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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2021
Commission File Number 1-11758
ms-20211231_g1.jpg
(Exact name of Registrant as specified in its charter)
Delaware1585 Broadway36-3145972(212)761-4000
(State or other jurisdiction of incorporation or organization)New York,NY10036
(I.R.S. Employer Identification No.)

(Registrant’s telephone number,
including area code)

(Address of principal executive offices, including zip code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of exchange on
which registered
Common Stock, $0.01 par value
MS
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate
MS/PA
New York Stock Exchange
Non-Cumulative Preferred Stock, Series A, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
MS/PE
New York Stock Exchange
Non-Cumulative Preferred Stock, Series E, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
MS/PF
New York Stock Exchange
Non-Cumulative Preferred Stock, Series F, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
MS/PI
New York Stock Exchange
Non-Cumulative Preferred Stock, Series I, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
MS/PK
New York Stock Exchange
Non-Cumulative Preferred Stock, Series K, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of 4.875%
MS/PL
New York Stock Exchange
Non-Cumulative Preferred Stock, Series L, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of 4.250%MS/PONew York Stock Exchange
Non-Cumulative Preferred Stock, Series O, $0.01 par value
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026
MS/26C
New York Stock Exchange
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto)
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No 
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes    No
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No  
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  Yes    No  
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                
Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    
Indicate by check mark whether Registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes    No  
As of June 30, 2021, the aggregate market value of the common stock of Registrant held by non-affiliates of Registrant was approximately $162,040,978,089. This calculation does not reflect a determination that persons are affiliates for any other purposes.
As of January 31, 2022, there were 1,781,299,489 shares of Registrant’s common stock, $0.01 par value, outstanding.
Documents Incorporated by Reference: Portions of Registrant’s definitive proxy statement for its 2022 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.


 
ANNUAL REPORT ON FORM 10-K
ms-20211231_g1.jpg
For the year ended December 31, 2021
Table of ContentsPartItemPage
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 1A
II7
  
  
  
  
  
  
  
  
  
 7A
  
  
  
  
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Table of ContentsPartItemPage
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
9
 9A
 9B
9C
I1B
 2
 3
 4
II5
III10
 11
 12
 13
 14
IV15
 16
  
i

 
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Forward-Looking Statements
We have included in or incorporated by reference into this report, and from time to time may make in our public filings, press releases or other public statements, certain statements, including (without limitation) those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Risk” and “Legal Proceedings” that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control.
The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. The risks and uncertainties involved in our businesses could affect the matters referred to in such statements, and it is possible that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include (without limitation):
the effect of market conditions, particularly in the global equity, fixed income, currency, credit and commodities markets, including corporate and mortgage (commercial and residential) lending and real estate and energy markets;
the level of individual investor participation in the global markets, as well as the level of client assets;
the flow of investment capital into or from assets under management or supervision;
the level and volatility of equity, fixed income and commodity prices, interest rates, inflation and currency values, other market indices or other market factors, such as market liquidity;
the availability and cost of both credit and capital as well as the credit ratings assigned to our unsecured short-term and long-term debt;
technological changes instituted by us, our competitors or counterparties and technological risks, business continuity and related operational risks, including breaches or other disruptions of our or a third party’s (or third parties thereof) operations or systems;
risk associated with cybersecurity threats, including data protection and cybersecurity risk management;
our ability to effectively manage our capital and liquidity, including under stress tests designed by our banking regulators;
the impact of current, pending and future legislation or changes thereto, regulation (including capital, leverage, funding, liquidity, consumer protection, and recovery and resolution requirements) and our ability to address such requirements;
uncertainty concerning fiscal or monetary policies established by central banks and financial regulators, government shutdowns, debt ceilings or funding;
changes to global trade policies, tariffs, interest rates, replacements of LIBOR and replacement or reform of other interest rate benchmarks;
legal and regulatory actions, including litigation and enforcement, in the U.S. and worldwide;
changes in tax laws and regulations globally;
the effectiveness of our risk management processes and related controls, including climate risk;
our ability to effectively respond to an economic downturn, or other market disruptions;
the effect of social, economic, and political conditions and geopolitical events, including as a result of changes in U.S. presidential administrations or Congress, and sovereign risk;
the actions and initiatives of current and potential competitors, as well as governments, central banks, regulators and self-regulatory organizations;
our ability to provide innovative products and services and execute our strategic initiatives, and costs related thereto, including with respect to the operational or technological integration related to such innovative and strategic initiatives;
the performance and results of our acquisitions, divestitures, joint ventures, partnerships, strategic alliances, or other strategic arrangements and related integrations;
investor, consumer and business sentiment and confidence in the financial markets;
our reputation and the general perception of the financial services industry;
our ability to retain and attract qualified employees;
the effects of the coronavirus disease (“COVID-19”) pandemic, including the rate of distribution and administration of vaccines globally, the severity and duration of any resurgence of COVID-19 variants, future actions taken by governmental authorities, and the effects on our employees, customers and counterparties;
climate-related incidents, other pandemics and acts of war, aggression or terrorism; and
other risks and uncertainties detailed under “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and elsewhere throughout this report.
Accordingly, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made, whether as a result of new information, future events or otherwise except as required by applicable law. You should, however, consult further disclosures we may make in future filings of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments thereto or in future press releases or other public statements.
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Available Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website, www.sec.gov, that contains annual, quarterly and current reports, proxy and information statements and other information that issuers file electronically with the SEC. Our electronic SEC filings are available to the public at the SEC’s website.
Our website is www.morganstanley.com. You can access our Investor Relations webpage at www.morganstanley.com/about-us-ir. We make available free of charge, on or through our Investor Relations webpage, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available, through our Investor Relations webpage, via a link to the SEC’s website, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.
You can access information about our corporate governance at www.morganstanley.com/about-us-governance, our sustainability initiatives at www.morganstanley.com/about-us/sustainability-at-morgan-stanley and our commitment to diversity and inclusion at www.morganstanley.com/about-us/diversity. Our webpages include:
Amended and Restated Certificate of Incorporation;
Amended and Restated Bylaws;
Charters for our Audit Committee, Compensation, Management Development and Succession Committee, Nominating and Governance Committee, Operations and Technology Committee, and Risk Committee;
Corporate Governance Policies;
Policy Regarding Corporate Political Activities;
Policy Regarding Shareholder Rights Plan;
Equity Ownership Commitment;
Code of Ethics and Business Conduct;
Code of Conduct;
Integrity Hotline Information;
Environmental and Social Policies;
Sustainability Report;
Task Force on Climate-related Financial Disclosures Report; and
Diversity and Inclusion Report.
Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. We will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC (“NYSE”) on our website. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036 (212-761-4000). The information on our website is not incorporated by reference into this report.

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Business
Overview
We are a global financial services firm that, through our subsidiaries and affiliates, advises, and originates, trades, manages and distributes capital for, governments, institutions and individuals. We were originally incorporated under the laws of the State of Delaware in 1981, and our predecessor companies date back to 1924. We are a financial holding company (“FHC”) regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (“BHC Act”). We conduct our business from our headquarters in and around New York City, our regional offices and branches throughout the U.S. and our principal offices in London, Tokyo, Hong Kong and other world financial centers. Unless the context otherwise requires, the terms “Morgan Stanley,” the “Firm,” “us,” “we” and “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout the 2021 Form 10-K.
Financial information concerning us, our business segments and geographic regions for each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019 is included in “Financial Statements and Supplementary Data.”
On March 1, 2021, we completed the acquisition of Eaton Vance Corp. (“Eaton Vance”), and on October 2, 2020, we completed the acquisition of E*TRADE Financial Corporation (E*TRADE). For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Investment Management” and Note 3 to the financial statements.
Business Segments
We are a global financial services firm that maintains significant market positions in each of our business segments: Institutional Securities, Wealth Management and Investment Management. Through our subsidiaries and affiliates, we provide a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Additional information related to our business segments, respective clients, and products and services provided is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Competition
All aspects of our businesses are highly competitive, and we expect them to remain so. We compete in the U.S. and globally for clients, market share and human talent. Operating
within the financial services industry on a global basis presents, among other things, technological, risk management, regulatory and other infrastructure challenges that require effective resource allocation in order for us to remain competitive. Our competitive position depends on a number of factors, including our reputation, the quality and consistency of our long-term investment performance, innovation, execution, relative pricing or other factors including entering into new, or expanding current, businesses as a result of acquisitions and other strategic initiatives. Our ability to sustain or improve our competitive position also depends substantially on our ability to continue to attract and retain highly qualified employees while managing compensation and other costs. We compete with commercial banks, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, sponsors of mutual funds, hedge funds and private equity funds, energy companies, financial technology firms and other companies offering financial or ancillary services in the U.S. and globally, as well as digitally, including through the internet. In addition, restrictive laws and regulations applicable to certain financial services institutions, which may prohibit us from engaging in certain transactions and impose more stringent capital and liquidity requirements, can put us at a competitive disadvantage to competitors in certain businesses not subject to these same requirements. See also “Supervision and Regulation” herein and “Risk Factors.”
We compete directly in the U.S. and globally with other securities and financial services firms and broker-dealers and with others on a regional or product basis. Additionally, there is increased competition driven by established firms and asset managers, as well as the emergence of new firms and business models (including innovative uses of technology) competing for the same clients and assets or offering similar products and services to retail and institutional customers. We also compete with companies that provide online trading and banking services, investment advisor services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services.
Our ability to access capital at competitive rates (which is generally impacted by our credit ratings), to commit and to deploy capital efficiently, particularly in our capital-intensive underwriting and sales, trading, financing and market-making activities, also affects our competitive position. We expect corporate clients to continue to request that we provide loans or lending commitments in connection with certain investment banking activities.
It is possible that competition may become even more intense as we continue to compete with financial or other institutions that may be larger, or better capitalized, or may have a stronger local presence and longer operating history in certain geographies or products. Many of these firms have the ability to offer a wide range of products and services, and on different platforms, that may enhance their competitive
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position and could result in pricing pressure on our businesses.
We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.
Our ability to compete successfully in the investment management industry is affected by several factors, including our reputation, investment objectives, quality of investment professionals, performance of investment strategies or product offerings relative to peers and appropriate benchmark indices, advertising and sales promotion efforts, fee levels, the effectiveness of and access to distribution channels and investment pipelines, and the types and quality of products offered. Our investment products, including alternative investment products, may compete with investments offered by other investment managers with passive investment products or who may be subject to less stringent legal and regulatory regimes than us.
Supervision and Regulation
As a major financial services firm, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business.
We continue to monitor the changing political, tax and regulatory environment. While it is likely that there will be changes in the way major financial institutions are regulated in both the U.S. and other markets in which we operate, it remains difficult to predict the exact impact these changes will have on our business, financial condition, results of operations and cash flows for a particular future period. We expect to remain subject to extensive supervision and regulation.
Financial Holding Company
Consolidated Supervision.    We operate as a BHC and FHC under the BHC Act and are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve. In particular, we are subject to (among other things): significant regulation and supervision; intensive scrutiny of our businesses and plans for expansion of those businesses; limitations on activities; a systemic risk regime that imposes heightened capital and liquidity requirements; restrictions on activities and investments imposed by a section of the BHC Act added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) referred to
as the “Volcker Rule”; and comprehensive derivatives regulation. In addition, the Consumer Financial Protection Bureau (“CFPB”) has primary rulemaking, enforcement and examination authority over us and our subsidiaries with respect to federal consumer protection laws, to the extent applicable.
Scope of Permitted Activities.    The BHC Act limits the activities of BHCs and FHCs and grants the Federal Reserve authority to limit our ability to conduct activities. We must obtain the Federal Reserve’s approval before engaging in certain banking and other financial activities both in the U.S. and internationally.
The BHC Act grandfathers “activities related to the trading, sale or investment in commodities and underlying physical properties,” provided that we were engaged in “any of such activities as of September 30, 1997 in the U.S.” and provided that certain other conditions that are within our reasonable control are satisfied. We currently engage in our commodities activities pursuant to the BHC Act grandfather exemption, as well as other authorities under the BHC Act.
Activities Restrictions under the Volcker Rule.    The Volcker Rule prohibits banking entities, including us and our affiliates, from engaging in certain proprietary trading activities, as defined in the Volcker Rule, subject to exemptions for underwriting, market-making, risk-mitigating hedging and certain other activities. The Volcker Rule also prohibits certain investments and relationships by banking entities with covered funds, as defined in the Volcker Rule, subject to a number of exemptions and exclusions. In addition, there is an extension until July 2022 for conformance for certain legacy covered funds.
Capital Requirements.    The Federal Reserve establishes capital requirements largely based on the Basel III capital standards established by the Basel Committee on Banking Supervision (“Basel Committee”), including well-capitalized standards, for large BHCs and evaluates our compliance with such requirements. The OCC establishes similar capital requirements and standards for Morgan Stanley Bank, N.A. (“MSBNA”), Morgan Stanley Private Bank, National Association (“MSPBNA”), E*TRADE Bank (“ETB”) and E*TRADE Savings Bank (“ETSB”), a wholly owned subsidiary of ETB (collectively, our “U.S. Bank Subsidiaries”). On January 1, 2022, ETSB merged with and into ETB, and subsequently ETB merged with and into MSPBNA, with MSPBNA as the surviving bank.
The Basel Committee has published a comprehensive set of revisions to its Basel III Framework. The impact on us of any revisions to the Basel Committee’s capital standards is uncertain and depends on future rulemakings by the U.S. banking agencies.
In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the


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CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants.
For more information about the specific capital requirements applicable to us and our U.S. Bank Subsidiaries, as well as our subsidiaries that are swap dealers and security-based swap dealers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements” and Note 17 to the financial statements.
Capital Planning, Stress Tests and Capital Distributions.    The Federal Reserve has adopted capital planning and stress test requirements for large BHCs, including Morgan Stanley. For more information about our capital planning and stress test requirements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements.”
In addition, the Federal Reserve, the OCC and the FDIC have the authority to prohibit or to limit the payment of dividends by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries, if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the banking organization. For information about the Federal Reserve’s restrictions on capital distributions for large BHCs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer.” All of these policies and other requirements could affect our ability to pay dividends and/or repurchase stock or require us to provide capital assistance to our U.S. Bank Subsidiaries under circumstances that we would not otherwise decide to do.
Liquidity Requirements.    In addition to capital regulations, the U.S. banking agencies have adopted liquidity and funding standards, including the LCR, the NSFR, liquidity stress testing and associated liquidity reserve requirements.
For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Balance Sheet—Regulatory Liquidity Framework.”
Systemic Risk Regime.    Under rules issued by the Federal Reserve, large BHCs, including Morgan Stanley, must conduct internal liquidity stress tests, maintain unencumbered highly liquid assets to meet projected net cash outflows for 30 days over the range of liquidity stress scenarios used in internal stress tests, and comply with various liquidity risk management requirements. These large BHCs also must comply with a range of risk management and corporate governance requirements.
The Federal Reserve also imposes single-counterparty credit limits (“SCCL”) for large banking organizations. U.S. G-SIBs, including us, are subject to a limit of 15% of Tier 1 capital for aggregate net credit exposures to any “major counterparty” (defined to include other U.S. G-SIBs, foreign G-SIBs and non-bank systemically important financial institutions supervised by the Federal Reserve). In addition, we are subject to a limit of 25% of Tier 1 capital for aggregate net credit exposures to any other unaffiliated counterparty.
The Federal Reserve has proposed rules that would create a new early remediation framework to address financial distress or material management weaknesses. The Federal Reserve also has the ability to establish additional prudential standards, including those regarding contingent capital, enhanced public disclosures and limits on short-term debt, including off-balance sheet exposures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements.”
If the Federal Reserve or the Financial Stability Oversight Council determines that a BHC with $250 billion or more in consolidated assets poses a “grave threat” to U.S. financial stability, the institution may be, among other things, restricted in its ability to merge or offer financial products and/or required to terminate activities and dispose of assets. See also “Capital Requirements” and “Liquidity Requirements” and “Resolution and Recovery Planning” herein.
Resolution and Recovery Planning. We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. Interim updates are required in certain limited circumstances, including material mergers or acquisitions or fundamental changes to our resolution strategy.
Our preferred resolution strategy, which is set out in our most recent resolution plan, is an SPOE strategy, which generally contemplates the provision of adequate capital and liquidity by the Parent Company to certain of its subsidiaries so that such subsidiaries have the resources necessary to implement the resolution strategy after the Parent Company has filed for bankruptcy.
Our next resolution plan is due July 1, 2023. Further, we submit an annual recovery plan to the Federal Reserve that outlines the steps that management could take over time to generate or conserve financial resources in times of prolonged financial stress.
Certain of our domestic and foreign subsidiaries are also subject to resolution and recovery planning requirements in the jurisdictions in which they operate. For example, the FDIC currently requires certain insured depository institutions (“IDI”), including MSBNA and MSPBNA, to submit a
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resolution plan every three years, that describes the IDI’s strategy for a rapid and orderly resolution in the event of material financial distress or failure of the IDI.
In addition, certain financial companies, including BHCs such as the Firm and certain of its subsidiaries, can be subject to a resolution proceeding under the orderly liquidation authority, with the FDIC being appointed as receiver, provided that determination of extraordinary financial distress and systemic risk is made by the U.S. Treasury Secretary in consultation with the U.S. President. Regulators have adopted certain orderly liquidation authority implementing regulations and may expand or clarify these regulations in the future. If we were subject to the orderly liquidation authority, the FDIC would have considerable powers, including: the power to remove directors and officers responsible for our failure and to appoint new directors and officers; the power to assign our assets and liabilities to a third party or bridge financial company without the need for creditor consent or prior court review; the ability to differentiate among our creditors, including treating certain creditors within the same class better than others, subject to a minimum recovery right on the part of disfavored creditors to receive at least what they would have received in bankruptcy liquidation; and broad powers to administer the claims process to determine distributions from the assets of the receivership. The FDIC has been developing an SPOE strategy that could be used to implement the orderly liquidation authority.
Regulators have also taken and proposed various actions to facilitate an SPOE strategy under the U.S. Bankruptcy Code, the orderly liquidation authority or other resolution regimes.
For more information about our resolution plan-related submissions and associated regulatory actions, see “Risk Factors—Legal, Regulatory and Compliance Risk,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Resolution and Recovery Planning.”
Cyber and Information Security Risk Management and Protection of Client Information
The financial services industry faces increased global regulatory focus regarding cyber and information security risk management practices. Many aspects of our businesses are subject to cybersecurity legal and regulatory requirements enacted by U.S. federal and state governments and other non-U.S. jurisdictions. These laws are generally aimed at codifying basic cybersecurity protections and mandating data breach notification requirements.
Our businesses are also subject to increasing privacy and data protection legal requirements concerning the use and
protection of certain personal information. These requirements impose mandatory privacy and data protection obligations, including providing for individual rights, enhanced governance and accountability requirements, and significant fines and litigation risk for noncompliance. In addition, several jurisdictions have enacted or proposed personal data localization requirements and restrictions on cross-border transfer of personal data that may restrict our ability to conduct business in those jurisdictions or create additional financial and regulatory burdens to do so.
Many aspects of our businesses are subject to legal requirements concerning the use and protection of certain customer information, as well as the privacy and cybersecurity laws referenced above. We have adopted measures designed to comply with these and related applicable requirements in all relevant jurisdictions.
U.S. Bank Subsidiaries
The U.S. Bank Subsidiaries are FDIC-insured depository institutions subject to supervision, regulation and examination by the OCC and are subject to the OCC’s risk governance guidelines, which establish heightened standards for a large IDI’s risk governance framework and the oversight of that framework by the IDI’s board of directors. The U.S. Bank Subsidiaries are also subject to prompt corrective action standards, which require the relevant federal banking regulator to take prompt corrective action with respect to a depository institution if that institution does not meet certain capital adequacy standards. In addition, BHCs, such as Morgan Stanley, are required to serve as a source of strength to their U.S. bank subsidiaries and commit resources to support these subsidiaries in the event such subsidiaries are in financial distress.
Our U.S. Bank Subsidiaries are also subject to Sections 23A and 23B of the Federal Reserve Act, which impose restrictions on certain transactions with affiliates, including any extension of credit to, or purchase of assets from an affiliate. These restrictions limit the total amount of credit exposure that our U.S. Bank Subsidiaries may have to any one affiliate and to all affiliates and require collateral for those exposures. Section 23B requires affiliate transactions to be on market terms.
As commonly controlled FDIC-insured depository institutions, each of the U.S. Bank Subsidiaries could be responsible for any loss to the FDIC from the failure of another U.S. Bank Subsidiary.
Institutional Securities and Wealth Management
Broker-Dealer and Investment Adviser Regulation.    Our primary U.S. broker-dealer subsidiaries, Morgan Stanley & Co. LLC (“MS&Co.”), MSSB and E*TRADE Securities LLC, are registered broker-dealers with the SEC and in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands and are members of various self-regulatory


