million for litigation costs, up 44 percent from the $381 million it accrued in the first nine months of 2012. (Reporting by Lauren Tara LaCapra; Editing by Leslie Gevirtz)