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organizations, including Financial Industry Regulatory Authority (“FINRA”), and various securities exchanges and clearing organizations. Broker-dealers are subject to laws and regulations covering all aspects of the securities business, including sales and trading practices, securities offerings, publication of research reports, use of customers’ funds and securities, capital structure, risk management controls in connection with market access, recordkeeping and retention, and the conduct of their directors, officers, representatives and other associated persons. Broker-dealers are also regulated by securities administrators in those states where they do business. Our broker-dealer subsidiaries are members of the Securities Investor Protection Corporation.
MSSB is also a registered investment adviser with the SEC. MSSB’s relationship with its investment advisory clients is subject to the fiduciary and other obligations imposed on investment advisers. The SEC and other supervisory bodies generally have broad administrative powers to address non-compliance, including the power to restrict or limit MSSB from carrying on its investment advisory and other asset management activities.
The Firm is subject to various regulations that affect broker-dealer sales practices and customer relationships, including the SEC’s “Regulation Best Interest,” which requires broker-dealers to act in the “best interest” of retail customers at the time a recommendation is made without placing the financial or other interests of the broker-dealer ahead of the interest of the retail customer.
Margin lending by our broker-dealers is regulated by the Federal Reserve’s restrictions on lending in connection with customer and proprietary purchases and short sales of securities. Our broker-dealers are also subject to maintenance and other margin requirements imposed under FINRA and other self-regulatory organization rules.
Our U.S. broker-dealer subsidiaries are subject to the SEC’s net capital rule and the net capital requirements of various exchanges, other regulatory authorities and self-regulatory organizations. For more information about these requirements, see Note 17 to the financial statements.
Research.    In addition to research-related regulations currently in place in the U.S. and other jurisdictions, regulators continue to focus on research conflicts of interest and may impose additional regulations.
Regulation of Futures Activities and Certain Commodities Activities.    MS&Co. and E*TRADE Futures LLC, as futures commission merchants, and MSSB, as an introducing broker, are subject to net capital requirements of, and certain of their activities are regulated by, the CFTC, the NFA, the Joint Audit Committee (including the CME Group, in its capacity as MS&Co.’s designated self-regulatory organization), and various commodity futures exchanges. Rules and regulations of the CFTC, NFA, the Joint Audit Committee (including the CME Group) and commodity futures exchanges address
obligations related to, among other things, customer asset protections, including rules and regulations governing the segregation of customer funds, the use by futures commission merchants of customer funds, the margining of customer accounts and documentation entered into by futures commission merchants with their customers, recordkeeping and reporting obligations of futures commission merchants and introducing brokers, risk disclosure and risk management.
Our commodities activities are subject to extensive and evolving laws and regulations in the U.S. and abroad.
Derivatives Regulation.    We are subject to comprehensive regulation of our derivatives businesses, including regulations that impose margin requirements, public and regulatory reporting, central clearing and mandatory trading on regulated exchanges or execution facilities for certain types of swaps and security-based swaps (collectively, “Swaps.”)
CFTC and SEC rules require registration of swap dealers and security-based swap dealers, respectively, and impose numerous obligations on such registrants, including adherence to business conduct standards for all in-scope Swaps. We have provisionally or conditionally registered a number of U.S. and non U.S. swap dealers and security-based swap dealers. Swap dealers and security-based swap dealers regulated by a prudential regulator are subject to uncleared Swap margin requirements and minimum capital requirements established by the prudential regulators. Swap dealers and security-based swap dealers not subject to regulation by a prudential regulator are subject to uncleared Swap margin requirements and minimum capital requirements established by the CFTC and SEC, respectively. In some cases, the CFTC and SEC permit non-U.S. swap dealers and security-based swap dealers that do not have a prudential regulator to comply with applicable non-U.S. uncleared Swap margin and minimum capital requirements instead of direct compliance with CFTC or SEC requirements.
Investment Management
Many of the subsidiaries engaged in our investment management activities are registered as investment advisers with the SEC. Many aspects of our investment management activities are also subject to federal and state laws and regulations primarily intended to benefit the investor or client. These laws and regulations generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict us from carrying on our investment management activities in the event that we fail to comply with such laws and regulations.
In addition, certain of our subsidiaries are U.S. registered broker-dealers and act as distributors to our proprietary mutual funds and as placement agents to certain private investment funds managed by our Investment Management business segment. Certain of our affiliates are registered as commodity trading advisors and/or commodity pool operators, or are operating under certain exemptions from
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such registration pursuant to CFTC rules and other guidance, and have certain responsibilities with respect to each pool they advise. Our investment management activities are subject to additional laws and regulations, including restrictions on sponsoring or investing in, or maintaining certain other relationships with, covered funds, as defined by the Volcker Rule, subject to certain limited exemptions. See also “Financial Holding Company—Activities Restrictions under the Volcker Rule,” “Institutional Securities and Wealth Management—Broker-Dealer and Investment Adviser Regulation,” “Institutional Securities and Wealth Management—Regulation of Futures Activities and Certain Commodities Activities,” and “Institutional Securities and Wealth Management—Derivatives Regulation” herein and “Non-U.S. Regulation” herein for a discussion of other regulations that impact our Investment Management business activities.
U.S. Consumer Protection
We are subject to supervision and regulation by the CFPB with respect to U.S. federal consumer protection laws. Federal consumer protection laws to which we are subject include the Privacy of Consumer Financial Information Act, Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Electronic Fund Transfer Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Truth in Lending Act and Truth in Savings Act, all of which are enforced by the CFPB. We are also subject to certain federal consumer protection laws enforced by the OCC, including the Servicemembers Civil Relief Act. Furthermore, we are subject to certain state consumer protection laws, and under the Dodd-Frank Act, state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations. These federal and state consumer protection laws apply to a range of our activities.
Non-U.S. Regulation
All of our businesses are regulated extensively by non-U.S. regulators, including governments, central banks and regulatory bodies, securities exchanges, commodity exchanges, self-regulatory organizations, especially in those jurisdictions in which we maintain an office. Certain regulators have prudential, business conduct and other authority over us or our subsidiaries, as well as powers to limit or restrict us from engaging in certain businesses or to conduct administrative proceedings that can result in censures, fines, the issuance of cease-and-desist orders, or the suspension or expulsion of a regulated entity or its affiliates. Certain of our subsidiaries are subject to capital, liquidity, leverage and other prudential requirements that are applicable under non-U.S. law.
Financial Crimes Program
Our Financial Crimes program is coordinated on an enterprise-wide basis and supports our financial crime prevention efforts across all regions and business units with
responsibility for governance, oversight and execution of our anti-money laundering (“AML”), economic sanctions (“Sanctions”), anti-corruption, anti-tax evasion, and government and political activities compliance programs.
In the U.S., the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 and the Anti-Money Laundering Act of 2020, impose significant obligations on financial institutions to detect and deter money laundering and terrorist financing activity, including requiring banks, BHCs and their subsidiaries, broker-dealers, futures commission merchants, introducing brokers and mutual funds to implement AML programs, verify the identity of customers that maintain accounts, and monitor and report suspicious activity to appropriate law enforcement or regulatory authorities. Outside the U.S., applicable laws, rules and regulations similarly require designated types of financial institutions to implement AML programs.
We are also subject to Sanctions, such as regulations and economic sanctions programs administered by the U.S. Treasury's Office of Foreign Assets Control (“OFAC”) and similar sanctions programs imposed by foreign governments or global or regional multilateral organizations, and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, in the jurisdictions in which we operate. Anti-corruption laws generally prohibit offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to a government official or private party in order to influence official action or otherwise gain an unfair business advantage, such as to obtain or retain business.
Human Capital
Employees
Our employees are our most important asset. With offices in 41 countries, we have approximately 75 thousand employees across the globe as of December 31, 2021, whom we depend upon to build value for our clients and shareholders. To facilitate talent attraction and retention, we strive to make Morgan Stanley a diverse and inclusive workplace, with a strong culture and opportunities for our employees to grow and develop in their career and be supported by competitive compensation, benefits, and health and wellness programs.
Culture
Our core values are designed to guide decision making aligned to the expectations of our employees, clients, shareholders, regulators, directors and the communities in which we operate. These guiding values—Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back—are at the heart of our workplace culture and underpin our success. Our Code of Conduct is central to our expectation that employees embody our values, and, as such, every new hire and every employee annually is required to certify to their understanding of and


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adherence to the Code of Conduct. We also invite employee feedback on our culture and workplace through our ongoing employee engagement surveys. For a further discussion of the culture, values, and conduct of employees, see “Quantitative and Qualitative Disclosures about Risk—Risk Management.”
Diversity and Inclusion
We believe that a diverse and inclusive workforce is important to Morgan Stanley’s continued success and our ability to serve our clients. To this end, we pursue a comprehensive diversity and inclusion strategy that includes accountability, representation, advancement, culture, outreach and fostering a sense of belonging for all our employees. To build a diverse talent pipeline, we use global, targeted recruitment and development programs to hire, retain and promote women and ethnically diverse talent. We have also introduced representation objectives to drive greater accountability for a diverse workforce. All of our divisions have identified opportunities to improve diverse representation for women globally and ethnically diverse talent in the U.S. Additionally, the Morgan Stanley Institute for Inclusion helps lead an integrated and transparent diversity, equity and inclusion strategy to deliver our full potential to achieve meaningful change within our Firm and beyond, including our communities.
Talent Development and Retention
We are committed to identifying and developing the talents of our workforce, as well as succession planning. Our talent development programs provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations. With the evolving work environment, we have increased support for managers and employees, including ongoing training focused on managing and working in a hybrid environment. We also focus on the retention of our talented and skilled employees as one key component of a successful business and culture.
Compensation and Financial Wellness
We pursue responsible and effective compensation programs that reinforce our values and culture through four key objectives: delivering pay for sustainable performance, attracting and retaining top talent, aligning with shareholder interests and mitigating excessive risk taking. In addition to salaries, these programs (which vary by location) include annual bonuses, retirement savings plans with matching contributions, student loan refinancing, free will preparation through our legal plan and supplemental life insurance program, discounted group insurance options, and a financial wellness program in the U.S. and the U.K. To promote equitable rewards for all employees, including women and ethnically diverse employees, we have enhanced our practices to support fair and consistent compensation and reward decisions based on merit, perform ongoing reviews of compensation decisions, including at the point of hire and
promotion, and conduct regular assessments of our rewards structure.
Health and Wellness
The well-being of our employees is also key to the success of the Firm. To that end, we provide programs (which vary by location), including healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption and surrogacy assistance, employee assistance programs, tuition assistance and on-site services, such as health centers and fitness centers, among many others. Morgan Stanley sponsors free and confidential mental health counseling for all employees and their dependents (which vary by location). The Firm continues to offer mental health benefits in the U.S. that provide access to therapists, mental health coaches and other resources.
In 2021, the Firm launched a Global Wellbeing board, assembling senior leaders with a mission to advance the Firm’s wellbeing strategy. Additionally, in 2021, feedback from the global benefits survey and lessons learned during the pandemic helped identify several key opportunities to strategically expand our health and wellness offerings. In that regard, the Firm has made changes to our global offerings, including enhancements with respect to parental leave policies, paid leave benefits for family care, family building benefits, and subsidized fitness access. We also implemented a new U.S. national concierge primary care benefit. Further, in response to the COVID-19 pandemic, the Firm expanded offerings such as providing paid time off to receive vaccinations, set up in-office vaccination clinics, and made testing available both in office and at home, as well as implemented additional on-site safety measures in our facilities.
For more detailed information regarding our Human Capital programs and initiatives, see “Our People” in our 2020 Sustainability Report and our 2021 Diversity and Inclusion Report (both located on our website). The reports and information elsewhere on our website are not incorporated by reference into, and do not form any part of, this Annual Report.
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Human Capital Metrics1
CategoryMetricAt
December 31,
2021
Employees
Employees by geography
(thousands)
Americas51 
Asia Pacific15 
EMEA
Culture
Employee engagement2
% Proud to work at Morgan Stanley90 %
Diversity and InclusionGlobal gender representation% Women39 %
% Women officer3
27 %
U.S. ethnic diversity representation
% Ethnically diverse4
32 %
% Ethnically diverse officer3
26 %
Retention
Voluntary attrition in 2021
% Global12 %
TenureManagement Committee average length of service (years)20 
All employees average length of service (years)
CompensationCompensation and benefits
Total compensation and benefits expense in 2021 (millions)
$24,628 
1.Legacy Eaton Vance employees are included in all metrics other than “employee engagement.” For “tenure,” Eaton Vance tenure is based on length of service since joining Eaton Vance.
2.Based on 2021 employee engagement results, which reflect responses from 91% of employees.
3.Officer includes Managing Directors, Executive Directors and Vice Presidents.
4.U.S. ethnically diverse designations align with the Equal Employment Opportunity Commission’s ethnicity and race categories and includes American Indian or Native Alaskan, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Pacific Islander, and two or more races.
Information about our Executive Officers
The executive officers of Morgan Stanley and their age and titles as of February 24, 2022 are set forth below. Business experience is provided in accordance with SEC rules.
Mandell L. Crawley (46). Executive Vice President and Chief Human Resources Officer (since February 2021). Head of Private Wealth Management (June 2017 to January 2021). Chief Marketing Officer (September 2014 to June 2017). Head of National Business Development and Talent Management for Wealth Management (June 2011 to September 2014). Divisional Business Development Officer (May 2010 to June 2011). Regional Business Development Officer (May 2009 to May 2010). Head of Field Sales and Marketing (February 2008 to May 2009). Head of Fixed Income Capital Markets Sales and Distribution for Wealth Management (April 2004 to February 2008).
James P. Gorman (63). Chairman of the Board of Directors and Chief Executive Officer of Morgan Stanley (since January 2012). President and Chief Executive Officer (January 2010 to December 2011) and member of the Board of Directors (since January 2010). Co-President (December 2007 to December 2009) and Co-Head of Strategic Planning (October 2007 to December 2009). President and Chief Operating Officer of Wealth Management (February 2006 to April 2008).
Eric F. Grossman (55). Executive Vice President and Chief Legal Officer of Morgan Stanley (since January 2012). Global Head of Legal (September 2010 to January 2012). Global Head of Litigation (January 2006 to September 2010) and General Counsel of the Americas (May 2009 to September 2010). General Counsel of Wealth Management (November 2008 to September 2010). Partner at the law firm of Davis Polk & Wardwell LLP (June 2001 to December 2005).
Keishi Hotsuki (59). Executive Vice President (since May 2014) and Chief Risk Officer of Morgan Stanley (since May 2011). Interim Chief Risk Officer (January 2011 to May 2011) and Head of Market Risk Department (March 2008 to April 2014). Global Head of Market Risk Management at Merrill Lynch (June 2005 to September 2007).
Edward N. Pick (53). Co-President and Co-Head of Corporate Strategy (since June 2021). Head of Institutional Securities (since July 2018). Global Head of Sales and Trading (October 2015 to July 2018). Head of Global Equities (March 2011 to October 2015). Co-Head of Global Equities (April 2009 to March 2011). Co-Head of Global Capital Markets (July 2008 to April 2009). Co-Head of Global Equity Capital Markets (December 2005 to July 2008).
Jonathan M. Pruzan (53). Executive Vice President (since May 2015) and Chief Operating Officer (since June 2021). Head of Corporate Strategy (December 2016 to May 2021). Chief Financial Officer (May 2015 to May 2021). Co-Head of Global Financial Institutions Group (January 2010 to April 2015). Co-Head of North American Financial Institutions Group M&A (September 2007 to December 2009). Head of the U.S. Bank Group (April 2005 to August 2007).
Andrew M. Saperstein (55). Co-President (since June 2021) and Head of Wealth Management (Since April 2019). Co-Head of Wealth Management (January 2016 to April 2019). Co-Chief Operating Officer of Institutional Securities (March 2015 to January 2016). Head of Wealth Management Investment Products and Services (June 2012 to March 2015).
Daniel A. Simkowitz (56). Head of Investment Management (since October 2015) and Co-Head of Corporate Strategy (since June 2021). Co-Head of Global Capital Markets (March 2013 to September 2015). Chairman of Global Capital Markets (November 2009 to March 2013). Managing Director in Global Capital Markets (December 2000 to November 2009).
Sharon Yeshaya (42). Executive Vice President and Chief Financial Officer (since June 2021). Head of Investor Relations (June 2016 to May 2021). Chief of Staff in the Office of the Chairman and CEO (January 2015 to May 2016). Co-Head of New Product Origination for Derivative Structured Products (December 2012 to December 2014).


December 2021 Form 10-K
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Risk Factors
For a discussion of the risks and uncertainties that may affect our future results and strategic objectives, see “Forward-Looking Statements” preceding “Business” and “Return on Tangible Common Equity Goal” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our results of operations may be adversely affected by the impacts of the COVID-19 pandemic.
Although the global economy has begun to recover from the COVID-19 pandemic, as many health and safety restrictions have been lifted and vaccine distribution continues to increase, certain adverse consequences of the pandemic continue to impact the global economy and may persist for some time, including labor shortages and disruptions of global supply chains. The growth in economic activity and demand for goods and services, alongside labor shortages and supply chain complications, has also contributed to rising inflationary pressures. Should these ongoing effects of the pandemic continue for an extended period or worsen, we could experience reduced client activity and demand for our products and services.

The Firm continues to be fully operational and, recognizing that local conditions vary for our offices around the world and that the trajectory of the virus continues to be uncertain, our employees are able to work from home and in our offices as deemed necessary. If significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions, or other restrictions in connection with the pandemic, the impact of the pandemic on our businesses could be exacerbated.
The extent to which the consequences of the COVID-19 pandemic affect our businesses, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and our ability to take capital actions, will depend on future developments that remain uncertain, including the rate of distribution and administration of vaccines globally, the severity and duration of any resurgence of COVID-19 variants, future actions taken by governmental authorities, central banks and other third parties in response to the pandemic, and the effects on our customers, counterparties, employees and third-party service providers. Moreover, the effects of the COVID-19 pandemic will heighten many of the other risks described throughout this section. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer.”
Market Risk
Market risk refers to the risk that a change in the level of one or more market prices, rates, indices, volatilities, correlations or other market factors, such as market liquidity, will result in
losses for a position or portfolio owned by us. For more information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”
Our results of operations may be materially affected by market fluctuations and by global and economic conditions and other factors, including changes in asset values.
Our results of operations have been in the past and may, in the future, be materially affected by fluctuations in the global financial markets, including the level and volatility of equity, fixed income and commodity prices, the level and term structure of interest rates, inflation and currency values, and the level of other market indices, which may be driven by economic conditions, the effects of the COVID-19 pandemic, or other widespread events such as natural disasters, climate-related incidents or acts of war or aggression, changes to global trade policies and the implementation of tariffs or protectionist trade policies and other factors.
The results of our Institutional Securities business segment, particularly results relating to our involvement in primary and secondary markets for all types of financial products, are subject to substantial market fluctuations due to a variety of factors that we cannot control or predict with great certainty. These fluctuations impact results by causing variations in business flows and activity and in the fair value of securities and other financial products. Fluctuations also occur due to the level of global market activity, which, among other things, affects the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments.
Periods of unfavorable market or economic conditions may have adverse impacts on the level of individual investor participation in the global markets and/or the level of client assets, and, in very low interest rate environments, the level of net interest income, which would negatively impact the results of our Wealth Management business segment.
Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact our Investment Management business segment.
The value of our financial instruments may be materially affected by market fluctuations. Market volatility, illiquid market conditions and disruptions in the credit markets may make it extremely difficult to value and monetize certain of our financial instruments, particularly during periods of market displacement. Subsequent valuations in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments and may adversely impact historical or prospective fees and performance-based income (also known as incentive fees, which include carried interest) in respect of certain businesses. In addition, at the
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time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of our financial instruments, which may have an adverse effect on our results of operations in future periods.
In addition, financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating trading losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale. Our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves. However, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur.
Holding large and concentrated positions may expose us to losses.
Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading), and lending businesses (including margin lending) in the event of unfavorable market movements or when market conditions are more favorable for our competitors. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks.”
Credit Risk
Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”
We are exposed to the risk that third parties that are indebted to us will not perform their obligations.
We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the loan repayment
amount; posting margin and/or collateral and other commitments to clearing houses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.
We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, residential mortgage loans and HELOCs.
Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates, and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as natural disasters, geopolitical events or the ongoing COVID-19 pandemic, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher than anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring; (ii) over-collateralization; (iii) ability to call for additional collateral; or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients.
Certain of our credit exposures may be concentrated by counterparty, product, industry or country. Although our models and estimates account for correlations among related types of exposures, a change in the market environment for a concentrated product or an external factor impacting a concentrated counterparty, industry or country may result in credit losses in excess of amounts forecast. Concentrations of credit risk are managed through the Firm’s comprehensive and global Credit Limits Framework.
In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.


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A default by a large financial institution could adversely affect financial markets.
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, clearing or other relationships among the institutions. Increased centralization of trading activities through particular clearing houses, central agents or exchanges as required by provisions of the Dodd-Frank Act may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearing houses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”
Operational Risk

Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyber attacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”
We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third parties (or third parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.
Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, resulting in new operational risk that we may not fully appreciate or identify.
The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by
unaffiliated third parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our information technology systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation.
As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes or due to fraud or cyber attack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third party’s systems (or third parties thereof), processes or information assets, or improper or unauthorized action by third parties, including consultants and subcontractors or our employees, we have in the past and may receive regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses, or damage to our reputation.
In addition, the interconnectivity of multiple financial institutions with central agents, exchanges and clearing houses, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could materially impact our ability to conduct business. Furthermore, the concentration of company and personal information held by a handful of third parties increases the risk that a breach at a key third party may cause an industry-wide event that could significantly increase the cost and risk of conducting business.
There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities where we are located. This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, hurricanes and wildfires); electrical outage; environmental hazard; computer servers; communications or other services we use; our employees or third parties with whom we conduct business.
Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business.
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Notwithstanding evolving technology and technology-based risk and control systems, our businesses ultimately rely on people, including our employees and those of third parties with which we conduct business. As a result of human error or engagement in violations of applicable policies, laws, rules or procedures, certain errors or violations are not always discovered immediately by our technological processes or by our controls and other procedures, which are intended to prevent and detect such errors or violations. These can include calculation errors, mistakes in addressing emails or other communications, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us.
We conduct business in various jurisdictions outside the U.S., including jurisdictions that may not have comparable levels of protection for their corporate assets such as intellectual property, trademarks, trade secrets, know-how, and customer information and records. The protection afforded in those jurisdictions may be less established and/or predictable than in the U.S. or other jurisdictions in which we operate. As a result, there may also be heightened risks associated with the potential theft of their data, technology and intellectual property in those jurisdictions by domestic or foreign actors, including private parties and those affiliated with or controlled by state actors. Additionally, we are subject to complex and evolving U.S. and international laws and regulations governing cybersecurity, privacy and data governance, transfer and protection, which may differ and potentially conflict, in various jurisdictions. Any theft of data, technology or intellectual property may negatively impact our operations and reputation, including disrupting the business activities of our subsidiaries, affiliates, joint ventures or clients conducting business in those jurisdictions.
A cyber attack, information or security breach or a technology failure of ours or a third party could adversely affect our ability to conduct our business, manage our exposure to risk, or result in disclosure or misuse of confidential or proprietary information and otherwise adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.
Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external extremist parties, including foreign state actors, in some circumstances as a means to promote political ends. Global events and geopolitical instability may lead to increased nation state targeting of financial institutions in the U.S. and abroad. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors, or other third parties or users of our systems to disclose sensitive
information in order to gain access to our data or that of our employees or clients.
Cybersecurity risks may also derive from human error, fraud or malice on the part of our employees or third parties, or may result from accidental technological failure. These risks may be heightened by several factors, including remote work, or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third parties with whom we do business, the regulators with whom we share information, and each of their service providers, as well as the third parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyber attacks are complex and frequently change, and are difficult to anticipate.
Like other financial services firms, the Firm, its third-party providers, and its clients continue to be the subject of unauthorized access attacks, mishandling or misuse of information, computer viruses or malware, cyber attacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, denial of service attacks, data breaches, social engineering attacks and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cyber incidents will not occur in the future, and they could occur more frequently and on a more significant scale.
We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyber attack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of other third parties. Any of these events could result in reputational damage with our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which


December 2021 Form 10-K
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could adversely affect our business, financial condition or results of operations.
Given our global footprint and the high volume of transactions we process, the large number of clients, partners, vendors and counterparties with which we do business, and the increasing sophistication of cyber attacks, a cyber attack, information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all or any of which would further increase the costs and consequences of a cyber attack or data breach.
While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses.
We continue to make investments with a view toward maintaining and enhancing our cybersecurity posture. The cost of managing cyber and information security risks and attacks along with complying with new, increasingly expansive, and evolving regulatory requirements could adversely affect our results of operations and business.
Liquidity Risk
Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”
Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.
Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to
access the secured lending markets, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding.
In addition, our ability to raise funding could be impaired if investors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.
If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition.
Our borrowing costs and access to the debt capital markets depend on our credit ratings.
The cost and availability of unsecured financing generally are impacted by our long-term and short-term credit ratings. The rating agencies continue to monitor certain company-specific and industry-wide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions.
Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer term counterparty performance is a key consideration, such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade.
Termination of our trading and other agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can
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be based on ratings by either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”
We are a holding company and depend on payments from our subsidiaries.
The Parent Company has no operations and depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that limit, as well as authorize regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such transfers or dividends altogether in certain circumstances, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities.
These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under "Legal, Regulatory and Compliance Risk" herein.
Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.
Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies.
In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.
Legal, Regulatory and Compliance Risk
Legal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, anti-corruption and terrorist financing rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal and Compliance Risk.”
The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.
Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business. These laws and regulations significantly affect the way we do business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments.
The Firm and its employees are subject to (among other things) wide-ranging regulation and supervision, intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on new activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, commodities regulation, market structure regulation, consumer protection regulation, tax regulations, antitrust laws, trade and transaction reporting obligations, and broadened fiduciary obligations.
Ongoing implementation of, or changes in, including changes in interpretation or enforcement of, laws and regulations could materially impact the profitability of our businesses and the value of assets we hold, expose us to additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors.
In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or


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conflict with regulations that we are subject to in the U.S. and may adversely affect us. Legal and regulatory requirements continue to be subject to ongoing change, which may result in significant new costs to comply with new or revised requirements, as well as to monitor for compliance on an ongoing basis.
The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.
We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if we were unable to address any deficiencies identified by the regulators, we or any of our subsidiaries may be subject to more stringent capital, leverage, or liquidity requirements or restrictions on our growth, activities or operations, or after a two-year period, we may be required to divest assets or operations.
In addition, provided that certain procedures are met, we can be subject to a resolution proceeding under the orderly liquidation authority under Title II of the Dodd-Frank Act with the FDIC being appointed as receiver. The FDIC’s power under the orderly liquidation authority to disregard the priority of creditor claims and treat similarly situated creditors differently in certain circumstances, subject to certain limitations, could adversely impact holders of our unsecured debt. See “Business—Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements.”
Further, because both our resolution plan contemplates an SPOE strategy under the U.S. Bankruptcy Code and the FDIC has proposed an SPOE strategy through which it may apply its orderly liquidation authority powers, we believe that the application of an SPOE strategy is the reasonably likely outcome if either our resolution plan were implemented or a resolution proceeding were commenced under the orderly liquidation authority. An SPOE strategy generally contemplates the provision of adequate capital and liquidity by the Parent Company to certain of its subsidiaries so that such subsidiaries have the resources necessary to implement the resolution strategy, and the Parent Company has entered into a secured amended and restated support agreement with its material entities, as defined in our resolution plan, pursuant to which it would provide such capital and liquidity to such entities.
In further development of our SPOE strategy, a wholly owned, direct subsidiary of the Parent Company, Morgan
Stanley Holdings LLC (“Funding IHC”), serves as a resolution funding vehicle. The Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to the Funding IHC. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its material assets that can be contributed under the terms of the amended and restated support agreement (other than shares in subsidiaries of the Parent Company and certain other assets) (“Contributable Assets”), to the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our material entities.
The obligations of the Parent Company and of the Funding IHC, respectively, under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets), and the assets of the Funding IHC, as applicable. As a result, claims of our material entities, including the Funding IHC, against the assets of the Parent Company with respect to such secured assets are effectively senior to unsecured obligations of the Parent Company.
Although an SPOE strategy, whether applied pursuant to our resolution plan or in a resolution proceeding under the orderly liquidation authority, is intended to result in better outcomes for creditors overall, there is no guarantee that the application of an SPOE strategy, including the provision of support to the Parent Company’s material entities pursuant to the secured amended and restated support agreement, will not result in greater losses for holders of our securities compared with a different resolution strategy for us.
Regulators have taken and proposed various actions to facilitate an SPOE strategy under the U.S. Bankruptcy Code, the orderly liquidation authority and other resolution regimes. For example, the Federal Reserve requires top-tier BHCs of U.S. G-SIBs, including the Firm, to maintain minimum amounts of equity and eligible long-term debt TLAC in order to ensure that such institutions have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of debt to equity or otherwise by imposing losses on eligible TLAC where the SPOE strategy is used. The combined implication of the SPOE resolution strategy and the TLAC requirement is that our losses will be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on the creditors of our material entities without requiring taxpayer or government financial support.
In addition, certain jurisdictions, including the U.K. and other E.U. jurisdictions, have implemented, or are in the process of implementing, changes to resolution regimes to provide resolution authorities with the ability to recapitalize a failing entity organized in such jurisdiction by writing down certain unsecured liabilities or converting certain unsecured liabilities into equity. Such “bail-in” powers are intended to enable the recapitalization of a failing institution by allocating losses to
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its shareholders and unsecured creditors. Non-U.S. regulators are also considering requirements that certain subsidiaries of large financial institutions maintain minimum amounts of TLAC that would pass losses up from the subsidiaries to the Parent Company and, ultimately, to security holders of the Parent Company in the event of failure.
We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements.
We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve.
In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.
The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.
As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In addition to the monetary consequences, these measures could, for example, impact our ability to engage in, or impose limitations on, certain of our businesses.
These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry, and certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas or deferred prosecution agreements from, financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, financial condition or results of operations or cause us significant reputational harm, which could seriously harm our business.
The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC.
We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages, claims for indeterminate amounts of damages, or may result in penalties, fines, or other results adverse to us.
In some cases, the issuers that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information, or improper sales practices or conduct.
We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.
We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 15 to the financial statements.
We currently have certain legal proceedings related to claims for alleged breaches of representations and warranties. If there are decisions adverse to us in those legal proceedings, we may incur losses substantially in excess of our reserves. In addition, our reserves are based, in part, on certain factual and legal assumptions. If those assumptions are incorrect and need to be revised, we may need to adjust our reserves substantially.


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A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.
As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information.
We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.
Our regulators have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.
Risk Management
Our risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.
We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.
As our businesses change and grow, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.
In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of the COVID-19 pandemic, which could cause us to incur losses.
Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.
While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”
Climate change manifesting as physical or transition risks could adversely affect our operations, businesses and clients.
There is increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include acute events, such as flooding, extreme heat and wildfires, and chronic, longer-term shifts in climate patterns, such as increasing temperatures, sea level rise, and more frequent and prolonged drought. Such events could disrupt our operations or those of our clients or third parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility.
Additionally, transitioning to a low-carbon economy will likely require extensive policy, legal, technology and market changes. Transition risks, including changes in consumer preferences and additional regulatory and legislative
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requirements, including carbon taxes, could increase our expenses and adversely impact our strategies and those of our clients.
In addition, our reputation and client relationships may be adversely impacted as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries, projects, or initiatives associated with causing, or potentially slowing solutions to, climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
As climate risk is interconnected with other risk types, including geopolitical risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies, as well as governance structures, established for risks such as market, credit and operational risks. Because the timing and severity of climate change events or societal changes in reaction to them may be difficult to predict, our risk management strategies may not be effective in mitigating climate risk exposure.
In addition, the methodology and data used to manage and monitor climate risk continues to evolve and currently utilizes information and estimates that have been derived from information or factors released by third-party sources, which may not be current. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is reasonable at the time, we may only be able to complete limited validation. These and other factors could cause results to differ materially from those expressed in the estimates and beliefs made by third parties and by us, which could also impact our management of risk in this area.
Replacement of London Interbank Offered Rate and replacement or reform of other interest rate benchmarks could adversely affect our business, financial condition and results of operations.
Central banks around the world, including the Federal Reserve, have commissioned committees and working groups of market participants and official sector representatives to replace LIBOR and replace or reform other interest rate benchmarks (collectively, the “IBORs”). A transition away from the use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and will continue over the course of the next few years. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations.
The ongoing market transition away from IBORs and other interest rate benchmarks to alternative reference rates is complex and could have a range of adverse impacts on our business, financial condition and results of operations. In particular, such transition or reform could:
Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any IBOR-linked securities, loans and derivatives that are included in our financial assets and liabilities;
Require further extensive changes to documentation that governs or references IBOR or IBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities and related hedging transactions;
Result in a population of products with documentation that governs or references IBOR or IBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners;
Result in inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of an IBOR with one or more alternative reference rates, including regulatory guidance regarding constraints on the entry into new U.S. dollar IBOR-linked contracts after December 31, 2021;
Result in disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates;
Require the additional transition and/or further development of appropriate systems and analytics to effectively transition our risk management processes from IBORs to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and
Cause us to incur additional costs in relation to any of the above factors.
Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.
See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters” herein.


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Competitive Environment
We face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.
The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, sponsors of mutual funds, hedge funds, private equity funds, energy companies, financial technology firms and other companies offering financial or ancillary services in the U.S. and globally, as well as digitally, including through the internet. We also compete with companies that provide online trading and banking services, investment advisor services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price.
Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.
We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”
Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.
We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies will likely continue the pressure on revenues. The trend toward direct access to automated, electronic
markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.
Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.

Our people are our most important asset. We compete with various other companies in attracting and retaining qualified and skilled personnel. If we are unable to continue to attract and retain highly qualified employees, or do so at levels or in forms necessary to maintain our competitive position, or if compensation costs required to attract and retain employees become more expensive, or the competitive market for talent further intensifies, our performance, including our competitive position and results of operations, could be materially adversely affected.
The financial industry has experienced and may continue to experience more stringent regulation of employee compensation, including limitations relating to incentive-based compensation, clawback requirements and special taxation, which could have an adverse effect on our ability to hire or retain the most qualified employees.
International Risk
We are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.
We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, data transfer and outsourcing restrictions, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability. In many countries, the laws and regulations applicable to the securities and financial services industries are uncertain and evolving and subject to sudden change. It may be difficult for us to determine the exact requirements of local laws in every market or adapt to changes in law, which could adversely impact our businesses.
Our inability to remain in compliance with local laws in a particular market could have a significant and negative effect not only on our business in that market but also on our reputation generally. We are also subject to the risk that transactions we structure might not be legally enforceable in all cases. In addition, uncertainty as to the nature of the future relationship between the U.K. and the E.U. may adversely affect the manner in which we operate certain of our businesses across Europe.
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Various emerging market countries have experienced severe political, economic or financial disruptions, including significant devaluations of their currencies, defaults or potential defaults on sovereign debt, capital and currency exchange controls, high rates of inflation and low or negative growth rates in their economies. Crime and corruption, as well as issues of security and personal safety, also exist in certain of these countries. These conditions could adversely impact our businesses and increase volatility in financial markets generally.
A disease pandemic, such as COVID-19, or other widespread health emergencies, natural disasters, climate-related incidents, terrorist activities or military actions, or social or political tensions, could create economic and financial disruptions in emerging markets or in other areas of the global economy that could adversely affect our businesses, or could lead to operational difficulties (including travel limitations) that could impair our ability to manage or conduct our businesses around the world.
As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by OFAC and similar multinational bodies and governmental agencies worldwide, which may be in inconsistent with local law. We are also subject to applicable anti-corruption laws in the jurisdictions in which we operate, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. A violation of a sanction, embargo program or anti-corruption law could subject us, and individual employees, to a regulatory enforcement action, as well as significant civil and criminal penalties.
Acquisition, Divestiture and Joint Venture Risk
We may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances, and certain acquisitions may subject our business to new or increased risk.
In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with MUFG), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems, including the need to combine or separate accounting and data processing systems and management controls and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources.
For example, the integrations of E*TRADE and Eaton Vance involve a number of risks, including failure to realize anticipated cost savings and difficulty integrating the businesses. It is possible that the remaining integration processes could also result in unanticipated disruptions of
ongoing businesses, the loss of key employees, the loss of clients, or overall integrations that take longer than originally anticipated.
In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control.
In addition, conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.
There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected.
Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered.
For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.”


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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. Disclosures reflect the effects of the acquisitions of Eaton Vance Corp. (“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2020 results compared with 2019 results, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2020 filed with the SEC.
A description of the clients and principal products and services of each of our business segments is as follows:
Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.
Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; annuity and insurance products; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.
Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.
Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.
The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein.
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Management’s Discussion and Analysis
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Executive Summary
Overview of Financial Results
Consolidated Results—Year ended December 31, 2021
The Firm’s full year results reflect both record net revenues of $59.8 billion, up 23% year over year, and net income applicable to Morgan Stanley of $15.0 billion, up 37%.
The Firm delivered full year ROTCE of 19.8% (see “Selected Non-GAAP Financial Information” herein).
The full year Firm expense efficiency ratio was 67%.
At December 31, 2021, our standardized Common Equity Tier 1 capital ratio was 16.0%.
Institutional Securities reported record full year net revenues of $29.8 billion, up 13%, with strong revenues across Advisory, Underwriting and Equity.
Wealth Management delivered a full year pre-tax margin of 25.5%, or 26.9% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). The business added net new assets of $438 billion, and total client assets under management were $4.9 trillion, up 23% from a year ago.
Investment Management reported full year net revenues of $6.2 billion, driven by strong fee-based asset management revenues on record AUM of $1.6 trillion as of December 31, 2021.
Strategic Transactions
On March 1, 2021, we completed the acquisition of Eaton Vance. For further information, see “Business Segments—Investment Management” herein and Note 3 to the financial statements.
On October 2, 2020, we completed the acquisition of E*TRADE. For further information, see “Business Segments—Wealth Management” herein and Note 3 to the financial statements.

Net Revenues1
($ in millions)

ms-20211231_g2.jpg
1.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
Net Income Applicable to Morgan Stanley
($ in millions)

ms-20211231_g3.jpg
Earnings per Diluted Common Share1

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1.Adjusted Diluted EPS was $8.22 and $6.58 in 2021 and 2020, respectively (see “Selected Non-GAAP Financial Information” herein).
2021 Compared with 2020
We reported net revenues of $59.8 billion in 2021 compared with $48.8 billion in 2020. For 2021, net income applicable to Morgan Stanley was $15.0 billion, or $8.03 per diluted common share, compared with $11.0 billion or $6.46 per diluted common share in 2020.


December 2021 Form 10-K
22

 
Management’s Discussion and Analysis
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Non-interest Expenses1, 2
($ in millions)

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1.The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total.
2.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
Compensation and benefits expenses of $24,628 million in 2021 increased 18% from the prior year, primarily as a result of increases in the formulaic payout to Wealth Management representatives driven by higher compensable revenues, incremental compensation as a result of the E*TRADE and Eaton Vance acquisitions, higher discretionary incentive compensation driven by revenues, and higher salaries on increased headcount, partially offset by lower expenses related to certain deferred compensation plans linked to investment performance.
Non-compensation expenses of $15,455 million in 2021 increased 21% from the prior year, primarily driven by incremental expenses as a result of the E*TRADE and Eaton Vance acquisitions, increased investments in technology, higher volume-related expenses, and higher professional services expenses, partially offset by lower litigation expenses.
Provision for Credit Losses
The Provision for credit losses on loans and lending commitments of $4 million in 2021 was primarily as a result of portfolio growth offset by the impact of changes in loan quality mix. The Provision for credit losses on loans and lending commitments of $761 million in 2020 was primarily the result of actual and forecasted changes in asset quality trends, as well as risks related to uncertainty in the outlook for the sectors in focus due to COVID-19.
Business Segment Results
Net Revenues by Segment1, 2
($ in millions)
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Net Income Applicable to Morgan Stanley by Segment1
($ in millions)
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1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations.
2.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
Institutional Securities net revenues of $29,833 million in 2021 increased 13% from the prior year, primarily reflecting higher Investment banking and Equity business revenues, partially offset by lower Fixed income business revenues.
Wealth Management net revenues of $24,243 million in 2021 increased 27% from the prior year, primarily due to higher Asset management revenues and incremental revenues as a result of the E*TRADE acquisition.
Investment Management net revenues of $6,220 million in 2021 increased 67% from the prior year, primarily due to higher Asset management and related fees, including
23
December 2021 Form 10-K

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
incremental revenues related to the Eaton Vance acquisition.    
Net Revenues by Region1, 2, 3
($ in millions)
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1.The percentages on the bars in the charts represent the contribution of each region to the total.
2.For a discussion of how the geographic breakdown of net revenues is determined, see Note 23 to the financial statements.
3.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
Americas net revenues in the current year period increased 26%, driven by increases across all business segments. EMEA net revenues increased 18%, primarily driven by the Investment banking and Equity businesses within the Institutional Securities business segment. Asia net revenues increased 10%, primarily driven by the Equity business within the Institutional Securities business segment, partially offset by decreases in the Investment Management business segment.
Selected Financial Information and Other Statistical Data
$ in millions, except per share data202120202019
Consolidated results
Net revenues1
$59,755 $48,757 $41,538 
Earnings applicable to Morgan Stanley common shareholders$14,566 $10,500 $8,512 
Earnings per diluted common share$8.03 $6.46 $5.19 
Consolidated financial measures
Expense efficiency ratio1, 2
67 %69 %72 %
Adjusted expense efficiency ratio1, 2, 4
66 %68 %72 %
ROE3
15.0 %13.1 %11.7 %
Adjusted ROE3, 4
15.3 %13.3 %11.7 %
ROTCE3, 4
19.8 %15.2 %13.4 %
Adjusted ROTCE3, 4
20.2 %15.4 %13.4 %
Pre-tax margin1, 5
33 %30 %27 %
Effective tax rate 23.1 %22.5 %18.3 %
Pre-tax margin by segment5
Institutional Securities1
40 %35 %27 %
Wealth Management1
25 %23 %27 %
Wealth Management, adjusted1, 4
27 %24 %27 %
Investment Management27 %23 %26 %
Investment Management, adjusted4
29 %23 %26 %
in millions, except per share data and employee dataAt
December 31,
2021
At
December 31,
2020
Liquidity resources6
$356,003 $338,623 
Loans7
$200,761 $161,745 
Total assets$1,188,140 $1,115,862 
Deposits$347,574 $310,782 
Borrowings$233,127 $217,079 
Common shareholders' equity$97,691 $92,531 
Tangible common shareholders’ equity4
$72,499 $75,916 
Common shares outstanding1,772 1,810 
Book value per common share8
$55.12 $51.13 
Tangible book value per common share4, 8
$40.91 $41.95 
Worldwide employees9 (in thousands)
75 68 
Client assets10 (in billions)
$6,495 $4,780 
Capital ratios11
Common Equity Tier 1 capital—Standardized16.0 %17.4 %
Tier 1 capital—Standardized17.7 %19.4 %
Common Equity Tier 1 capital—Advanced17.4 %17.7 %
Tier 1 capital—Advanced19.1 %19.8 %
Tier 1 leverage7.1 %8.4 %
SLR12
5.6 %7.4 %
1.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
2.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.
3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.
4.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.
5.Pre-tax margin represents income before income taxes as a percentage of net revenues.
6.For a discussion of Liquidity resources, see “Liquidity and Capital Resources—Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.
7.Includes loans held for investment, net of ACL and loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet. Prior period amounts have been revised to conform to the current presentation.
8.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.
9.As of December 31, 2021, the number of employees includes Eaton Vance.
10.Client assets represents Wealth Management client assets and Investment Management assets under management.
11.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.
12.At December 31, 2020, our SLR reflects the impact of a Federal Reserve interim final rule that was in effect until March 31, 2021. For further information, see “Liquidity and Capital Resources—Regulatory Requirements” herein.
Coronavirus Disease Pandemic
Since its onset, the coronavirus disease (“COVID-19”) pandemic has had a significant impact on global economic conditions and the environment in which we operate our businesses, and it may continue to do so in the future. The Firm continues to be fully operational and, recognizing that local conditions vary for our offices around the world and that the trajectory of the virus continues to be uncertain, our employees are able to work from home and in our offices as deemed necessary.
Refer to “Risk Factors” and “Forward-Looking Statements” for more information on the potential effects of the ongoing COVID-19 pandemic on our future operating results.


December 2021 Form 10-K
24

 
Management’s Discussion and Analysis
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Selected Non-GAAP Financial Information
We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statement and otherwise. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy.
These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure.
The principal non-GAAP financial measures presented in this document are set forth in the following tables.
Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures
$ in millions, except per share data202120202019
Earnings applicable to Morgan Stanley common shareholders$14,566 $10,500 $8,512 
Impact of adjustments:
Wealth Management—Compensation expenses58 151 — 
Wealth Management—Non-compensation expenses288 80 — 
Investment Management—Compensation expenses44 — — 
Investment Management—Non-compensation expenses66 — — 
Total integration-related expenses456 231 — 
Related tax benefit(104)(42)— 
Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP1
$14,918 $10,689 $8,512 
Earnings per diluted common share$8.03 $6.46 $5.19 
Impact of adjustments0.19 0.12 — 
Adjusted earnings per diluted common share—non-GAAP1
$8.22 $6.58 $5.19 
Expense efficiency ratio2
67 %69 %72 %
Impact of adjustments(1)%(1)%— %
Adjusted expense efficiency ratio—non-GAAP1, 2
66 %68 %72 %
Wealth Management pre-tax margin2
25 %23 %27 %
Impact of adjustments2 %%— %
Adjusted Wealth Management pre-tax margin—non-GAAP1, 2
27 %24 %27 %
Investment Management pre-tax margin27 %23 %26 %
Impact of adjustments2 %— %— %
Adjusted Investment Management pre-tax margin—non-GAAP1
29 %23 %26 %
At December 31,
$ in millions202120202019
Tangible equity
Common shareholders' equity$97,691 $92,531 $73,029 
Less: Goodwill and net intangible assets(25,192)(16,615)(9,249)
Tangible common shareholders' equity—non-GAAP$72,499 $75,916 $63,780 
 Average Monthly Balance
$ in millions202120202019
Tangible equity
Common shareholders' equity$97,094 $80,246 $72,720 
Less: Goodwill and net intangible assets(23,392)(10,951)(9,140)
Tangible common shareholders' equity—non-GAAP$73,702 $69,295 $63,580 
$ in billions202120202019
Average common equity
Unadjusted—GAAP$97.1 $80.2 $72.7 
Adjusted1—Non-GAAP
97.2 80.3 72.7 
ROE3
Unadjusted—GAAP15.0 %13.1 %11.7 %
Adjusted1—Non-GAAP
15.3 %13.3 %11.7 %
Average tangible common equity—Non-GAAP
Unadjusted$73.7 $69.3 $63.6 
Adjusted1
73.8 69.3 63.6 
ROTCE3—Non-GAAP
Unadjusted19.8 %15.2 %13.4 %
Adjusted1
20.2 %15.4 %13.4 %
Non-GAAP Financial Measures by Business Segment
$ in billions202120202019
Average common equity4
Institutional Securities$43.5 $42.8 $40.4 
Wealth Management28.6 20.8 18.2 
Investment Management8.8 2.6 2.5 
ROE5
Institutional Securities20 %15 %10 %
Wealth Management16 %16 %20 %
Investment Management15 %23 %29 %
Average tangible common equity4
Institutional Securities$42.9 $42.3 $39.9 
Wealth Management13.4 11.3 10.2 
Investment Management0.9 1.7 1.5 
ROTCE5
Institutional Securities20 %16 %10 %
Wealth Management34 %29 %36 %
Investment Management144 %36 %47 %
1.Adjusted amounts exclude the effect of costs related to the integrations of E*TRADE and Eaton Vance, net of tax as appropriate.
2.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.
3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted.
4.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see "Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments' Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity.
5.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.
25
December 2021 Form 10-K

 
Management’s Discussion and Analysis
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Return on Tangible Common Equity Goal
In January 2022, we established an ROTCE goal of over 20%, excluding integration-related expenses.
Our ROTCE goal is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors, including, among other things: macroeconomic and market conditions, which may be impacted by the future course of COVID-19; legislative, accounting, tax and regulatory developments; industry trading and investment banking volumes; equity market levels; interest rate environment; outsized legal expenses or penalties; the ability to control expenses; capital levels; and mergers and acquisitions.
See “Risk Factors” herein for further information on market and economic conditions and their potential effects on our future operating results.
For further information on non-GAAP measures (ROTCE excluding integration-related expenses), see “Selected Non-GAAP Financial Information” herein.
Business Segments
Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 23 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.
Updates to our Financial Presentation
As part of our effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. Prior period amounts have been reclassified to conform to the current presentation.
Provision for Credit Losses
The Provision for credit losses for loans and lending commitments is presented as a separate line item in the income statement. Previously, the Provision for credit losses for loans was included in Other revenues, and the provision for credit losses for lending commitments was included in Other expense.
Other Revenues
Gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment corporate loans and lending commitments, which were previously reported in Trading revenues, are reported within Other revenues in the income statement. This presentation better aligns with the recognition of mark-to-market gains and losses
on held-for-sale loans and lending commitments, which continue to be reported in Other revenues.
Institutional Securities
Equity—Financing, Equity—Execution services and Fixed income include certain Investments and Other revenues to the extent directly attributable to those businesses. The remaining Investments and Other revenues not included in those businesses’ results are reported in Other. Other also includes revenues previously reported as Other sales and trading.
Investment Management
We have renamed the previously disclosed revenue line Asset management to Asset management and related fees and have combined the remaining revenue lines into a new category named Performance-based income and other.
The following discussion reflects these updates to our financial presentation:
Net Revenues
Investment Banking 
Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.
Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.
Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.
Trading
Trading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to certain employee deferred compensation plans.
Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to:


December 2021 Form 10-K
26

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time;
building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants;
managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks;
trading in the market to remain current on pricing and trends; and
engaging in other activities to provide efficiency and liquidity for markets.
In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.
Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to investments associated with certain employee deferred compensation plans.
Investments
Investments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions.
Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions. Typically, there are no fee revenues from these investments.
Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, there are certain sponsored Investment Management funds consolidated by us where revenues are primarily attributable to holders of noncontrolling interests.
Commissions and Fees 
Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to
securities, services related to sales and trading activities, and sales of other products.
Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives.
Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, futures and options and also include revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution.
Asset Management
Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.
Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested.
Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized annually.
Net Interest
Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings.
Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense.
Within the Wealth Management business segment, Interest income is driven by Investment securities, Loans and margin
27
December 2021 Form 10-K

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income.
Other
Other revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment corporate loans and lending commitments.
Other revenues for Wealth Management are derived from realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.
Provision for Credit Losses
The Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.
Institutional Securities—Fixed Income and Equities
Fixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses. We make transaction-related decisions based on, among other things, an assessment of the aggregate expected profit or loss associated with a transaction, including any associated commissions and fees, dividends, or net interest income, any costs associated with financing or hedging our positions and other related expenses.
Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.
Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities lending products, and in Trading revenues for derivative products. Fees for providing fund administration services are reflected in Asset management revenues.
Equity—Execution services. A significant portion of the results for this business is generated by commissions and fees from executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC transactions. We make markets for our clients principally in equity-related securities and derivative products, including those that provide liquidity and are utilized for hedging. Market-making also generates gains and losses on inventory held to facilitate client activity, which are reflected in Trading revenues. Execution services also includes certain Investments and Other revenues.
Fixed income—Within fixed income, we make markets in various flow and structured products in order to facilitate client activity as part of the following products and services:
Global macro products. We make markets for our clients in interest rate, foreign exchange and emerging market products, including exchange-traded and OTC securities and derivative instruments. The results of this market-making activity are primarily driven by gains and losses from buying and selling positions to stand ready for and satisfy client demand and are recorded in Trading revenues.
Credit products. We make markets in credit-sensitive products, such as corporate bonds and mortgage securities and other securitized products, and related derivative instruments. The values of positions in this business are sensitive to changes in credit spreads and interest rates, which result in gains and losses reflected in Trading revenues. We undertake lending activities, which include commercial mortgage lending, secured lending facilities and financing extended to sales and trading customers. Due to the amount and type of the interest-bearing securities and loans making up this business, a significant portion of the results is also reflected in Net interest revenues.
Commodities products and Other. We make markets in various commodity products related primarily to electricity, natural gas, oil and metals. Other activities primarily include results from the centralized management of our fixed income derivative counterparty exposures and the management of derivative counterparty risk. These activities are primarily recorded in Trading revenues.
Fixed income also includes certain Investments and Other revenues.
Institutional Securities—Other Net Revenues
Other net revenues include impacts from certain treasury functions, such as liquidity costs and gains and losses on economic hedges related to certain borrowings, as well as gains and losses from financial instruments used to economically hedge compensation expense related to certain employee deferred compensation plans, as well as Investments and Other revenues that are not directly attributable to Fixed income and Equities businesses.


December 2021 Form 10-K
28

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Compensation Expense
Compensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of investments to which certain deferred compensation plans are referenced, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits.
The factors that drive compensation for our employees vary from period to period, from segment to segment and within a segment. For certain revenue-producing employees in the Wealth Management and Investment Management business segments, compensation is largely paid on the basis of formulaic payouts that link employee compensation to revenues. Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the Firm’s, business unit’s and individual’s performance.
Compensation expense for deferred cash-based compensation plans is recognized over the relevant vesting period and is adjusted based on the notional earnings of the referenced investments until distribution. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the immediate recognition of gains and losses on the Firm's investments and the compensation expense recognized over the vesting period.
Income Taxes
The income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment. Certain items have been allocated to each business segment, generally in proportion to its respective net revenues or other relevant measures.
29
December 2021 Form 10-K

 
Management’s Discussion and Analysis
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Institutional Securities
Income Statement Information
    % Change
$ in millions20212020201920212020
Revenues
Advisory$3,487 $2,008 $2,116 74 %(5)%
Equity4,437 3,092 1,708 43 %81 %
Fixed income2,348 2,104 1,910 12 %10 %
Total Underwriting6,785 5,196 3,618 31 %44 %
Total Investment banking10,272 7,204 5,734 43 %26 %
Equity1
11,435 9,921 8,133 15 %22 %
Fixed income1
7,516 8,847 5,985 (15)%48 %
Other1
610 504 644 21 %(22)%
Net revenues1
29,833 26,476 20,496 13 %29 %
Provision for credit losses1
(7)731 151 (101)%N/M
Compensation and benefits9,165 8,342 7,433 10 %12 %
Non-compensation expenses1
8,861 8,252 7,422 7 %11 %
Total non-interest expenses1
18,026 16,594 14,855 9 %12 %
Income before provision for income taxes11,814 9,151 5,490 29 %67 %
Provision for income taxes2,746 2,040 769 35 %165 %
Net income9,068 7,111 4,721 28 %51 %
Net income applicable to noncontrolling interests111 99 122 12 %(19)%
Net income applicable to Morgan Stanley$8,957 $7,012 $4,599 28 %52 %
1.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for additional information.
Investment Banking
Investment Banking Volumes
$ in billions202120202019
Completed mergers and acquisitions1
$1,090 $887 $826 
Equity and equity-related offerings2, 3
117 100 61 
Fixed income offerings2, 4
365 377 287 
Source: Refinitiv data as of January 3, 2022. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.
1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.
2.Based on full credit for single book managers and equal credit for joint book managers.
3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.
4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.
Investment Banking Revenues
Investment banking revenues of $10,272 million in 2021 increased 43% compared with the prior year, primarily reflecting increases in advisory and equity underwriting.
Advisory revenues increased primarily due to higher completed transactions.
Equity underwriting revenues increased on higher volumes, primarily in initial public offerings, private placement offerings and secondary block share trades.
Fixed income underwriting revenues increased primarily due to higher non-investment grade loan and bond
issuances and securitized products revenues, partially offset by a decrease in investment grade bond issuances.
See “Investment Banking Volumes” herein.
Equity, Fixed Income and Other Net Revenues
Equity and Fixed Income Net Revenues
 2021
$ in millionsTrading
Fees1
Net
Interest2
All
Other3
Total
Financing$4,110 $508 $520 $8 $5,146 
Execution services3,327 2,648 (226)540 6,289 
Total Equity$7,437 $3,156 $294 $548 $11,435 
Total Fixed income$5,098 $307 $1,835 $276 $7,516 
 
20204
$ in millionsTrading
Fees1
Net
Interest2
All
Other3
Total
Financing$3,736 $439 $342 $$4,521 
Execution services2,882 2,658 (256)116 5,400 
Total Equity$6,618 $3,097 $86 $120 $9,921 
Total Fixed income$6,841 $299 $1,696 $11 $8,847 
 
20194
$ in millionsTrading
Fees1
Net
Interest2
All
Other3
Total
Financing$4,225 $372 $(514)$$4,092 
Execution services1,986 2,203 (216)68 4,041 
Total Equity$6,211 $2,575 $(730)$77 $8,133 
Total Fixed income$5,175 $324 $70 $416 $5,985 
1.Includes Commissions and fees and Asset management revenues.
2.Includes funding costs, which are allocated to the businesses based on funding usage.
3.Includes Investments and Other revenues.
4.Certain prior period amounts have been reclassified to conform to the current period presentation. See “Business Segments” herein and Note 1 to the financial statements for additional information.
Equity
Net revenues of $11,435 million in 2021 increased 15% compared with the prior year, reflecting an increase in both our execution services and financing businesses, with notable strength in Asia.
Financing revenues increased primarily driven by higher average client balances and higher client activity, partially offset by a credit loss of $644 million related to a single client in the first quarter of 2021.
Execution services revenues increased primarily due to higher mark-to-market gains on business-related investments, including a significant mark-to-market gain of $225 million, the impact of market conditions on inventory held to facilitate client activity and higher client activity, partially offset by trading losses of $267 million related to the aforementioned credit event.
Fixed Income
Net revenues of $7,516 million in 2021 decreased 15% compared with the prior year, primarily driven by global macro products.


December 2021 Form 10-K
30

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Global macro products revenues decreased in rates and foreign exchange products, primarily due to the effect of tighter bid-offer spreads.
Credit products revenues decreased primarily due to the effect of tighter bid offer spreads on corporate credit products, partially offset by higher revenues in securitized products.
Commodities products and other fixed income revenues increased primarily driven by higher counterparty credit risk management results.
Other Net Revenues
Other Net revenues of $610 million in 2021 increased 21% compared with the prior year, primarily driven by higher results from our Japanese joint venture, MUMSS, and lower mark-to-market losses on corporate loans held-for-sale, net of related hedges, partially offset by lower gains on investments associated with certain employee deferred compensation plans.
Net Interest
Net interest revenues of $2,645 million in the current year period are included within Equity, Fixed Income, and Other and increased 16% compared with the prior year, primarily driven by higher balances in Equity Financing and secured lending facilities.
Provision for Credit Losses
In 2021, the Provision for credit losses on loans and lending commitments was a net release of $7 million, primarily as the impact of changes in loan quality mix were offset by portfolio growth. The Provision for credit losses on loans and lending commitments of $731 million in the prior year was primarily the result of actual and forecasted changes in asset quality trends, as well as risks related to uncertainty in the outlook for the sectors in focus due to COVID-19.
For further information on the Provision for credit losses, see “Credit Risk” herein.
Non-interest Expenses
Non-interest expenses of $18,026 million in 2021 increased 9% compared with the prior year as a result of both higher Compensation and benefits and Non-compensation expenses.
Compensation and benefits expenses increased in the current year primarily due to an increase in discretionary incentive compensation driven by higher revenues, higher salaries and benefits on increased headcount, and higher expenses related to certain deferred compensation plans linked to the Firm’s share price.
Non-compensation expenses increased in the current year primarily due to increased volume-related expenses, investments in technology, and professional services, partially offset by a decrease in litigation expenses.

31
December 2021 Form 10-K

 
Management’s Discussion and Analysis
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Wealth Management
Income Statement Information
    % Change
$ in millions20212020201920212020
Revenues
Asset management$13,966 $10,955 $10,199 27 %%
Transactional1
4,259 3,694 2,969 15 %24 %
Net interest5,393 4,022 4,222 34 %(5)%
Other1,2
625 415 356 51 %17 %
Net revenues2
24,243 19,086 17,746 27 %%
Provision for credit losses2
11 30 10 (63)%200 %
Compensation and benefits13,090 10,970 9,774 19 %12 %
Non-compensation expenses2
4,961 3,699 3,130 34 %18 %
Total non-interest expenses2
18,051 14,669 12,904 23 %14 %
Income before provision for income taxes6,181 4,387 4,832 41 %(9)%
Provision for income taxes1,447 1,026 1,104 41 %(7)%
Net income applicable to Morgan Stanley
$4,734 $3,361 $3,728 41 %(10)%
1.Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues.
2.Certain prior period amounts have been reclassified to conform to the current presentation. See "Business Segments" herein and Note 1 to the financial statements for additional information.
Acquisition of E*TRADE
The comparisons of current year results to prior periods are impacted by the acquisition of E*TRADE on October 2, 2020. For additional information on the acquisition of E*TRADE, see Note 3 to the financial statements.
Wealth Management Metrics
$ in billionsAt December 31,
2021
At December 31,
2020
Total client assets$4,930$3,999
U.S. Bank Subsidiary loans$129$98
Margin and other lending1
$31$23
Deposits2
$346$306
Annualized weighted average cost of deposits0.10%0.24%
202120202019
Net new assets3
$437.7$182.7$97.8
1.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.
2.Deposits are sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $9 billion and $25 billion of off-balance sheet deposits as of December 31, 2021 and December 31, 2020, respectively.
3.Net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.
Advisor-led Channel
$ in billionsAt December 31,
2021
At December 31,
2020
Advisor-led client assets1
$3,886$3,167
Fee-based client assets2
$1,839$1,472
Fee-based client assets as a
percentage of advisor-led client
assets
47%46%
202120202019
Fee-based asset flows3
$179.3$77.4$64.9
1.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.
2.Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein.
Self-directed Channel
$ in billionsAt December 31,
2021
At December 31,
2020
Self-directed assets1
$1,044$832
Self-directed households (in millions)2
7.46.7
202120202019
Daily average revenue trades (“DARTs”) (in thousands)3
1,1612803
1.Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.
2.Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels will be included in each of the respective channel counts.
3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.
Workplace Channel1
$ in billionsAt December 31,
2021
At December 31,
2020
Workplace unvested assets2
$509$435
Number of participants (in millions)3
5.64.9
1.The workplace channel includes equity compensation solutions for companies, their executives and employees.
2.Workplace unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 24% for 2021. The rate is derived using full-year combined Morgan Stanley and E*TRADE stock plan inflows for 2020, less related outflows for 2020 and 2021, and dividing the result by 2020 inflows.
3.Workplace participants represent total accounts with vested and/or unvested assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.
Net Revenues
Asset Management
Asset management revenues of $13,966 million in 2021 increased 27% compared with the prior year, primarily due to higher fee-based asset levels in the current year periods as a result of market appreciation and positive fee-based flows since the prior year.
See “Fee-Based Client Assets Rollforwards” herein.
Transactional Revenues
Transactional revenues of $4,259 million in 2021 increased 15% compared with the prior year, primarily due to


December 2021 Form 10-K
32

 
Management’s Discussion and Analysis
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incremental revenues as a result of the E*TRADE acquisition and higher revenues from structured product and closed-end fund issuances, partially offset by lower gains related to investments associated with certain employee deferred compensation plans.
Net Interest
Net interest revenues of $5,393 million in 2021 increased 34% compared with the prior year, primarily due to incremental net interest as a result of the E*TRADE acquisition, continued growth in bank lending, and a decrease in prepayment amortization related to mortgage-backed securities. These increases in Net interest were partially offset by the net effect of lower interest rates.
Other
Other revenues of $625 million in 2021 increased 51% compared with the prior year, primarily due to incremental revenues as a result of the E*TRADE acquisition.
Non-interest Expenses
Non-interest expenses of $18,051 million in 2021 increased 23% compared with the prior year, as a result of both higher Compensation and benefits and Non-compensation expenses.
Compensation and benefits expenses increased, primarily due to an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues and incremental compensation as a result of the E*TRADE acquisition, partially offset by lower expenses related to certain deferred compensation plans linked to investment performance.
Non-compensation expenses increased, primarily due to incremental expenses as a result of the E*TRADE acquisition.
Fee-Based Client Assets Rollforwards
$ in billionsAt
December 31,
2020
Inflows1
OutflowsMarket
Impact
At
December 31,
2021
Separately managed2
$359 $86 $(20)$54 $479 
Unified managed379 100 (54)42 467 
Advisor177 42 (30)22 211 
Portfolio manager
509 113 (58)72 636 
Subtotal$1,424 $341 $(162)$190 $1,793 
Cash management
48 30 (32) 46 
Total fee-based client assets
$1,472 $371 $(194)$190 $1,839 
$ in billionsAt
December 31,
2019
InflowsOutflowsMarket
Impact
At
December 31,
2020
Separately managed2
$322 $48 $(25)$14 $359 
Unified managed313 63 (43)46 379 
Advisor155 33 (28)17 177 
Portfolio manager
435 86 (57)45 509 
Subtotal$1,225 $230 $(153)$122 $1,424 
Cash management
42 28 (22)— 48 
Total fee-based
client assets
$1,267 $258 $(175)$122 $1,472 
$ in billionsAt
December 31,
2018
InflowsOutflowsMarket
Impact
At
December 31,
2019
Separately managed2
$279 $53 $(19)$$322 
Unified managed257 48 (39)47 313 
Advisor137 27 (32)23 155 
Portfolio manager
353 75 (48)55 435 
Subtotal$1,026 $203 $(138)$134 $1,225 
Cash management
20 36 (14)— 42 
Total fee-based
client assets
$1,046 $239 $(152)$134 $1,267 
1.Includes $43 billion of fee-based assets acquired in an asset acquisition in the third quarter of 2021, reflected in Separately managed.
2.Includes non-custody account values reflecting prior quarter-end balances due to a lag in the reporting of asset values by third-party custodians.
Average Fee Rates1
Fee rate in bps202120202019
Separately managed14 14 15 
Unified managed95 99 100 
Advisor82 85 86 
Portfolio manager93 94 95 
Subtotal72 73 74 
Cash management5 
Total fee-based client assets70 70 73 
1.Based on Asset management revenues related to advisory services associated with fee-based assets.
Inflows—include new accounts, account transfers, deposits, dividends and interest.
Outflows—include closed or terminated accounts, account transfers, withdrawals and client fees.
Market impact—includes realized and unrealized gains and losses on portfolio investments.
Separately managed—accounts by which third-party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset manager. Only one third-party asset manager strategy can be held per account.
Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual
33
December 2021 Form 10-K

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.
Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments.
Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.
Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment.


December 2021 Form 10-K
34

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Investment Management
Income Statement Information
    % Change
$ in millions20212020201920212020
Revenues
Asset management and related
fees
$5,576 $3,013 $2,629 85 %15 %
Performance-based income and
other1
644 721 1,134 (11)%(36)%
Net revenues6,220 3,734 3,763 67 %(1)%
Compensation and benefits2,373 1,542 1,630 54 %(5)%
Non-compensation expenses2,169 1,322 1,148 64 %15 %
Total non-interest expenses4,542 2,864 2,778 59 %%
Income from continuing
operations before income
taxes
1,678 870 985 93 %(12)%
Provision for income taxes356 171 193 108 %(11)%
Net income1,322 699 792 89 %(12)%
Net income applicable to
noncontrolling interests
(25)84 73 (130)%15 %
Net income applicable to
Morgan Stanley
$1,347 $615 $719 119 %(14)%
1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.
Acquisition of Eaton Vance
The comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements.
Net Revenues
Asset Management and Related Fees
Asset management and related fees of $5,576 million in 2021 increased 85% compared with the prior year, primarily due to incremental revenues as a result of the Eaton Vance acquisition and higher average AUM driven by strong investment performance and positive net flows.
See “Assets under Management or Supervision” herein.
Performance-based Income and Other
Performance-based income and other revenues of $644 million in 2021 decreased 11% compared with the prior year, primarily due to the reversal of accrued carried interest and investment losses compared with gains in the prior year, in an Asia private equity fund, as well as lower gains on investments associated with certain employee deferred compensation plans. These decreases were partially offset by higher accrued carried interest, as well as investment gains in 2021 in other private credit and equity, real estate and infrastructure funds.
Non-interest Expenses
Non-interest expenses of $4,542 million in 2021 increased 59% compared with the prior year as a result of higher Non-compensation expenses and higher Compensation and benefits.
Compensation and benefits expenses increased primarily due to incremental compensation as a result of the Eaton Vance acquisition and higher compensation associated with carried interest, partially offset by lower expenses related to certain deferred compensation plans linked to investment performance.
Non-compensation expenses increased primarily due to incremental expenses as a result of the Eaton Vance acquisition.

35
December 2021 Form 10-K

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Assets under Management or Supervision
Rollforwards 
$ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotal
December 31, 2020$242 $98 $153 $493 $288 $781 
Inflows100 67 95 262 1,940 2,202 
Outflows(85)(55)(78)(218)(1,852)(2,070)
Market Impact34  51 85 6 91 
Acquired1
119 103 251 473 116 589 
Other(15)(6)(6)(27)(1)(28)
December 31, 2021$395 $207 $466 $1,068 $497 $1,565 
$ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotal
December 31, 2019$138 $79 $139 $356 $196 $552 
Inflows87 37 26 150 1,584 1,734 
Outflows(51)(29)(24)(104)(1,493)(1,597)
Market Impact69 78 79 
Other(1)13 — 13 
December 31, 2020$242 $98 $153 $493 $288 $781 
$ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotal
December 31, 2018$103 $68 $128 $299 $164 $463 
Inflows39 25 22 86 1,315 1,401 
Outflows(31)(20)(17)(68)(1,283)(1,351)
Market Impact28 10 43 45 
Other(1)(4)(4)(2)(6)
December 31, 2019$138 $79 $139 $356 $196 $552 
1.Related to the Eaton Vance acquisition.
Average AUM
$ in billions202120202019
Equity$362 $174 $124 
Fixed income181 86 71 
Alternatives and Solutions380 145 134 
Long-term AUM subtotal923 405 329 
Liquidity and Overlay Services430 252 171 
Total AUM$1,353 $657 $500 
Average Fee Rates1
Fee rate in bps202120202019
Equity74 76 76 
Fixed income38 29 32 
Alternatives and Solutions36 58 64 
Long-term AUM51 60 61 
Liquidity and Overlay Services5 15 17 
Total AUM37 42 46 
1.Based on Asset management revenues, net of waivers, excluding performance-based fees and other non-management fees. For certain non-U.S. funds, it includes the portion of advisory fees that the advisor collects on behalf of third-party distributors. The payment of those fees to the distributor is included in Non-compensation expenses in the income statement.
Certain Eaton Vance products may have higher or lower average fee rates than similar products prior to the acquisition, with the overall impact yielding a lower average fee rate; however, Asset management and related fees arising from the acquisition are incremental to our revenues.
Inflows—represent investments or commitments from new and existing clients in new or existing investment products, including reinvestments of client dividends and increases in invested capital. Inflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.
Outflows—represent redemptions from clients’ funds, transition of funds from the committed capital period to the invested capital period and decreases in invested capital. Outflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.
Market impact—includes realized and unrealized gains and losses on portfolio investments. This excludes any funds where market impact does not impact management fees.
Other—contains both distributions and foreign currency impact for all periods. Distributions represent decreases in invested capital due to returns of capital after the investment period of a fund. It also includes fund dividends that the client has not reinvested. Foreign currency impact reflects foreign currency changes for non-U.S. dollar dominated funds.
Alternatives and Solutions—includes products in fund of funds, real estate, infrastructure, private equity and credit strategies and multi-asset portfolios, as well as systematic strategies that create custom investment solutions.
Liquidity and Overlay Services—includes liquidity fund products, as well as overlay services, which represent investment strategies that use passive exposure instruments to obtain, offset or substitute specific portfolio exposures, beyond those provided by the underlying holdings of the fund.



December 2021 Form 10-K
36

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Supplemental Financial Information
U.S. Bank Subsidiaries
Our U.S. bank subsidiaries, Morgan Stanley Bank N.A. (“MSBNA”), Morgan Stanley Private Bank, National Association (“MSPBNA”), E*TRADE Bank (“ETB”) and E*TRADE Savings Bank (“ETSB”) (collectively, “U.S. Bank Subsidiaries”) accept deposits, provide loans to a variety of customers, including large corporate and institutional clients as well as high to ultra-high net worth individuals, and invest in securities. Lending activity in the U.S. Bank Subsidiaries from the Institutional Securities business segment primarily includes Secured lending facilities and Commercial real estate loans. Lending activity in the U.S. Bank Subsidiaries from the Wealth Management business segment primarily includes Securities-based lending, which allows clients to borrow money against the value of qualifying securities, and Residential real estate loans.

For additional information on ETB and ETSB see Business—Supervision and Regulation.
For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. For a further discussion about loans and lending commitments, see Notes 10 and 15 to the financial statements.
U.S. Bank Subsidiaries’ Supplemental Financial Information1
$ in billionsAt
December 31,
2021
At
December 31,
2020
Investment securities portfolio:
Investment securities—AFS$81.6 $90.3 
Investment securities—HTM61.7 52.6 
Total investment securities$143.3 $142.9 
Wealth Management Loans2
Residential real estate$44.2 $35.2 
Securities-based lending and Other3
85.0 62.9 
Total, net of ACL$129.2 $98.1 
Institutional Securities Loans2
Corporate$6.5 $7.9 
Secured lending facilities33.1 27.4 
Commercial and Residential real estate10.4 10.1 
Securities-based lending and Other6.3 5.4 
Total, net of ACL$56.3 $50.8 
Total Assets$386.1 $346.5 
Deposits4
$346.2 $309.7 
1.Amounts exclude transactions between the bank subsidiaries, as well as deposits from the Parent Company and affiliates.
2.For a further discussion of loans in the Wealth Management and Institutional Securities business segments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein.
3.Other loans primarily include tailored lending.
4.For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Balance Sheet—Unsecured Financing” herein.
Other Matters
Deferred Cash-Based Compensation
The Firm sponsors a number of deferred cash-based compensation programs for current and former employees,
which generally contain vesting, clawback and cancellation provisions.
Employees are permitted to allocate the value of their deferred awards among a menu of notional investments, whereby the value of their awards will track the performance of the referenced notional investments. The menu of investments, which is selected by the Firm, includes fixed income, equity, commodity and money market funds.
Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.
The Firm invests directly, as a principal, in financial instruments and other investments to economically hedge certain of its obligations under these deferred cash-based compensation plans. Changes in the value of such investments are recorded in Trading and Investments revenues. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the immediate recognition of gains and losses on the Firm’s investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference is generally not material to Income from continuing operations before income taxes in any individual period, it may impact Firm reported ratios (e.g., the Expense efficiency ratio) in certain periods. At December 31, 2021, substantially all employee notional investments that subjected the Firm to price risk were hedged.
Amounts Recognized in Compensation Expense
$ in millions202120202019
Deferred cash-based awards$810 $1,263 $1,233 
Return on referenced investments526 856 645 
Total recognized in compensation expense$1,336 $2,119 $1,878 
Amounts Recognized in Compensation Expense by Segment
$ in millions202120202019
Institutional Securities$372 $851 $916 
Wealth Management798 1,000 760 
Investment Management 166 268 202 
Total recognized in compensation expense$1,336 $2,119 $1,878 
37
December 2021 Form 10-K

 
Management’s Discussion and Analysis
ms-20211231_g1.jpg
Projected Future Compensation Obligation1
$ in millions
Award liabilities at December 31, 20212, 3
$6,095 
Fully vested amounts to be distributed by the end of February 20224
(1,124)
Unrecognized portion of prior awards at December 31, 20213
1,128 
2021 performance year awards granted in 20223
451 
Total5
$6,550 
1.Amounts relate to performance years 2021 and prior.
2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2021.
3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.
4.Distributions after February of each year are generally immaterial.
5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.
The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.
Projected Future Compensation Expense1
$ in millions
Estimated to be recognized in:
2022
$600 
2023310 
Thereafter669 
Total$1,579 
1.Amounts relate to performance years 2021 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.
The previous table sets forth an estimate of compensation expense associated with the Projected Future Compensation Obligation. Our projected future compensation obligation and expense for deferred cash-based compensation for performance years 2021 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information.
For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 20 to the financial statements.
Accounting Development Updates
The Financial Accounting Standards Board has issued certain accounting updates, which we have either determined are not applicable or are not expected to have a significant impact on our financial statements.
Critical Accounting Policies
Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity.
Fair Value
Financial Instruments Measured at Fair Value
A significant number of our financial instruments are carried at fair value. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to:
Trading assets and Trading liabilities;
Investment Securities—AFS;
Certain Securities purchased under agreements to resell;
Certain Deposits, primarily certificates of deposit;
Certain Securities sold under agreements to repurchase;
Certain Other secured financings; and
Certain Borrowings.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
In determining fair value, we use various valuation approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable prices and inputs and minimizes the use of unobservable prices and inputs by requiring that the relevant observable inputs be used when available. The hierarchy is broken down into three levels, wherein Level 1 represents quoted prices in active markets, Level 2 represents valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, require the greatest use of judgment.
In periods of market disruption, the observability of prices and inputs may be reduced for many instruments, which could cause an instrument to be recategorized from Level 1 to Level 2 or from Level 2 to Level 3. In addition, a downturn in market conditions could lead to declines in the valuation of many instruments. For further information on the definition of fair value, Level 1, Level 2, Level 3 and related valuation techniques, and quantitative information about and sensitivity of significant unobservable inputs used in Level 3 fair value measurements, see Notes 2 and 5 to the financial statements.
Where appropriate, valuation adjustments are made to account for various factors such as liquidity risk (bid-ask adjustments), credit quality, model uncertainty, concentration risk and funding in order to arrive at fair value. For a further


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discussion of valuation adjustments that we apply, see Note 2 to the financial statements.
Goodwill and Intangible Assets
Goodwill
We test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill.
For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case the quantitative test would be performed.
When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, limited by the carrying amount of goodwill allocated to that reporting unit.
The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology or methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies. At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value.
Intangible Assets
Intangible assets are initially recorded at cost, or in the situation where acquired as part of a business combination, at the fair value determined as part of the acquisition method of accounting. Subsequently, amortizable intangible assets are carried in the balance sheet at amortized cost, where amortization is recognized over their estimated useful lives. Indefinite lived intangible assets are not amortized but are tested for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist.
On a quarterly basis:
All intangible assets are assessed for the presence of impairment indicators. Where such indicators are present, an evaluation for impairment is conducted.
For amortizable intangible assets, an impairment loss exists if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows.
For indefinite-lived intangible assets, an impairment exists if the carrying amount of the intangible asset exceeds its fair value.
Amortizable intangible assets are assessed for any indication that the remaining useful life or the finite life classification should be revised. In such cases, the remaining carrying amount is amortized prospectively over the revised useful life, unless it is determined that the life of the intangible asset is indefinite, in which case the intangible asset is not amortized.
Indefinite-lived intangible assets are assessed for any indication that the life of the intangible asset is no longer indefinite; in such cases, the carrying amount of the intangible asset is amortized prospectively over its remaining useful life.
The initial valuation of an intangible asset as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of an impairment assessment are subjective and based, in part, on inputs that are unobservable and can be subject to uncertainty. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, customer attrition rates and discount rates.
For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Adverse market or economic events could result in impairment charges in future periods.
See Notes 2, 3 and 11 to the financial statements for additional information about goodwill and intangible assets.
Legal and Regulatory Contingencies
In the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution.
Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress.
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Management’s Discussion and Analysis
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We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business and involving, among other matters, sales, financing, prime-brokerage, market-making activities, wealth and investment management services, financial products or offerings sponsored, underwritten or sold by us, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
Accruals for litigation and regulatory proceedings are generally determined on a case-by-case basis. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss or range of loss or additional range of loss can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.
Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals.
See Note 15 to the financial statements for additional information on legal contingencies.
Income Taxes
We are subject to the income and indirect tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have significant business operations. These tax laws are complex and subject to interpretation by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and the expense for indirect taxes and must also make estimates about when
certain items affect taxable income in the various tax jurisdictions.
Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. We periodically evaluate the likelihood of assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.
Our provision for income taxes is composed of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse.
Our deferred tax balances may also include deferred assets related to tax attribute carryforwards, such as net operating losses and tax credits that will be realized through reduction of future tax liabilities and, in some cases, are subject to expiration if not utilized within certain periods. We perform regular reviews to ascertain whether deferred tax assets are realizable. These reviews include management’s estimates and assumptions regarding future taxable income and incorporate various tax planning strategies, including strategies that may be available to tax attribute carryforwards before they expire.
Once the deferred tax asset balances have been determined, we may record a valuation allowance against the deferred tax asset balances to reflect the amount we estimate is more likely than not to be realized at a future date. Both current and deferred income taxes may reflect adjustments related to our unrecognized tax benefits.
Significant judgment is required in estimating the consolidated provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance, if any), accrued interest or penalties and uncertain tax positions. Revisions in estimates and/or the actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.
See Note 2 to the financial statements for additional information on our significant assumptions, judgments and interpretations associated with the accounting for income taxes and Note 22 to the financial statements for additional information on our tax examinations.
Liquidity and Capital Resources
Our liquidity and capital policies are established and maintained by senior management, with oversight by the


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Management’s Discussion and Analysis
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Asset/Liability Management Committee and the Board of Directors (“Board”). Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Treasury department, Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and controlling the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the Risk Committee of the Board.
Balance Sheet
We monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments.
We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage.
Total Assets by Business Segment
At December 31, 2021
$ in millionsISWMIMTotal
Assets
Cash and cash equivalents$91,251 $36,003 $471 $127,725 
Trading assets at fair value288,405 1,921 4,543 294,869 
Investment securities41,407 141,591  182,998 
Securities purchased under agreements to resell112,267 7,732  119,999 
Securities borrowed128,154 1,559  129,713 
Customer and other receivables57,009 37,643 1,366 96,018 
Loans1
58,822 129,307 5 188,134 
Other assets2
14,820 22,682 11,182 48,684 
Total assets$792,135 $378,438 $17,567 $1,188,140 
 At December 31, 2020
$ in millionsISWMIMTotal
Assets
Cash and cash equivalents$74,281 $31,275 $98 $105,654 
Trading assets at fair value308,413 280 4,045 312,738 
Investment securities41,630 140,524 — 182,154 
Securities purchased under agreements to resell84,998 31,236 — 116,234 
Securities borrowed110,480 1,911 — 112,391 
Customer and other receivables67,085 29,781 871 97,737 
Loans1
52,449 98,130 18 150,597 
Other assets2
13,986 22,458 1,913 38,357 
Total assets$753,322 $355,595 $6,945 $1,115,862 
1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 10 to the financial statements).
2.Other assets primarily includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets.
A substantial portion of total assets consists of liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio, comprising Investment securities, Cash and cash equivalents and Securities purchased under agreements to resell. Total assets increased slightly to $1,188 billion at December 31, 2021 compared with $1,116 billion at December 31, 2020.
Liquidity Risk Management Framework
The primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.
The following principles guide our Liquidity Risk Management Framework:
Sufficient Liquidity Resources should be maintained to cover maturing liabilities and other planned and contingent outflows;
Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;
Source, counterparty, currency, region and term of funding should be diversified; and
Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding.
The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.
Required Liquidity Framework
Our Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed
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Management’s Discussion and Analysis
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environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.
Liquidity Stress Tests
We use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.
The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:
No government support;
No access to equity and limited access to unsecured debt markets;
Repayment of all unsecured debt maturing within the stress horizon;
Higher haircuts for and significantly lower availability of secured funding;
Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;
Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;
Discretionary unsecured debt buybacks;
Drawdowns on lending commitments provided to third parties; and
Client cash withdrawals and reduction in customer short positions that fund long positions.
Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.
At December 31, 2021 and December 31, 2020, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.
Liquidity Resources
We maintain sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
The amount of Liquidity Resources we hold is based on our risk tolerance and is subject to change depending on market and Firm-specific events. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations.
Liquidity Resources by Type of Investment
$ in millionsAt
December 31,
2021
At
December 31,
2020
Cash deposits with central banks$70,147 $49,669 
Unencumbered HQLA securities1:
U.S. government obligations154,879 136,555 
U.S. agency and agency mortgage-backed securities110,435 99,659 
Non-U.S. sovereign obligations2
11,959 39,745 
Other investment grade securities607 2,053 
Total HQLA1
$348,027 $327,681 
Cash deposits with banks (non-HQLA)7,976 10,942 
Total Liquidity Resources$356,003 $338,623 
1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.
2.Primarily composed of unencumbered Japanese, U.K., German, French and Dutch government obligations.
Liquidity Resources by Bank and Non-Bank Legal Entities
At
December 31,
2021
At
December 31,
2020
Average Daily Balance
Three Months Ended
$ in millionsDecember 31, 2021
Bank legal entities
U.S.$171,642 $178,033 $164,760 
Non-U.S.8,582 7,670 9,266 
Total Bank legal entities
180,224 185,703 174,026 
Non-Bank legal entities
U.S.:
Parent Company60,391 59,468 56,002 
Non-Parent Company52,932 33,368 56,648 
Total U.S.113,323 92,836 112,650 
Non-U.S.62,456 60,084 58,373 
Total Non-Bank legal entities
175,779 152,920 171,023 
Total Liquidity Resources$356,003 $338,623 $345,049 


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Management’s Discussion and Analysis
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Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors.
Regulatory Liquidity Framework
Liquidity Coverage Ratio and Net Stable Funding Ratio
The Firm, MSBNA, MSPBNA and ETB are required to maintain a minimum LCR and NSFR of 100%. The LCR requires that banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR requires large banking organizations to maintain sufficiently stable sources of funding over a one-year time horizon.
As of December 31, 2021, the Firm, MSBNA, MSPBNA and ETB are compliant with the minimum LCR and NSFR requirements of 100%.
Liquidity Coverage Ratio
 Average Daily Balance
Three Months Ended
$ in millionsDecember 31, 2021September 30, 2021
Eligible HQLA1
  
Cash deposits with central banks$54,606 $66,288 
Securities2
183,105 174,068 
Total Eligible HQLA1
$237,711 $240,356 
LCR134 %134 %
1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.
2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.
Funding Management
We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.
We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.
Secured Financing
The liquid nature of the marketable securities and short-term receivables arising principally from sales and trading
activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded.
We have established longer tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria.
To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. Furthermore, we obtain term secured funding liabilities in excess of less liquid inventory as an additional risk mitigant to replace maturing trades in the event that secured financing markets, or our ability to access them, become limited. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.
We generally maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.
Collateralized Financing Transactions
$ in millionsAt
December 31,
2021
At
December 31,
2020
Securities purchased under agreements to resell and Securities borrowed
$249,712 $228,625 
Securities sold under agreements to repurchase and Securities loaned
$74,487 $58,318 
Securities received as collateral1
$10,504 $4,277 
 Average Daily Balance
Three Months Ended
$ in millionsDecember 31, 2021December 31, 2020
Securities purchased under agreements to resell and Securities borrowed
$236,327 $195,376 
Securities sold under agreements to repurchase and Securities loaned
$69,565 $54,528 
1.Included within Trading assets in the balance sheet.

See “Total Assets by Business Segment” herein for more details on the assets shown in the previous table and Notes 2 and 9 to the financial statements for more details on collateralized financing transactions.
In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables
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in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework.
Unsecured Financing
We view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 7 and 14 to the financial statements).
Deposits
$ in millionsAt
December 31,
2021
At
December 31,
2020
Savings and demand deposits:
Brokerage sweep deposits1
$298,352 $232,071 
Savings and other
34,395 47,150 
Total Savings and demand deposits332,747 279,221 
Time deposits14,827 31,561 
Total2
$347,574 $310,782 
1.Amounts represent balances swept from client brokerage accounts.
2.Excludes approximately $9 billion and $25 billion of off-balance sheet deposits at unaffiliated financial institutions as of December 31, 2021 and December 31, 2020, respectively. This client cash held by third parties is not reflected in our balance sheet and is not immediately available for liquidity purposes.
Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics. The increase in total deposits in 2021 was primarily driven by higher client cash balances swept into Brokerage sweep deposits and the onboarding in the first quarter of 2021 of approximately $20 billion of E*TRADE sweep deposits previously held off-balance sheet at unaffiliated financial institutions, partially offset by maturities of Time deposits and lower Savings and other deposits.
Borrowings by Remaining Maturity at December 31, 20211
$ in millionsParent
Company
SubsidiariesTotal
Original maturities of one year or less
$1,300 $4,464 $5,764 
Original maturities greater than one year
2022$7,236 $6,961 $14,197 
202317,201 6,585 23,786 
202420,506 8,660 29,166 
202519,070 6,491 25,561 
202618,096 5,930 24,026 
Thereafter86,640 23,987 110,627 
Total$168,749 $58,614 $227,363 
Total Borrowings$170,049 $63,078 $233,127 
1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date.
Borrowings of $233 billion as of December 31, 2021 increased slightly when compared with $217 billion at December 31, 2020.
We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types.
The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.
For further information on Borrowings, see Note 14 to the financial statements.
Credit Ratings
We rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.”


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Management’s Discussion and Analysis
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Parent Company, MSBNA and MSPBNA Issuer Ratings at February 18, 2022
Parent Company
Short-Term
Debt
Long-Term
Debt
Rating
Outlook
DBRS, Inc.R-1 (middle)A (high)Stable
Fitch Ratings, Inc.F1APositive
Moody’s Investors Service, Inc.P-1A1Stable
Rating and Investment Information, Inc.
a-1AStable
S&P Global RatingsA-2BBB+Positive
MSBNA
Short-Term
Debt
Long-Term
Debt
Rating
Outlook
Fitch Ratings, Inc.F1A+Positive
Moody’s Investors Service, Inc.P-1Aa3Stable
S&P Global RatingsA-1A+Stable
MSPBNA
Short-Term
Debt
Long-Term
Debt
Rating
Outlook
Moody’s Investors Service, Inc.P-1Aa3Stable
S&P Global RatingsA-1A+Stable
On November 18, 2021, Fitch Ratings, Inc. revised the Parent Company and MSBNA outlooks from stable to positive.
On May 24, 2021, S&P Global Ratings revised the Parent Company outlook from stable to positive.
Incremental Collateral or Terminating Payments
In connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 7 to the financial statements for additional information on OTC derivatives that contain such contingent features.
While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency pre-downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests.
Capital Management
We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency
guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.
Common Stock Repurchases
in millions, except for per share data202120202019
Number of shares126 29 121 
Average price per share$91.13 $46.01 $44.23 
Total$11,464 $1,347 $5,360 
For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 18 to the financial statements.
For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.
Common Stock Dividend Announcement
Announcement dateJanuary 19, 2022
Amount per share$0.70
Date paidFebruary 15, 2022
Shareholders of record as ofJanuary 31, 2022
For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.
For additional information on our common stock and information on our preferred stock, see Note 18 to the financial statements.
Off-Balance Sheet Arrangements
We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.
We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 16 to the financial statements.
For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 15 to the financial statements. For further information on our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.
Regulatory Requirements
Regulatory Capital Framework
We are an FHC under the Bank Holding Company Act of 1956, as amended (“BHC Act”) and are subject to the regulation and oversight of the Federal Reserve. The Federal
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December 2021 Form 10-K

 
Management’s Discussion and Analysis
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Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are Swap Entities, see Note 17 to the financial statements.
Regulatory Capital Requirements
We are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.
Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios.
Capital Buffer Requirements
At December 31, 2021 and December 31, 2020
StandardizedAdvanced
Capital buffers
Capital conservation buffer2.5%
SCB1
5.7%N/A
G-SIB capital surcharge2
3.0%3.0%
CCyB3
0%0%
Capital buffer requirement8.7%5.5%
1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.
2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.
3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.
The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our Standardized Approach capital buffer requirement is equal to the sum of our SCB, G-SIB capital surcharge and
CCyB, and our Advanced Approach capital buffer requirement is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.
Risk-Based Regulatory Capital Ratio Requirements
At December 31, 2021 and December 31, 2020
Regulatory Minimum
StandardizedAdvanced
Required ratios1
Common Equity Tier 1 capital ratio4.5 %13.2%10.0%
Tier 1 capital ratio6.0 %14.7%11.5%
Total capital ratio8.0 %16.7%13.5%
1.Required ratios represent the regulatory minimum plus the capital buffer requirement.
Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:
Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;
Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and
Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).
Our risk-based capital ratios are computed under each of (i) the standardized approaches for calculating credit risk and market risk RWA (“Standardized Approach”) and (ii) the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“Advanced Approach”). The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights.
Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.
CECL Deferral. As of December 31, 2021 and December 31, 2020, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure are calculated excluding the effect of the adoption of CECL based on our election to defer this effect over a five-year transition period that began on January 1, 2020. The deferral impacts begin to phase back in at 25% per year beginning in 2022 and become fully phased-in beginning in 2025.


December 2021 Form 10-K
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Management’s Discussion and Analysis
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Regulatory Capital Ratios
$ in millions
Required
Ratio
1
At December 31,
2021
At December 31,
2020
Risk-based capital—
Standardized
Common Equity Tier 1 capital$75,742 $78,650 
Tier 1 capital 83,348 88,079 
Total capital 93,166 97,213 
Total RWA2
 471,921 453,106 
Common Equity Tier 1 capital ratio13.2 %16.0 %17.4 %
Tier 1 capital ratio14.7 %17.7 %19.4 %
Total capital ratio16.7 %19.7 %21.5 %
$ in millions
Required
Ratio
1
At December 31,
2021
At December 31,
2020
Risk-based capital—
Advanced
Common Equity Tier 1 capital$75,742 $78,650 
Tier 1 capital 83,348 88,079 
Total capital 92,927 96,994 
Total RWA 435,749 445,151 
Common Equity Tier 1 capital ratio10.0 %17.4 %17.7 %
Tier 1 capital ratio11.5 %19.1 %19.8 %
Total capital ratio13.5 %21.3 %21.8 %
$ in millions
Required
Ratio1
At December 31, 2021At December 31, 2020
Leverage-based capital
Adjusted average assets3
$1,169,939 $1,053,510 
Tier 1 leverage ratio4.0 %7.1 %8.4 %
Supplementary leverage exposure2, 4, 5
$1,476,962 $1,192,506 
SLR5
5.0 %5.6 %7.4 %
1.Required ratios are inclusive of any buffers applicable as of the date presented.
2.We early adopted the Standardized Approach for Counterparty Credit Risk (“SA-CCR”) on December 1, 2021. SA-CCR replaced the current exposure method used to measure derivatives counterparty exposure within the Standardized Approach RWA and Supplementary Leverage Ratio exposure calculations. As a result of the adoption, as of December 31, 2021, our risk-weighted assets under the Standardized Approach increased by $25 billion, and our Standardized Common Equity Tier 1 capital ratio decreased by 90 basis points.
3.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions.
4.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.
5.Our SLR and Supplementary leverage exposure as of December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks based on a Federal Reserve interim final rule that was in effect until March 31, 2021. As of December 31, 2020, the impact of the interim final rule on our SLR was an increase of 80 bps.
Regulatory Capital
$ in millions
At
December 31,
2021
At
December 31,
2020
Change
Common Equity Tier 1 capital
Common stock and surplus$11,361 $15,799 $(4,438)
Retained earnings89,679 78,978 10,701 
AOCI(3,102)(1,962)(1,140)
Regulatory adjustments and deductions:
Net goodwill(16,641)(11,527)(5,114)
Net intangible assets(6,704)(4,165)(2,539)
Other adjustments and deductions1
1,149 1,527 (378)
Total Common Equity Tier 1
capital
$75,742 $78,650 $(2,908)
Additional Tier 1 capital
Preferred stock$7,750 $9,250 $(1,500)
Noncontrolling interests562 619 (57)
Additional Tier 1 capital$8,312 $9,869 $(1,557)
Deduction for investments in covered funds(706)(440)(266)
Total Tier 1 capital$83,348 $88,079 $(4,731)
Standardized Tier 2 capital
Subordinated debt$8,609 $7,737 $872 
Eligible ACL1,155 1,265 (110)
Other adjustments and deductions54 132 (78)
Total Standardized Tier 2
capital
$9,818 $9,134 $684 
Total Standardized capital$93,166 $97,213 $(4,047)
Advanced Tier 2 capital
Subordinated debt$8,609 $7,737 $872 
Eligible credit reserves916 1,046 (130)
Other adjustments and
deductions
54 132 (78)
Total Advanced Tier 2 capital$9,579 $8,915 $664 
Total Advanced capital$92,927 $96,994 $(4,067)
1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.

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December 2021 Form 10-K

 
Management’s Discussion and Analysis
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RWA Rollforward
$ in millionsStandardizedAdvanced
Credit risk RWA
Balance at December 31, 2020$387,066 $284,930 
Change related to the following items:
Derivatives25,467 (17,523)
Securities financing transactions(4,863)(1,543)
Investment securities(3,134)6,512 
Commitments, guarantees and loans310 4,493 
Equity investments4,129 4,321 
Other credit risk7,527 4,057 
Total change in credit risk RWA$29,436 $317 
Balance at December 31, 2021$416,502 $285,247 
Market risk RWA
Balance at December 31, 2020$66,040 $66,040 
Change related to the following items:
Regulatory VaR(7,842)(7,842)
Regulatory stressed VaR(1,206)(1,206)
Incremental risk charge2,335 2,335 
Comprehensive risk measure269 269 
Specific risk(4,177)(4,177)
Total change in market risk RWA$(10,621)$(10,621)
Balance at December 31, 2021$55,419 $55,419 
Operational risk RWA
Balance at December 31, 2020N/A$94,181 
Change in operational risk RWAN/A902 
Balance at December 31, 2021N/A$95,083 
Total RWA$471,921 $435,749 
Regulatory VaR—VaR for regulatory capital requirements
Credit risk RWA in 2021 increased under the Standardized Approach, while it is relatively unchanged under the Advanced Approach. Under the Standardized Approach, the increase was primarily in Derivatives, driven by the impact of the early adoption of SA-CCR on December 1, 2021. Under the Advanced Approach, CVA in Derivatives decreased due to lower credit spread volatility, offset by increases in Investment securities from the E*TRADE acquisition now being risk-weighted under the Advanced Approach, event lending within the Institutional Securities business segment, as well as equity investments and other credit risk.
Market risk RWA decreased in 2021 under the Standardized and Advanced Approaches, primarily due to a decrease in VaR mainly as a result of reduced volatility as the peak COVID-19 market stress in 2020 is no longer included in VaR.
G-SIB Capital Surcharge
We and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.
Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements
The Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”).
These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law.
A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure.
The final rule imposes TLAC buffer requirements on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers.


December 2021 Form 10-K
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Management’s Discussion and Analysis
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Required and Actual TLAC and Eligible LTD Ratios
 Actual
Amount/Ratio
$ in millionsRegulatory Minimum
Required Ratio1
At
December 31,
2021
At
December 31,
2020
External TLAC2
$235,681 $216,129 
External TLAC as a % of RWA18.0 %21.5 %49.9 %47.7 %
External TLAC as a % of leverage exposure7.5 %9.5 %16.0 %18.1 %
Eligible LTD3
$144,659 $120,561 
Eligible LTD as a % of RWA9.0 %9.0 %30.7 %26.6 %
Eligible LTD as a % of leverage exposure4.5 %4.5 %9.8 %10.1 %
1.Required ratios are inclusive of applicable buffers.
2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.
3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date.
Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.
We are in compliance with all TLAC requirements as of December 31, 2021 and December 31, 2020.
Capital Plans, Stress Tests and the Stress Capital Buffer
The Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.
We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.
The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated
capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us.
As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%.
The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period. The SCB incorporates the results of the supervisory stress test results and incorporates four quarters of common stock dividends. Federal Reserve approval for capital actions is required in some specific circumstances.
A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle in certain circumstances.
Our SCB will remain at 5.7% from October 1, 2021 through September 30, 2022. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 required ratio of 13.2%.
The Federal Reserve has the authority to impose restrictions on capital actions as a supervisory matter. In the second quarter of 2020, the Federal Reserve imposed capital action restrictions on large BHCs, including us, which it modified in the fourth quarter of 2020 and subsequently extended. Under the modified capital action restrictions announced on December 18, 2020 and subsequently extended by the Federal Reserve, in the first two quarters of 2021, large BHCs were permitted to pay common stock dividends, provided they did not increase the amount of common stock dividends to be larger than the level paid in the second quarter of 2020, and make share repurchases that, in the aggregate, did not exceed an amount equal to the average of the firm’s net income for the four preceding calendar quarters; make share repurchases that equal the amount of share issuances related to expensed employee compensation; and redeem and make scheduled payments on additional Tier 1 and Tier 2 capital instruments. The Federal Reserve subsequently announced that the
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December 2021 Form 10-K

 
Management’s Discussion and Analysis
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restrictions described above would end on June 30, 2021 for all firms whose capital levels are above minimum risk-based requirements in the Federal Reserve’s annual supervisory stress test.
Based on the results of the 2021 supervisory stress tests, the temporary capital action supervisory restrictions previously applicable to us ended on June 30, 2021. Beginning July 1, 2021, the Firm is permitted, in its discretion, to adjust its capital distributions without seeking prior approval from the Federal Reserve, provided that it remains in compliance with all applicable regulatory capital requirements, including the SCB. We disclosed a summary of the results of our company-run stress tests on our Investor Relations website and announced that our Board of Directors authorized the increase of our quarterly common stock dividend to $0.70 per share from $0.35 per share beginning with the common stock dividend announced on July 15, 2021 and authorized the repurchase of up to $12 billion of outstanding common stock from July 1, 2021 through June 30, 2022, from time to time as conditions warrant, which supersedes the previous common stock repurchase authorization.
For the 2022 capital planning and stress test cycle, we are required to submit our capital plan and company-run stress test results to the Federal Reserve by April 5, 2022. The Federal Reserve is expected to publish summary results of the CCAR and Dodd-Frank Act supervisory stress tests of each large BHC, including us, by June 30, 2022. We are required to disclose a summary of the results of our company-run stress tests within 15 days of the date the Federal Reserve discloses the results of the supervisory stress tests.
Attribution of Average Common Equity According to the Required Capital Framework
Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital.
The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent common equity. We generally hold Parent common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.
Average Common Equity Attribution under the Required Capital Framework1
$ in billions202120202019
Institutional Securities$43.5 $42.8 $40.4 
Wealth Management2
28.6 20.8 18.2 
Investment Management3
8.8 2.6 2.5 
Parent16.2 14.0 11.6 
Total$97.1 $80.2 $72.7 
1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.
2.The total average common equity and the allocation to the Wealth Management business segment in 2021 reflect the E*TRADE acquisition on October 2, 2020.
3. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.
The Firm has made updates to its Required Capital framework for 2021 and continues to evaluate the impact of evolving regulatory requirements, as appropriate.
Resolution and Recovery Planning
We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.”
As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its Contributable Assets to our material entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our material entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our material entities and without requiring taxpayer or government financial support.
The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our material entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company.


December 2021 Form 10-K
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Management’s Discussion and Analysis
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For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”
Regulatory Developments and Other Matters
Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate Benchmarks
Central banks around the world, including the Federal Reserve, have commissioned committees and working groups of market participants and official sector representatives to replace LIBOR and replace or reform other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and will continue over the course of the next few years.
In accordance with announcements by the Financial Conduct Authority (“FCA”), which regulates LIBOR publication, and ICE Benchmark Administration Limited, which administers LIBOR publication, the publication of most non-U.S. dollar LIBOR rates ceased as of the end of December 2021. While publication of the one-, three- and six-month Sterling and Japanese yen LIBOR settings will continue at least until the end of 2022 on the basis of a “synthetic” methodology (known as “synthetic LIBOR”), these rates have been designated unrepresentative by the FCA and are solely available for use in legacy transactions. Furthermore, while certain U.S. dollar LIBOR tenors are expected to continue to be published until June 30, 2023, the U.S. banking agencies and the FCA have issued guidance instructing banks to cease entering into new contracts referencing U.S. dollar LIBOR no later than December 31, 2021, with certain exceptions.
As of December 31, 2021, our LIBOR-referenced contracts were primarily concentrated in derivative contracts and to a lesser extent, loans, floating rate notes, preferred shares, securitizations and mortgages. A significant majority of our derivative contracts, and a majority of our non-derivative contracts contain fallback provisions or otherwise have an expected path that will allow for the transition to an alternative reference rate upon the cessation of the applicable LIBOR rate.
While we have made substantial progress in the transition away from the IBORs, we nonetheless currently remain party to a significant number of U.S. dollar LIBOR-linked contracts. A significant majority of our U.S. dollar derivative contracts contain IBOR fallback provisions based in the first instance on SOFR due to incorporation of the International Swaps and Derivatives Association (“ISDA”) Fallbacks Supplement or through amendment by adherence to the 2020 IBOR Fallbacks Protocol. Further, to the extent that a U.S. dollar LIBOR-linked derivative or non-derivative contract is governed by New York law, New York State has enacted
legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain contracts under certain circumstances with a benchmark based on SOFR, including any spread adjustment, recommended by the Federal Reserve, the Federal Reserve Bank of New York or the Alternative Reference Rates Committee. For those U.S. dollar LIBOR-linked contracts without appropriate fallbacks and for which the New York State legislation is not expected to apply, we are actively developing appropriate transition plans in light of the planned June 30, 2023 cessation date for the remaining U.S. dollar LIBOR tenors.
Following the cessation or non-representativeness designation of non-U.S. dollar LIBOR rates as of December 31, 2021, our non-U.S. dollar LIBOR-linked contracts containing fallback provisions transitioned to alternative reference rates through the operation of the fallbacks within the contracts. For example, as of the first reset date following December 31, 2021, derivative contracts referencing non-U.S. dollar LIBOR that either incorporate the ISDA IBOR Fallbacks Supplement or that were amended through adherence to the 2020 IBOR Fallbacks Protocol, are or will be valued using the adjusted version of the applicable risk-free reference rate selected as an alternative to the IBORs by the appropriate national committee (e.g., Sterling Overnight Index Average rate in place of Sterling LIBOR and the Tokyo Overnight Average rate in place of Japanese yen LIBOR).
Of the remaining portion of non-U.S. dollar LIBOR-linked contracts that have not transitioned to alternative reference rates through the operation of fallback provisions, many of these contracts reference Sterling or Japanese yen LIBOR settings for which a synthetic rate will be published at least until the end of 2022, therefore these contracts will continue to reference synthetic LIBOR at least for the duration of 2022.
Our IBOR transition plan is overseen by a global steering committee, with senior management oversight, and we continue to execute against our Firm-wide IBOR transition plan to complete the transition to alternative reference rates, including implementing regulatory guidance to cease entering into new contracts referencing U.S. dollar LIBOR after December 31, 2021, with certain exceptions.
See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of interest rate benchmarks.
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December 2021 Form 10-K

Quantitative and Qualitative Disclosures about Risk 
Risk Management
Overview
Risk is an inherent part of our businesses and activities. We believe effective risk management is vital to the success of our business activities. Accordingly, we have an Enterprise Risk Management (“ERM”) framework to integrate the diverse roles of risk management into a holistic enterprise structure and to facilitate the incorporation of risk assessment into decision-making processes across the Firm.
We have policies and procedures in place to identify, measure, monitor, escalate, mitigate and control the principal risks involved in the activities of the Institutional Securities, Wealth Management and Investment Management business segments, as well as at the Parent Company level. The principal risks involved in our business activities include market (including non-trading risks), credit, operational, model, compliance, cybersecurity, liquidity, strategic, reputational and conduct risk. Strategic risk is integrated into our business planning, embedded in the evaluation of all principal risks and overseen by the Board.
The cornerstone of our risk management philosophy is the pursuit of risk-adjusted returns through prudent risk taking that protects our capital base and franchise. This philosophy is implemented through the ERM framework. Five key principles underlie this philosophy: integrity, comprehensiveness, independence, accountability and transparency. To help ensure the efficacy of risk management, which is an essential component of our reputation, senior
management requires thorough and frequent communication and the appropriate escalation of risk matters. The fast-paced, complex and constantly evolving nature of global financial markets requires us to maintain a risk management culture that is incisive, knowledgeable about specialized products and markets, and subject to ongoing review and enhancement.
Our risk appetite defines the aggregate level and types of risk that the Firm is willing to accept to achieve its business objectives, taking into account the interests of clients and fiduciary duties to shareholders, as well as capital and other regulatory requirements. This risk appetite is embedded in our risk culture and linked to our short-term and long-term strategic, capital and financial plans, as well as compensation programs. This risk appetite and the related Board-level risk limits and risk tolerance statements are reviewed and approved by the Risk Committee of the Board (“BRC”) and the Board on at least an annual basis.
Risk Governance Structure
Risk management at the Firm requires independent Firm-level oversight, accountability of our business divisions, and effective communication of risk matters across the Firm, to senior management and ultimately to the Board. Our risk governance structure is set forth in the following chart and also includes risk managers, committees, and groups within and across business segments and operating legal entities. The ERM framework, composed of independent but complementary entities, facilitates efficient and comprehensive supervision of our risk exposures and processes.
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RRPResolution and Recovery Planning
1.Committees include the Capital Commitment Committee, Global Large Loan Committee, Equity Underwriting Committee, Leveraged Finance Underwriting Committee and Municipal Capital Commitment Committee.
2.Committees include the Securities Risk Committee, Wealth Management Risk Committee and Investment Management Risk Committee.
3.Established in January 2022.



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Morgan Stanley Board of Directors
The Board has oversight of the ERM framework and is responsible for helping to ensure that our risks are managed in a sound manner. The Board has authorized the committees within the ERM framework to help facilitate our risk oversight responsibilities. As set forth in our Corporate Governance Policies, the Board also oversees, and receives reports on, our financial performance, strategy and business plans, as well as our practices and procedures relating to reputational and franchise risk, and culture, values and conduct.
Risk Committee of the Board
The BRC assists the Board in its oversight of the ERM framework; oversees major risk exposures of the Firm, including market, credit, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures; oversees our risk appetite statement, including risk limits and tolerances; reviews capital, liquidity and funding strategy and related guidelines and policies; reviews the contingency funding plan and capital planning process; oversees our significant risk management and risk assessment guidelines and policies; oversees the performance of the Chief Risk Officer; reviews reports from our Strategic Transactions Committee, CCAR Committee and RRP Committee; reviews new product risk, emerging risks, climate risk and regulatory matters; and reviews the Internal Audit Department reports on the assessment of the risk management, liquidity and capital functions. The BRC reports to the Board on a regular basis and coordinates with other Board committees with respect to oversight of risk management and risk assessment guidelines.
Audit Committee of the Board
The Audit Committee of the Board (“BAC”) oversees the integrity of our financial statements, compliance with legal and regulatory requirements, and system of internal controls; oversees risk management and risk assessment guidelines in coordination with the Board, the BRC, and the Operations and Technology Committee of the Board (“BOTC”); reviews the major legal, compliance and conduct risk exposures of the Firm and the steps management has taken to monitor and control such exposures; selects, determines the fees, evaluates and, when appropriate, replaces the independent auditor; oversees the qualifications, independence and performance of our independent auditor and pre-approves audit and permitted non-audit services; oversees the performance of our Chief Audit Officer; and, after review, recommends to the Board the acceptance and inclusion of the annual audited financial statements in the Firm’s annual report on Form 10-K. The BAC reports to the Board on a regular basis.
Operations and Technology Committee of the Board
The BOTC oversees our operations and technology strategy and significant investments in support of such strategy;
oversees operations, technology and operational risk, including information security, fraud, vendor, data protection, privacy, business continuity and resilience, cybersecurity risks and the steps management has taken to monitor and control such exposures; receives reports regarding business continuity and resilience; and reviews risk management and risk assessment guidelines in coordination with the Board, the BRC and the BAC, and policies regarding operations, technology and operational risk. The BOTC reports to the Board on a regular basis.
Firm Risk Committee
The Board has also authorized the Firm Risk Committee (“FRC”), a management committee appointed and co-chaired by the Chief Executive Officer and Chief Risk Officer, which includes the most senior officers of the Firm from the business, independent risk functions and control groups, to help oversee the ERM framework. The FRC’s responsibilities include: oversight of our risk management principles, procedures and limits; the monitoring of capital levels and material market, credit, model, operational, liquidity, legal, compliance and reputational risk matters, and other risks, as appropriate; and the steps management has taken to monitor and manage such risks. The FRC also establishes and communicates risk tolerance, including aggregate Firm limits and tolerances, as appropriate. The Governance Process Review Subcommittee of the FRC oversees governance and process issues on behalf of the FRC. The FRC reports to the Board, the BAC, the BOTC and the BRC through the Chief Risk Officer, Chief Financial Officer and Chief Legal Officer.
Functional Risk and Control Committees
Functional risk and control committees and other committees within the ERM framework facilitate efficient and comprehensive supervision of our risk exposures and processes.
Each business segment has a risk committee that is responsible for helping to ensure that the business segment, as applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement, monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework established by the FRC; and reviews, on a periodic basis, our aggregate risk exposures, risk exception experience, and the efficacy of our risk identification, measurement, monitoring and management policies and procedures, and related controls.
Chief Risk Officer
The Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model, operational and liquidity risks; and reviews results of risk management processes with the
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Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Chief Financial Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.
Independent Risk Management Functions
The risk management functions (Market Risk, Credit Risk, Operational Risk, Model Risk and Liquidity Risk Management departments) are independent of our business units and report to the Chief Risk Officer. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” herein.
Support and Control Groups
Our support and control groups include, but are not limited to, the Legal and Compliance Division, the Finance Division, Technology Division, Operations Division, the Human Resources Department, Corporate Services, Firm Resilience, and Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance, conduct and regulatory risk; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.
Internal Audit Department
The Internal Audit Department (“IAD”) independently assesses the Firm’s risk management processes and controls using methodology developed from professional auditing standards and regulatory guidance. IAD undertakes these responsibilities through periodic reviews of our business activities, operations and systems, as well as special investigations and retrospective reviews that may be specifically requested by the BAC or management. In addition to regular reports to the BAC, the Chief Audit Officer, who reports functionally to the BAC and administratively to the Chief Executive Officer, periodically reports to the BRC and BOTC on various matters of risks and controls.
Culture, Values and Conduct of Employees
Employees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, control functions such as Risk Management and Compliance, and Internal Audit).
The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Firm’s Corporate Governance Policies. Our Culture, Values and Conduct Committee, along with the Compliance and Conduct Risk Committee, are the senior management committees that oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of this program is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing Conduct Risk (i.e., the risk arising from misconduct by employees or contingent workers) and Conduct Risk incidents at the Firm.
The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current year compensation and/or prior year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Management committees from control functions periodically meet to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions.
The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.


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Risk Limits Framework
Risk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities.
Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits.
Risk Management Process
In subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.
Market Risk
Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest rate risk) from lending and deposit-taking activities. The Investment Management business segment primarily incurs non-trading market risk from capital investments in its funds.
Market risk also includes non-trading interest rate risk. Non-trading interest rate risk in the banking book (amounts classified for regulatory capital purposes under the banking book regime) refers to the exposure that a change in interest rates will result in prospective earnings changes for assets and liabilities in the banking book.
Sound market risk management is an integral part of our culture. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. The control groups help ensure that these risks are measured and closely monitored and are made transparent to senior management. The Market Risk Department is responsible for ensuring the transparency of material market risks, monitoring compliance with established limits and escalating risk concentrations to appropriate senior management.
To execute these responsibilities, the Market Risk Department monitors our risk against limits on aggregate risk exposures, performs a variety of risk analyses, routinely reports risk summaries, and maintains our VaR and scenario analysis systems. Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures); by measures of position size and sensitivity; and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units. The material risks identified by these processes are summarized in reports produced by the Market Risk Department that are circulated to and discussed with senior management, the FRC, the BRC and the Board.
Trading Risks
Primary Market Risk Exposures and Market Risk Management
We have exposures to a wide range of risks related to interest rates and credit spreads, equity prices, foreign exchange rates and commodity prices as well as the associated implied volatilities and spreads of the global markets in which we conduct our trading activities.
We are exposed to interest rate and credit spread risk as a result of our market-making activities and other trading in interest rate-sensitive financial instruments (i.e., risk arising from changes in the level or implied volatility of interest rates, the timing of mortgage prepayments, the shape of the yield curve and/or credit spreads). The activities from which those exposures arise and the markets in which we are active include, but are not limited to, the following: derivatives, corporate and government debt across both developed and emerging markets and asset-backed debt, including mortgage-related securities.
We are exposed to equity price and implied volatility risk as a result of making markets in equity securities and derivatives and maintaining other positions, including positions in non-public entities. Positions in non-public entities may include, but are not limited to, exposures to private equity, venture capital, private partnerships, real estate funds and other funds. Such positions are less liquid, have longer investment horizons and are more difficult to hedge than listed equities.
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We are exposed to foreign exchange rate and implied volatility risk as a result of making markets in foreign currencies and foreign currency derivatives, from maintaining foreign exchange positions and from holding non-U.S. dollar-denominated financial instruments.
We are exposed to commodity price and implied volatility risk as a result of market-making activities in commodity products related primarily to electricity, natural gas, oil and precious metals. Commodity exposures are subject to periods of high price volatility as a result of changes in supply and demand. These changes can be caused by weather conditions; physical production and transportation; or geopolitical and other events that affect the available supply and level of demand for these commodities.
We manage our trading positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Hedging activities may not always provide effective mitigation against trading losses due to differences in the terms, specific characteristics or other basis risks that may exist between the hedge instrument and the risk exposure that is being hedged.
We manage the market risk associated with our trading activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis. We manage and monitor our market risk exposures in such a way as to maintain a portfolio that we believe is well-diversified in the aggregate with respect to market risk factors and that reflects our aggregate risk tolerance as established by our senior management.
Aggregate market risk limits have been approved for the Firm across all divisions worldwide. Additional market risk limits are assigned to trading desks and, as appropriate, products and regions. Trading division risk managers, desk risk managers, traders and the Market Risk Department monitor market risk measures against limits in accordance with policies set by our senior management.
Value-at-Risk
The statistical technique known as VaR is one of the tools we use to measure, monitor and review the market risk exposures of our trading portfolios. The Market Risk Department calculates and distributes daily VaR-based risk measures to various levels of management.
We estimate VaR using a model based on a one-year equal weighted historical simulation for general market risk factors and name-specific risk in corporate equities and related derivatives, and Monte Carlo simulation for name-specific risk in bonds, loans and related derivatives. The model constructs a distribution of hypothetical daily changes in the value of trading portfolios based on historical observation of
daily changes in key market indices or other market risk factors, and information on the sensitivity of the portfolio values to these market risk factor changes.
VaR for risk management purposes (“Management VaR”) is computed at a 95% level of confidence over a one-day time horizon, which is a useful indicator of possible trading losses resulting from adverse daily market moves. The 95%/one-day VaR corresponds to the unrealized loss in portfolio value that, based on historically observed market risk factor movements, would have been exceeded with a frequency of 5%, or five times in every 100 trading days, if the portfolio were held constant for one day.
Our VaR model generally takes into account linear and non-linear exposures to equity and commodity price risk, interest rate risk, credit spread risk and foreign exchange rates. The model also takes into account linear exposures to implied volatility risks for all asset classes and non-linear exposures to implied volatility risks for equity, commodity and foreign exchange referenced products. The VaR model also captures certain implied correlation risks associated with portfolio credit derivatives, as well as certain basis risks (e.g., corporate debt and related credit derivatives).
We use VaR as one of a range of risk management tools. Among their benefits, VaR models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of varied market risks and portfolio assets. One key element of the VaR model is that it reflects risk reduction due to portfolio diversification or hedging activities. However, VaR has various limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR.
The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures. VaR is most appropriate as a risk measure for trading positions in liquid financial markets and will understate the risk associated with severe events, such as periods of extreme illiquidity. We are aware of these and other limitations and, therefore, use VaR as only one component in our risk management oversight process. This process also incorporates stress testing and scenario analyses and extensive risk monitoring, analysis and control at the trading desk, division and Firm levels.
We update our VaR model in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. We are


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committed to continuous review and enhancement of VaR methodologies and assumptions in order to capture evolving risks associated with changes in market structure and dynamics. As part of our regular process improvements, additional systematic and name-specific risk factors may be added to improve the VaR model’s ability to more accurately estimate risks to specific asset classes or industry sectors.
Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or of our ability to monitor and manage risk. There can be no assurance that our actual losses on a particular day will not exceed the VaR amounts indicated in the following tables or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses that, should they occur, may be significantly greater than the VaR amount.
VaR statistics are not readily comparable across firms because of differences in the firms’ portfolios, modeling assumptions and methodologies. These differences can result in materially different VaR estimates across firms for similar portfolios. The impact of such differences varies depending on the factor history assumptions, the frequency with which the factor history is updated and the confidence level. As a result, VaR statistics are more useful when interpreted as indicators of trends in a firm’s risk profile rather than as an absolute measure of risk to be compared across firms.
Our regulators have approved the same VaR model we use for risk management purposes for use in regulatory calculations.
The portfolio of positions used for Management VaR differs from that used for Regulatory VaR. Management VaR contains certain positions that are excluded from Regulatory VaR.
95%/One-Day Management VaR 
 2021
$ in millionsPeriod
End
Average
High1
Low1
Interest rate and credit spread$21 $29 $41 $21 
Equity price20 26 170 19 
Foreign exchange rate6 9 24 4 
Commodity price16 14 27 8 
Less: Diversification benefit2
(31)(32)N/AN/A
Primary Risk Categories$32 $46 $171 $32 
Credit Portfolio12 15 31 11 
Less: Diversification benefit2
(12)(11)N/AN/A
Total Management VaR$32 $50 $175 $32 
 2020
$ in millionsPeriod
End
Average
High1
Low1
Interest rate and credit spread$35 $37 $62 $24 
Equity price23 23 39 12 
Foreign exchange rate14 10 19 
Commodity price15 17 29 10 
Less: Diversification benefit2
(32)(43)N/AN/A
Primary Risk Categories$55 $44 $62 $28 
Credit Portfolio31 22 31 12 
Less: Diversification benefit2
(10)(12)N/AN/A
Total Management VaR$76 $54 $78 $32 
1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure.
2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component.
Average Total Management VaR and Management VaR for the Primary Risk Categories decreased in 2021 from 2020 primarily due to reduced exposures in Interest rate and credit spreads, and the significant volatility in 2020 no longer being included in the one-year VaR window. During 2021, Management VaR peaked at $175 million for one day driven by increased equity exposure resulting from the aforementioned credit event for a single client.
Distribution of VaR Statistics and Net Revenues
We evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There were 14 trading loss days in 2021, one of which exceeded 95% Total Management VaR.
Daily 95%/One-Day Total Management VaR for 2021
($ in millions)
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Daily Net Trading Revenues for 2021
($ in millions)
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The previous histogram shows the distribution of daily net trading revenues for 2021. Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.
Non-Trading Risks
We believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.
Credit Spread Risk Sensitivity1
$ in millionsAt
December 31,
2021
At
December 31,
2020
Derivatives$7 $
Borrowings carried at fair value48 50 
1.Amounts represent the potential gain for each 1 bps widening of our credit spread.
U.S. Bank Subsidiaries’ Net Interest Income Sensitivity Analysis
$ in millionsAt
December 31,
2021
At
December 31,
2020
Basis point change
+100$1,267 $1,540 
-100(893)(654)
The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our U.S. Bank Subsidiaries. These shocks are applied to our 12-month forecast for our U.S. Bank Subsidiaries, which
incorporates market expectations of interest rates and our forecasted business activity.
We do not manage to any single rate scenario but rather manage net interest income in our U.S. Bank Subsidiaries to optimize across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates, and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. The change in sensitivity to interest rates between December 31, 2021 and December 31, 2020 is primarily driven by the effects of changes in the mix of our assets and liabilities and changes in market rates.
Investments Sensitivity, Including Related Performance Fees
 Loss from 10% Decline
$ in millionsAt
December 31,
2021
At
December 31,
2020
Investments related to Investment
Management activities
$407 $386 
Other investments:
MUMSS167 184 
Other Firm investments331 210 
We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable. The change in investments sensitivity related to Other Firm investments between December 31, 2021 and December 31, 2020 was primarily driven by new investments in Community Reinvestment Act affordable housing and increases in investments in the Equity business.
Asset Management Revenue Sensitivity
Certain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. The overall level of these revenues depends on multiple factors that include, but are not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues do not correlate completely with changes in the related markets.


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Credit Risk
Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments.
We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following:
extending credit to clients through loans and lending commitments;
entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;
providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the repayment amount;
posting margin and/or collateral to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties;
placing funds on deposit at other financial institutions to support our clearing and settlement obligations; and
investing or trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.
We incur credit risk in our Wealth Management business segment, primarily through lending to individuals and entities, including, but not limited to, the following:
margin loans collateralized by securities;
securities-based lending and other forms of secured loans, including tailored lending to high and ultra-high net worth clients;
single-family residential mortgage loans in conforming, non-conforming or HELOC form primarily to existing Wealth Management clients; and
employee loans granted primarily to recruit certain Wealth Management representatives.
Monitoring and Control
The Credit Risk Management Department (“CRM”) establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels. The CRM approves extensions of credit, evaluates the creditworthiness of the counterparties and borrowers on a regular basis, and helps ensure that credit exposure is actively monitored and managed. The evaluation of counterparties and borrowers includes an assessment of the probability that an obligor will default on its financial obligations and any losses that may occur when an obligor defaults. In addition, credit risk exposure is actively managed by credit professionals and committees within the CRM and through various risk committees, whose membership includes individuals from the CRM. A comprehensive and global Credit Limits Framework
is utilized to manage credit risk levels across the Firm. The Credit Limits Framework is calibrated within our risk tolerance and includes single-name limits and portfolio concentration limits by country, industry and product type.
The CRM helps ensure timely and transparent communication of material credit risks, compliance with established limits and escalation of risk concentrations to appropriate senior management. The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and trading activities. The stress tests shock market factors (e.g., interest rates, commodity prices, credit spreads), risk parameters (e.g., probability of default and loss given default), recovery rates and expected losses in order to assess the impact of stresses on exposures, profit and loss, and our capital position. Stress tests are conducted in accordance with our established policies and procedures.
Credit Evaluation
The evaluation of corporate and institutional counterparties and borrowers includes assigning credit ratings, which reflect an assessment of an obligor’s probability of default and loss given default. Credit evaluations typically involve the assessment of financial statements; leverage; liquidity; capital strength; asset composition and quality; market capitalization; access to capital markets; adequacy of collateral, if applicable; and, in the case of certain loans, cash flow projections and debt service requirements. The CRM also evaluates strategy, market position, industry dynamics, management and other factors such as country risks and legal and contingent risks that could affect the obligor’s risk profile. Additionally, the CRM evaluates the relative position of our exposure in the borrower’s capital structure and relative recovery prospects, as well as other structural elements of the particular transaction.
The evaluation of consumer borrowers is tailored to the specific type of lending. Securities-based loans are evaluated based on factors that include, but are not limited to, the amount of the loan and the amount, quality, diversification, price volatility and liquidity of the collateral. The underwriting of residential real estate loans includes, but is not limited to, review of the obligor’s debt-to-income ratio, net worth, liquidity, collateral, LTV ratio and industry standard credit scoring models (e.g., FICO scores). Subsequent credit monitoring for individual loans is performed at the portfolio level, and collateral values are monitored on an ongoing basis.
Credit risk metrics assigned to our borrowers during the evaluation process are incorporated into the CRM maintenance of the allowance for credit losses. Such allowance serves as a reserve for probable inherent losses, as well as probable losses related to loans identified as impaired. For more information on the allowance for credit losses, see Notes 2 and 10 to the financial statements.
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Risk Mitigation
We may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets.
In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 9 to the financial statements for additional information about our collateralized transactions.
Loans and Lending Commitments
 At December 31, 2021
$ in millionsHFIHFSFVOTotal
Institutional Securities:
Corporate
$5,567 $8,107 $8 $13,682 
Secured lending facilities
31,471 3,879  35,350 
Commercial and Residential real estate
7,227 1,777 4,774 13,778 
Securities-based lending and Other
1,292 45 7,710 9,047 
Total Institutional Securities45,557 13,808 12,492 71,857 
Wealth Management:
Residential real estate
44,251 7  44,258 
Securities-based lending and Other
85,143 17  85,160 
Total Wealth Management129,394 24  129,418 
Total Investment Management1
5  135 140 
Total loans2
174,956 13,832 12,627 201,415 
ACL(654)(654)
Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 
Lending commitments3
$134,934 
Total exposure



$335,695 
At December 31, 2020
$ in millionsHFIHFSFVOTotal
Institutional Securities:
Corporate
$6,046 $8,580 $13 $14,639 
Secured lending facilities
25,727 3,296 648 29,671 
Commercial and Residential real estate
7,346 859 3,061 11,266 
Securities-based lending and Other
1,279 55 7,001 8,335 
Total Institutional Securities40,398 12,790 10,723 63,911 
Wealth Management:
Residential real estate
35,268 11 — 35,279 
Securities-based lending and Other
62,947 — — 62,947 
Total Wealth Management98,215 11 — 98,226 
Total Investment
Management1
12 425 443 
Total loans2
138,619 12,813 11,148 162,580 
ACL(835)(835)
Total loans, net of ACL$137,784 $12,813 $11,148 $161,745 
Lending commitments3
$127,855 
Total exposure



$289,600 
Total exposure—consists of Total loans, net of ACL, and Lending commitments
1.Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.
2.FVO also includes the fair value of certain unfunded lending commitments.
3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.
We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements.
In 2021, total loans and lending commitments increased by approximately $46 billion, primarily due to growth in Securities-based and Residential real estate loans within the Wealth Management business segment, as well as increases in Secured lending facilities and Corporate lending commitments within the Institutional Securities business segment.
See Notes 5, 6, 10 and 15 to the financial statements for further information.


December 2021 Form 10-K
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Risk Disclosures
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Allowance for Credit Losses—Loans and Lending Commitments
$ in millions
ACL—Loans$835 
ACL—Lending commitments396 
Total at December 31, 20201,231 
Gross charge-offs(126)
Provision for credit losses4 
Other(11)
Total at December 31, 2021$1,098 
ACL—Loans$654 
ACL—Lending commitments444 
Provision for Credit Losses by Business Segment
Year Ended
December 31, 2021
$ in millionsISWMTotal
Loans$(57)$9 $(48)
Lending commitments50 2 52 
Total$(7)$11 $4 
Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered.

The aggregate allowance for credit losses for loans and lending commitments decreased in 2021, primarily reflecting charge-offs. The provision for credit losses on loans and lending commitments was flat, primarily as a result of portfolio growth, offset by the impact of changes in loan quality mix.
The base scenario used in our ACL models as of December 31, 2021 was generated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models, and assumes continued growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product.
Forecasted U.S. GDP Growth Rates in Base Scenario
4Q 20224Q 2023
Year-over-year growth rate3.2 %2.0 %
See Notes 10 to the financial statements for further information. See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL.
Status of Loans Held for Investment
At December 31, 2021At December 31, 2020
ISWMISWM
Accrual98.7 %99.8 %99.2 %99.7 %
Nonaccrual1
1.3 %0.2 %0.8 %0.3 %
1.These loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt.
Net Charge-off Ratios for Loans Held for Investment
$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal
2021
Net charge-off ratio1
0.44 %0.24 %0.38 % %0.01 %0.08 %
Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 
2020
Net charge-off ratio1
0.41 %— %0.87 %— %(0.01)%0.07 %
Average loans$8,633 $25,281 $7,326 $32,361 $56,018 $129,619 
2019
Net charge-off ratio1
— %— %— %0.01 %— %— %
Average loans$5,005 $19,446 $7,072 $28,568 $46,966 $107,057 
1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL.
Institutional Securities Loans and Lending Commitments1 
 At December 31, 2021
 Contractual Years to Maturity 
$ in millions< 11-55-15>15Total
Loans
AA$ $35 $38 $ $73 
A890 1,089 675  2,654 
BBB5,335 8,944 563  14,842 
BB10,734 18,349 814 18 29,915 
Other NIG4,656 10,475 3,439 160 18,730 
Unrated2
171 665 511 3,753 5,100 
Total loans21,786 39,557 6,040 3,931 71,314 
Lending commitments
AAA 50   50 
AA3,283 2,690   5,973 
A5,255 17,646 407 303 23,611 
BBB6,703 36,096 766  43,565 
BB2,859 19,698 3,122  25,679 
Other NIG992 13,420 6,180 55 20,647 
Unrated2
672 40 3  715 
Total lending
commitments
19,764 89,640 10,478 358 120,240 
Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 
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At December 31, 20203
 Contractual Years to Maturity
$ in millions< 11-55-15>15Total
Loans
AA$279 $10 $— $— $289 
A759 834 391 — 1,984 
BBB5,043 8,472 469 — 13,984 
BB10,963 13,073 503 — 24,539 
Other NIG5,214 10,958 2,830 439 19,441 
Unrated2
141 472 1,246 1,076 2,935 
Total loans22,399 33,819 5,439 1,515 63,172 
Lending commitments
AAA— 50 — — 50 
AA4,047 3,173 — — 7,220 
A6,025 18,167 150 275 24,617 
BBB6,783 33,282 412 48 40,525 
BB4,357 16,916 3,103 — 24,376 
Other NIG664 13,352 2,614 38 16,668 
Unrated2
— — — 
Total lending
commitments
21,880 84,940 6,279 361 113,460 
Total exposure$44,279 $118,759 $11,718 $1,876 $176,632 
NIG–Non-investment grade
1.Counterparty credit ratings are internally determined by the CRM.
2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.
3.Certain prior period amounts have been reclassified to conform to the current presentation.
Institutional Securities Loans and Lending Commitments by Industry
$ in millionsAt
December 31,
2021
At
December 31,
2020
Financials$52,066 $44,358 
Real estate31,560 25,484 
Industrials17,446 15,861 
Information technology13,471 11,358 
Communications services12,645 12,600 
Healthcare12,618 12,650 
Consumer discretionary11,628 11,177 
Utilities10,310 9,504 
Energy8,544 10,064 
Consumer staples7,855 9,088 
Materials6,394 6,084 
Insurance4,954 3,889 
Other2,063 4,515 
Total exposure$191,554 $176,632 
Sectors Currently in Focus due to COVID-19

The economic effects of COVID-19 have impacted borrowers in many sectors and industries, though certain sectors remain more sensitive to the current economic environment and are continuing to receive heightened focus. The sectors currently in focus are retail, air travel, lodging and leisure, upstream energy, and healthcare services and systems. As of December 31, 2021, exposures to these sectors are included across the Industrials, Financials, Real estate, Consumer discretionary, Energy and Healthcare industries in the previous table, and in aggregate represent less than 10% of total Institutional
Securities business segment lending exposure. Further, as of December 31, 2021, over 90% of these exposures are either investment grade and/or secured by collateral. The future developments of COVID-19 and its effect on the economic environment remain uncertain; therefore, the sectors impacted may change over time. Refer to “Risk Factors” herein.
Institutional Securities Lending Activities
The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate, and Securities-based lending and Other. As of December 31, 2021, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral.
Corporate comprises relationship and event-driven loans and lending commitments, which typically consist of revolving lines of credit, term loans and bridge loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. For additional information on event-driven loans, see “Institutional Securities Event-Driven Loans and Lending Commitments” herein.
Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 16 to the financial statements for information about our securitization activities.
Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.
Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.


December 2021 Form 10-K
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Risk Disclosures
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Institutional Securities Event-Driven Loans and Lending Commitments
 At December 31, 2021
 Contractual Years to Maturity 
$ in millions<11-55-15Total
Loans, net of ACL$951 $2,088 $1,803 $4,842 
Lending commitments1,619 5,288 8,879 15,786 
Total exposure$2,570 $7,376 $10,682 $20,628 
 
At December 31, 20201
 Contractual Years to Maturity 
$ in millions<11-55-15Total
Loans, net of ACL$1,241 $1,780 $2,090 $5,111 
Lending commitments2,810 7,327 4,650 14,787 
Total exposure$4,051 $9,107 $6,740 $19,898 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
Event-driven loans and lending commitments are associated with a particular event or transaction, such as to support client merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.
Institutional Securities Loans and Lending Commitments Held for Investment
At December 31, 2021
$ in millionsLoansLending CommitmentsTotal
Corporate$5,567 $73,585 $79,152 
Secured lending facilities31,471 10,003 41,474 
Commercial real estate7,227 1,475 8,702 
Other1,292 887 2,179 
Total, before ACL$45,557 $85,950 $131,507 
ACL$(543)$(426)$(969)
At December 31, 2020
$ in millionsLoansLending CommitmentsTotal
Corporate$6,046 $69,488 $75,534 
Secured lending facilities25,727 8,312 34,039 
Commercial real estate7,346 334 7,680 
Other1,279 1,135 2,414 
Total, before ACL$40,398 $79,269 $119,667 
ACL$(739)$(391)$(1,130)
Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments
$ in millionsCorporate Secured Lending FacilitiesCommercial Real EstateOtherTotal
ACL—Loans$309 $198 $211 $21 $739 
ACL—Lending commitments323 38 11 19 391 
Total at December 31, 2020632 236 222 40 1,130 
Gross charge-offs(23)(67)(27)(3)(120)
Provision for credit losses(82)36 35 4 (7)
Other1
(6)(1)(4)(23)(34)
Total at December 31, 2021$521 $204 $226 $18 $969 
ACL—Loans$165 $163 $206 $9 $543 
ACL—Lending commitments356 41 20 9 426 
1.Other primarily reflects the allowance for credit losses associated with the Community Development Fund loans portfolio that was transferred to the Wealth Management business segment from the Institutional Securities business segment in the second quarter of 2021.
Institutional Securities Loans Held for Investment—Ratios of Allowance for Credit Losses to Balance before Allowance
At
December 31,
2021
At
December 31,
2020
Corporate3.0 %5.1 %
Secured lending facilities0.5 %0.8 %
Commercial real estate2.9 %2.9 %
Other0.7 %1.7 %
Total Institutional Securities loans1.2 %1.8 %
Wealth Management Loans and Lending Commitments
 At December 31, 2021
 Contractual Years to Maturity 
$ in millions<11-55-15>15Total
Securities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 
Residential real estate
loans
4 10 1,231 42,954 44,199 
Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 
Lending commitments11,894 2,467 51 282 14,694 
Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 
 
At December 31, 20201
 Contractual Years to Maturity 
$ in millions<11-55-15>15Total
Securities-based lending and Other loans$54,483 $6,754 $1,672 $— $62,909 
Residential real estate loans1,258 33,952 35,221 
Total loans, net of ACL$54,492 $6,756 $2,930 $33,952 $98,130 
Lending commitments11,666 2,476 244 14,395 
Total exposure$66,158 $9,232 $2,939 $34,196 $112,525 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.
Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and,
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Risk Disclosures
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pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.
Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.
Wealth Management Allowance for Credit Losses—Loans and Lending Commitments
$ in millions
ACL—Loans$96 
ACL—Lending commitments
Total at December 31, 2020101 
Gross charge-offs(6)
Provision for credit losses11 
Other1
23 
Total at December 31, 2021$129 
ACL—Loans$111 
ACL—Lending commitments18 
1.Other primarily reflects the allowance for credit losses associated with the Community Development Fund loans portfolio that was transferred to the Wealth Management business segment from the Institutional Securities business segment in the second quarter of 2021.
At December 31, 2021, more than 75% of Wealth Management residential real estate loans were to borrowers with “Exceptional” or “Very Good” FICO scores (i.e., exceeding 740). Additionally, Wealth Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary.
Customer and Other Receivables
Margin and Other Lending
$ in millionsAt
December 31,
2021
At
December 31,
2020
Institutional Securities$40,545 $51,570 
Wealth Management30,987 23,144 
Total$71,532 $74,714 
The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.
Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” herein.
Employee Loans
For information on employee loans and related ACL, see Note 10 to the financial statements.


December 2021 Form 10-K
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Risk Disclosures
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Derivatives
Fair Value of OTC Derivative Assets
 
Counterparty Credit Rating1
 
$ in millionsAAAAAABBBNIGTotal
At December 31, 2021
Less than 1 year$1,561 $11,088 $32,069 $25,680 $11,924 $82,322 
1-3 years780 4,577 16,821 15,294 6,300 43,772 
3-5 years593 4,807 6,805 8,030 3,317 23,552 
Over 5 years4,359 26,056 61,091 44,091 4,633 140,230 
Total, gross$7,293 $46,528 $116,786 $93,095 $26,174 $289,876 
Counterparty netting(3,093)(36,957)(91,490)(68,365)(11,642)(211,547)
Cash and securities
collateral
(3,539)(7,608)(20,500)(17,755)(5,762)(55,164)
Total, net$661 $1,963 $4,796 $6,975 $8,770 $23,165 
 
Counterparty Credit Rating1
 
$ in millionsAAAAAABBBNIGTotal
At December 31, 2020
Less than 1 year$1,179 $16,166 $52,164 $26,088 $12,175 $107,772 
1-3 years572 5,225 17,560 13,750 8,134 45,241 
3-5 years359 4,326 11,328 8,363 4,488 28,864 
Over 5 years4,545 32,049 84,845 63,084 13,680 198,203 
Total, gross$6,655 $57,766 $165,897 $111,285 $38,477 $380,080 
Counterparty netting(3,269)(44,306)(134,310)(84,171)(22,227)(288,283)
Cash and securities
collateral
(3,124)(10,973)(26,712)(20,708)(8,979)(70,496)
Total, net$262 $2,487 $4,875 $6,406 $7,271 $21,301 
$ in millionsAt
December 31,
2021
At
December 31,
2020
Industry
Utilities$5,918 $3,954 
Financials5,096 6,195 
Consumer Discretionary3,069 1,866 
Energy2,587 965 
Information technology1,060 1,104 
Industrials985 1,291 
Regional governments963 806 
Healthcare682 1,494 
Not-for-profit organizations531 701 
Sovereign governments386 650 
Communications services348 529 
Consumer staples324 339 
Real estate280 378 
Materials240 430 
Insurance174 518 
Other522 81 
Total$23,165 $21,301 
1.Counterparty credit ratings are determined internally by the CRM.
We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For a description of our risk mitigation strategies, see “Credit Risk—Risk Mitigation” herein.
Credit Derivatives
A credit derivative is a contract between a seller and buyer of protection against the risk of a credit event occurring on one
or more debt obligations issued by a specified reference entity. The buyer typically pays a periodic premium over the life of the contract and is protected for the period. If a credit event occurs, the seller is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events, as defined in the contract, may be one or more of the following defined events: bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation, payment moratorium and restructuring.
We trade in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. In transactions referencing a portfolio of entities or securities, protection may be limited to a tranche of exposure or a single name within the portfolio. We are an active market maker in the credit derivatives markets. As a market maker, we work to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, we use credit derivatives to manage our exposure to residential and commercial mortgage loans and corporate lending exposures. The effectiveness of our CDS protection as a hedge of our exposures may vary depending upon a number of factors, including the contractual terms of the CDS.
We actively monitor our counterparty credit risk related to credit derivatives. A majority of our counterparties are composed of banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties may include provisions related to counterparty rating downgrades, which may result in the counterparty posting additional collateral to us. As with all derivative contracts, we consider counterparty credit risk in the valuation of our positions and recognize CVAs as appropriate within Trading revenues in the income statement.
For additional credit exposure information on our credit derivative portfolio, see Note 7 to the financial statements.
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Country Risk
Country risk exposure is the risk that events in, or that affect, a foreign country (any country other than the U.S.) might adversely affect us. We actively manage country risk exposure through a comprehensive risk management framework that combines credit and market fundamentals and allows us to effectively identify, monitor and limit country risk.
Our obligor credit evaluation process may also identify indirect exposures, whereby an obligor has vulnerability or exposure to another country or jurisdiction. Examples of indirect exposures include mutual funds that invest in a single country, offshore companies whose assets reside in another country to that of the offshore jurisdiction and finance company subsidiaries of corporations. Indirect exposures identified through the credit evaluation process may result in a reclassification of country risk.
We conduct periodic stress testing that seeks to measure the impact on our credit and market exposures of shocks stemming from negative economic or political scenarios. When deemed appropriate by our risk managers, the stress test scenarios include possible contagion effects and second order risks. This analysis, and results of the stress tests, may result in the amendment of limits or exposure mitigation.
Our sovereign exposures consist of financial contracts and obligations entered into with sovereign and local governments. Our non-sovereign exposures consist of financial contracts and obligations entered into primarily with corporations and financial institutions.
Index credit derivatives are included in the following country risk exposure table. Each reference entity within an index is allocated to that reference entity’s country of risk. Index exposures are allocated to the underlying reference entities in proportion to the notional weighting of each reference entity in the index, adjusted for any fair value receivable or payable for that reference entity. Where credit risk crosses multiple jurisdictions, for example, a CDS purchased from an issuer in a specific country that references bonds issued by an entity in a different country, the fair value of the CDS is reflected in the Net Counterparty Exposure row based on the country of the CDS issuer. Further, the notional amount of the CDS adjusted for the fair value of the receivable or payable is reflected in the Net Inventory row based on the country of the underlying reference entity.
Top 10 Non-U.S. Country Exposures at December 31, 2021
$ in millionsUnited KingdomJapanGermanyFranceSpain
Sovereign
Net inventory1
$19 $5,353 $(2,507)$(688)$(126)
Net counterparty exposure2
10 78 96 8 41 
Exposure before hedges29 5,431 (2,411)(680)(85)
Hedges3
(306)(78)(287)(6) 
Net exposure$(277)$5,353 $(2,698)$(686)$(85)
Non-sovereign
Net inventory1
$462 $933 $141 $11 $111 
Net counterparty exposure2
13,922 3,742 2,762 2,913 649 
Loans3,787 451 1,617 537 2,893 
Lending commitments6,899 174 4,839 3,901 1,276 
Exposure before hedges25,070 5,300 9,359 7,362 4,929 
Hedges3
(1,755)(154)(1,454)(2,072)(739)
Net exposure$23,315 $5,146 $7,905 $5,290 $4,190 
Total net exposure$23,038 $10,499 $5,207 $4,604 $4,105 
$ in millionsBrazilIndiaCanadaKoreaChina
Sovereign
Net inventory1
$2,536 $1,055 $(256)$1,574 $(309)
Net counterparty exposure2
 5 25 236 34 
Exposure before hedges2,536 1,060 (231)1,810 (275)
Hedges3
(12)  (38)(71)
Net exposure$2,524 $1,060 $(231)$1,772 $(346)
Non-sovereign
Net inventory1
$96 $829 $355 $87 $985 
Net counterparty exposure2
254 931 1,216 718 571 
Loans285 220 184 46 473 
Lending commitments274  1,610 135 1,047 
Exposure before hedges909 1,980 3,365 986 3,076 
Hedges3
(39) (120)(13)(152)
Net exposure$870 $1,980 $3,245 $973 $2,924 
Total net exposure$3,394 $3,040 $3,014 $2,745 $2,578 
1.Net inventory represents exposure to both long and short single-name and index positions (i.e., bonds and equities at fair value and CDS based on a notional amount assuming zero recovery adjusted for the fair value of any receivable or payable).
2.Net counterparty exposure (e.g, repurchase transactions, securities lending and OTC derivatives) is net of the benefit of collateral received and also is net by counterparty when legally enforceable master netting agreements are in place. For more information, see “Additional Information—Top 10 Non-U.S. Country Exposures” herein.
3.Amounts represent net CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures. Amounts are based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable. For further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives" herein.


December 2021 Form 10-K
66

 
Risk Disclosures
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Additional Information—Top 10 Non-U.S. Country Exposures
Collateral Held against Net Counterparty Exposure1
$ in millions
At
December 31,
2021
Counterparty credit exposure
Collateral2
 
GermanySpain and Croatia$11,604 
United KingdomU.K., U.S. and France 7,590 
OtherJapan, France and U.S.17,494 
1.The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at December 31, 2021.
2.Primarily consists of cash and government obligations of the countries listed.
Operational Risk
Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyber attacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing).
We have established an operational risk framework to identify, measure, monitor and control risk across the Firm. Effective operational risk management is essential to reducing the impact of operational risk incidents and mitigating legal, regulatory and reputational risks. The framework is continually evolving to account for changes in the Firm and to respond to the changing regulatory and business environment.
We have implemented operational risk data and assessment systems to monitor and analyze internal and external operational risk events, to assess business environment and internal control factors, and to perform scenario analysis. The collected data elements are incorporated in the operational risk capital model. The model encompasses both quantitative and qualitative elements. Internal loss data and scenario analysis results are direct inputs to the capital model, while external operational incidents, business environment and internal control factors are evaluated as part of the scenario analysis process.
In addition, we employ a variety of risk processes and mitigants to manage our operational risk exposures. These include a governance framework, a comprehensive risk management program and insurance. Operational risks and associated risk exposures are assessed relative to the risk tolerance reviewed and confirmed by the Board and are prioritized accordingly.
The breadth and range of operational risk are such that the types of mitigating activities are wide-ranging. Examples of activities include: continuous enhancement of defenses against cyber attacks; use of legal agreements and contracts to transfer and/or limit operational risk exposures; due diligence;
implementation of enhanced policies and procedures; technology change management controls; exception management processing controls; and segregation of duties.
Primary responsibility for the management of operational risk is with the business segments, the control groups and the business managers therein. The business managers maintain processes and controls designed to identify, assess, manage, mitigate and report operational risk. Each of the business segments has a designated operational risk coordinator. The operational risk coordinator regularly reviews operational risk issues and reports to our senior management within each business. Each control group also has a designated operational risk coordinator and a forum for discussing operational risk matters with our senior management. Oversight of operational risk is provided by the Operational Risk Oversight Committee, legal entity risk committees, regional risk committees and senior management. In the event of a merger; joint venture; divestiture; reorganization; or creation of a new legal entity, a new product, or a business activity, operational risks are considered, and any necessary changes in processes or controls are implemented.
The Operational Risk Department (“ORD”) provides independent oversight of operational risk and assesses, measures and monitors operational risk against tolerance. The ORD works with the divisions and control groups to embed a transparent, consistent and comprehensive framework for managing operational risk within each area and across the Firm.
The ORD scope includes oversight of technology risk, cybersecurity risk, information security risk, the fraud risk management and prevention program, and third-party risk management (supplier and affiliate risk oversight and assessment), among others.
Cybersecurity
Our cybersecurity and information security policies, procedures and technologies are designed to protect our own, our client and our employee data against unauthorized disclosure, modification or misuse and are also designed to address regulatory requirements. These policies and procedures cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response and recovery planning.
Business Continuity Management and Disaster Recovery
The Firm’s business continuity and disaster recovery programs are designed to provide assurance of business continuity in the event of disruptions impacting our people, technology, facilities and third parties, and to comply with regulatory requirements. The key elements of these programs include crisis management, business continuity planning,
67
December 2021 Form 10-K

 
Risk Disclosures
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disaster recovery, testing and verification, and process improvement.
Third-Party Risk Management
In connection with our ongoing operations, we utilize the services of third-party suppliers, which we anticipate will continue and may increase in the future. These services include, for example, outsourced processing and support functions and other professional services. Our risk-based approach to managing exposure to these services includes the performance of due diligence, implementation of service level and other contractual agreements, consideration of operational risks and ongoing monitoring of third-party suppliers’ performance. We maintain and continue to enhance our third-party risk management program, which is designed to align with our risk tolerance and meet regulatory requirements. The program includes appropriate governance, policies, procedures and enabling technology. The third-party risk management program includes the adoption of appropriate risk management controls and practices throughout the third-party management life cycle to manage risk of service failure, risk of data loss and reputational risk, among others.
Model Risk
Model risk refers to the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to financial loss, poor business and strategic decision making or damage to our reputation. The risk inherent in a model is a function of the materiality, complexity and uncertainty around inputs and assumptions.
Model risk is generated from the use of models impacting financial statements, regulatory filings, capital adequacy assessments and the formulation of strategy.
Sound model risk management is an integral part of our Risk Management Framework. The Model Risk Management Department (“MRM”) is a distinct department in Risk Management responsible for the oversight of model risk.
The MRM establishes a model risk tolerance in line with our risk appetite. The tolerance is based on an assessment of the materiality of the risk of financial loss or reputational damage due to errors in design, implementation and/or inappropriate use of models. The tolerance is monitored through model-specific and aggregate business-level assessments, which are based upon qualitative and quantitative factors.
A guiding principle for managing model risk is the “effective challenge” of models. The effective challenge of models is defined as critical analysis by objective, informed parties who can identify model limitations and assumptions and drive appropriate changes. The MRM provides effective challenge of models, independently validates and approves models for use, annually recertifies models, identifies and tracks remediation plans for model limitations and reports on model risk metrics. The department also oversees the development
of controls to support a complete and accurate Firmwide model inventory.
Liquidity Risk
Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern. Liquidity risk also encompasses the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. Generally, we incur liquidity and funding risk as a result of our trading, lending, investing and client facilitation activities.
Our Liquidity Risk Management Framework is critical to helping ensure that we maintain sufficient liquidity reserves and durable funding sources to meet our daily obligations and to withstand unanticipated stress events. The Liquidity Risk Department is a distinct area in Risk Management responsible for the oversight and monitoring of liquidity risk. The Liquidity Risk Department ensures transparency of material liquidity and funding risks, compliance with established risk limits and escalation of risk concentrations to appropriate senior management.
To execute these responsibilities, the Liquidity Risk Department establishes limits in line with our risk appetite, identifies and analyzes emerging liquidity and funding risks to ensure such risks are appropriately mitigated, monitors and reports risk exposures against metrics and limits, and reviews the methodologies and assumptions underpinning our Liquidity Stress Tests to ensure sufficient liquidity and funding under a range of adverse scenarios.
The Treasury Department and applicable business units have primary responsibility for evaluating, monitoring and controlling the liquidity and funding risks arising from our business activities and for maintaining processes and controls to manage the key risks inherent in their respective areas. The Liquidity Risk Department coordinates with the Treasury Department and these business units to help ensure a consistent and comprehensive framework for managing liquidity and funding risk across the Firm. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.


December 2021 Form 10-K
68

 
Risk Disclosures
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Legal and Compliance Risk
Legal and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation that we may suffer as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing, and anti-corruption rules and regulations. We are generally subject to extensive regulation in the different jurisdictions in which we conduct our business (see also “Business—Supervision and Regulation” and “Risk Factors”).
We have established procedures based on legal and regulatory requirements on a worldwide basis that are designed to facilitate compliance with applicable statutory and regulatory requirements and to require that our policies relating to business conduct, ethics and practices are followed globally. In addition, we have established procedures to mitigate the risk that a counterparty’s performance obligations will be unenforceable, including consideration of counterparty legal authority and capacity, adequacy of legal documentation, the permissibility of a transaction under applicable law and whether applicable bankruptcy or insolvency laws limit or alter contractual remedies. The heightened legal and regulatory focus on the financial services and banking industries globally presents a continuing business challenge for us.
69
December 2021 Form 10-K

Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Morgan Stanley:
Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Morgan Stanley and subsidiaries (the “Firm”) as of December 31, 2021 and 2020, the related consolidated income statements, comprehensive income statements, cash flow statements and statements of changes in total equity for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Firm as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Firm’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Firm’s internal control over financial reporting.
Basis for Opinion

These financial statements are the responsibility of the Firm’s management. Our responsibility is to express an opinion on the Firm’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Level 3 Financial Assets and Liabilities Carried at Fair Value on a Recurring BasisRefer to Note 5 to the financial statements
Critical Audit Matter Description
The Firm’s trading and financing activities result in the Firm carrying material financial instruments having limited price transparency. These financial instruments can span a broad array of product types and generally include derivative, security, loan, and borrowing positions. As described in Note 5, these Level 3 financial instruments approximate $11.9 billion and $6.2 billion, respectively, of financial assets and liabilities carried at fair value on a recurring basis at December 31, 2021. Unlike financial instruments whose inputs are readily observable and, therefore, more easily independently corroborated, the valuation of financial instruments classified as Level 3 is inherently subjective and often involves the use of unobservable inputs and proprietary valuation models whose underlying algorithms and valuation methodologies are complex.

We identified the valuation of Level 3 financial assets and liabilities carried at fair value on a recurring basis as a critical audit matter given the Firm uses complex valuation models and/or model inputs that are not observable in the marketplace to determine the respective fair values. Performing our audit procedures to evaluate the appropriateness of these models and inputs involved a high degree of auditor judgment, professionals with specialized skills and knowledge, and an increased extent of testing.
How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of Level 3 financial assets and liabilities carried at fair value on a recurring basis included the following, among others:
We tested the design and operating effectiveness of the Firm’s internal controls that address fair value estimates, including model review and price verification. The Firm maintains these internal controls to assess the appropriateness of its valuation methodologies and the relevant inputs and assumptions used to determine fair value estimates.


December 2021 Form 10-K
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We independently evaluated the appropriateness of management’s significant valuation methodologies, including the input assumptions, considering the expected assumptions of other market participants and external data when available.
We developed independent fair value estimates for selected Level 3 financial instruments, using externally sourced inputs and independent valuation models, and used such estimates to further evaluate management’s fair value estimates. For certain of our selected Level 3 financial instruments, this included a comparison to the Firm’s fair value estimates for similar transactions and an evaluation of the Firm’s assumptions inclusive of the inputs, as applicable.
We tested the revenues arising from the trade date fair value estimates for selected structured transactions classified as Level 3 financial instruments. For certain of our selected transactions, we developed independent fair value estimates to test the valuation inputs and assumptions used by the Firm and evaluated whether these methods were consistent with relevant Firm valuation policies.
We assessed the consistency by which management has applied significant and unobservable valuation assumptions used in developing fair value estimates.
We performed a retrospective assessment of management’s fair value estimates for certain of our selected Level 3 financial instruments, for which there were events or transactions occurring after the valuation date. We did so by comparing management’s estimates to the relevant evidence provided by such events or transactions, as applicable.
Intangible AssetsValuation of Customer Relationship and Indefinite Lived Management Contract Intangible Assets for the Eaton Vance AcquisitionRefer to Note 3 to the financial statements
Critical Audit Matter Description
On March 1, 2021, the Firm completed the acquisition of Eaton Vance for approximately $8.7 billion. This business combination was recognized using the acquisition method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values, including identified intangibles of approximately $4 billion. The intangibles included customer relationships of $1.5 billion and indefinite lived management contracts of $2.1 billion. Management, with the assistance of a valuation specialist, estimated the fair value of the intangible assets by discounting the forecasted future cash flows. The determination of fair value of the identified intangible assets involves significant estimates and assumptions related to forecasted future cash flows including revenue growth rates and the selection of the discount rates.
We identified the valuation of customer relationship and indefinite lived management contract intangible assets as a critical audit matter because the fair value determination requires management to make significant estimates and assumptions in determining the forecasted future cash flows including revenue growth rates and the selection of the respective discount rates. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the involvement of our valuation specialists.

How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of customer relationship and indefinite lived management contract intangible assets acquired as part of the Eaton Vance acquisition included the following, among others:
We performed sensitivity analyses to evaluate the impact of changes in assumptions on the valuation of the customer relationship and indefinite lived management contract intangible assets.
We tested the operating effectiveness of internal controls over the valuation methodology used, the determination of forecasted future cash flows, assumptions relating to revenue growth and the selection of the discount rates.
We assessed the knowledge, skill, ability and objectivity of management’s valuation specialist and evaluated the work performed.
We evaluated the appropriateness of the valuation methodology used and the reasonableness of the forecasted future cash flows for the customer relationship and indefinite lived management contract intangible assets, specifically the assumptions relating to the revenue growth rates. Further, we evaluated whether the assumptions used were reasonable considering external market and industry data as well as the past performance of Eaton Vance.
We tested the source information underlying the determination of the revenue growth and discount rates and also tested the mathematical accuracy of the calculations.
We developed a range of independent estimates of discount rates for the customer relationship and indefinite lived management contract intangible assets and compared those to the discount rates utilized by management.

/s/ Deloitte & Touche LLP 
New York, New York
February 24, 2022

We have served as the Firm’s auditor since 1997.
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December 2021 Form 10-K

 
Consolidated Income Statement
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in millions, except per share data202120202019
Revenues
Investment banking$10,994 $7,674 $6,163 
Trading12,810 13,983 11,274 
Investments1,376 986 1,540 
Commissions and fees5,521 4,851 3,919 
Asset management19,967 14,272 13,083 
Other1,042 678 865 
Total non-interest revenues51,710 42,444 36,844 
Interest income9,411 10,162 17,098 
Interest expense1,366 3,849 12,404 
Net interest8,045 6,313 4,694 
Net revenues59,755 48,757 41,538 
Provision for credit losses4 761 161 
Non-interest expenses
Compensation and benefits24,628 20,854 18,837 
Brokerage, clearing and exchange fees3,341 2,929 2,493 
Information processing and communications3,119 2,465 2,194 
Professional services2,933 2,205 2,137 
Occupancy and equipment1,725 1,559 1,428 
Marketing and business development643 434 660 
Other3,694 3,132 2,327 
Total non-interest expenses40,083 33,578 30,076 
Income before provision for income taxes19,668 14,418 11,301 
Provision for income taxes4,548 3,239 2,064 
Net income$15,120 $11,179 $9,237 
Net income applicable to noncontrolling interests86 183 195 
Net income applicable to Morgan Stanley$15,034 $10,996 $9,042 
Preferred stock dividends 468 496 530 
Earnings applicable to Morgan Stanley common shareholders$14,566 $10,500 $8,512 
Earnings per common share
Basic$8.16 $6.55 $5.26 
Diluted8.03 6.46 5.19 
Average common shares outstanding
Basic1,785 1,603 1,617 
Diluted1,814 1,624 1,640 

Consolidated Comprehensive Income Statement
$ in millions202120202019
Net income$15,120 $11,179 $9,237 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(331)170 
Change in net unrealized gains (losses) on available-for-sale securities(1,542)1,580 1,137 
Pension and other(53)146 (66)
Change in net debt valuation adjustment696 (1,028)(1,639)
Total other comprehensive income (loss)$(1,230)$868 $(565)
Comprehensive income$13,890 $12,047 $8,672 
Net income applicable to noncontrolling interests86 183 195 
Other comprehensive income (loss) applicable to noncontrolling interests(90)42 (69)
Comprehensive income applicable to Morgan Stanley$13,894 $11,822 $8,546 

December 2021 Form 10-K
72
See Notes to Consolidated Financial Statements

 
Consolidated Balance Sheet
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$ in millions, except share data
At
December 31, 2021
At
December 31, 2020
Assets
Cash and cash equivalents$127,725 $105,654 
Trading assets at fair value ($104,186 and $132,578 were pledged to various parties)
294,869 312,738 
Investment securities (includes $102,830 and $110,383 at fair value)
182,998 182,154 
Securities purchased under agreements to resell (includes $7 and $15 at fair value)
119,999 116,234 
Securities borrowed129,713 112,391 
Customer and other receivables96,018 97,737 
Loans:
Held for investment (net of allowance for credit losses of $654 and $835)
174,302 137,784 
Held for sale13,832 12,813 
Goodwill16,833 11,635 
Intangible assets (net of accumulated amortization of $3,819 and $3,265)
8,360 4,980 
Other assets23,491 21,742 
Total assets$1,188,140 $1,115,862 
Liabilities
Deposits (includes $1,940 and $3,521 at fair value)
$347,574 $310,782 
Trading liabilities at fair value158,328 157,631 
Securities sold under agreements to repurchase (includes $791 and $1,115 at fair value)
62,188 50,587 
Securities loaned12,299 7,731 
Other secured financings (includes $5,133 and $11,701 at fair value)
10,041 15,863 
Customer and other payables228,685 227,437 
Other liabilities and accrued expenses29,300 25,603 
Borrowings (includes $76,340 and $73,701 at fair value)
233,127 217,079 
Total liabilities1,081,542 1,012,713 
Commitments and contingent liabilities (see Note 15)
Equity
Morgan Stanley shareholders’ equity:
Preferred stock7,750 9,250 
Common stock, $0.01 par value:
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,772,226,530 and 1,809,624,144
20 20 
Additional paid-in capital28,841 25,546 
Retained earnings89,432 78,694 
Employee stock trusts3,955 3,043 
Accumulated other comprehensive income (loss)(3,102)(1,962)
Common stock held in treasury at cost, $0.01 par value (266,667,449 and 229,269,835 shares)
(17,500)(9,767)
Common stock issued to employee stock trusts(3,955)(3,043)
Total Morgan Stanley shareholders’ equity105,441 101,781 
Noncontrolling interests1,157 1,368 
Total equity106,598 103,149 
Total liabilities and equity$1,188,140 $1,115,862 

See Notes to Consolidated Financial Statements
73
December 2021 Form 10-K

 
Consolidated Statement of Changes in Total Equity
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$ in millions202120202019
Preferred Stock
Beginning balance$9,250 $8,520 $8,520 
Issuance of preferred stock1,300 730 500 
Redemption of preferred stock(2,800)— (500)
Ending balance7,750 9,250 8,520 
Common Stock
Beginning and ending balance20 20 20 
Additional Paid-in Capital
Beginning balance25,546 23,935 23,794 
Share-based award activity1,117 518 131 
Issuance of preferred stock(25)— (3)
Issuance of common stock for the acquisition of Eaton Vance2,185 — — 
Issuance of common stock for the acquisition of E*TRADE 1,093 — 
Other net increases (decreases)18 — 13 
Ending balance28,841 25,546 23,935 
Retained Earnings
Beginning balance78,694 70,589 64,175 
Cumulative adjustment related to the adoption of the financial instruments-credit losses accounting update1
 (100)— 
Cumulative adjustment related to the adoption of the leases accounting update — 63 
Net income applicable to Morgan Stanley15,034 10,996 9,042 
Preferred stock dividends2
(468)(496)(524)
Common stock dividends2
(3,818)(2,295)(2,161)
Other net increases (decreases)(10)— (6)
Ending balance89,432 78,694 70,589 
Employee Stock Trusts
Beginning balance3,043 2,918 2,836 
Share-based award activity912 125 82 
Ending balance3,955 3,043 2,918 
Accumulated Other Comprehensive Income (Loss)
Beginning balance(1,962)(2,788)(2,292)
Net change in Accumulated other comprehensive income (loss)(1,140)826 (496)
Ending balance(3,102)(1,962)(2,788)
Common Stock Held in Treasury at Cost
Beginning balance(9,767)(18,727)(13,971)
Share-based award activity1,210 932 1,198 
Repurchases of common stock and employee tax withholdings(12,075)(1,890)(5,954)
Issuance of common stock for the acquisition of Eaton Vance3,132 — — 
Issuance of common stock for the acquisition of E*TRADE 9,918 — 
Ending balance(17,500)(9,767)(18,727)
Common Stock Issued to Employee Stock Trusts
Beginning balance(3,043)(2,918)(2,836)
Share-based award activity(912)(125)(82)
Ending balance(3,955)(3,043)(2,918)
Noncontrolling Interests
Beginning balance1,368 1,148 1,160 
Net income applicable to noncontrolling interests86 183 195 
Net change in Accumulated other comprehensive income (loss) applicable to noncontrolling interests(90)42 (69)
Other net increases (decreases)(207)(5)(138)
Ending balance1,157 1,368 1,148 
Total Equity$106,598 $103,149 $82,697 
1.See Note 2 for further information regarding cumulative adjustments for accounting changes.
2.See Note 18 for information regarding dividends per share for each class of stock.
December 2021 Form 10-K
74
See Notes to Consolidated Financial Statements

 
Consolidated Cash Flow Statement
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$ in millions202120202019
Cash flows from operating activities
Net income$15,120 $11,179 $9,237 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Deferred income taxes4 (250)165 
Stock-based compensation expense2,085 1,312 1,153 
Depreciation and amortization4,216 3,769 2,643 
Provision for credit losses4 761 161 
Other operating adjustments(147)274 (195)
Changes in assets and liabilities:
Trading assets, net of Trading liabilities9,075 15,551 (13,667)
Securities borrowed(17,322)(5,076)9,764 
Securities loaned4,568 (1,541)(3,402)
Customer and other receivables and other assets774 (29,774)233 
Customer and other payables and other liabilities7,758 10,187 19,942 
Securities purchased under agreements to resell(3,765)(28,010)10,298 
Securities sold under agreements to repurchase11,601 (3,613)4,441 
Net cash provided by (used for) operating activities33,971 (25,231)40,773 
Cash flows from investing activities
Proceeds from (payments for):
Other assets—Premises, equipment and software, net(2,308)(1,444)(1,826)
Changes in loans, net(36,106)(17,949)(17,359)
Investment securities:
Purchases(69,571)(59,777)(42,586)
Proceeds from sales20,652 13,750 17,151 
Proceeds from paydowns and maturities40,916 24,517 12,012 
Cash paid as part of the Eaton Vance acquisition, net of cash acquired(2,648)— — 
Cash acquired as part of the E*TRADE acquisition 3,807 — 
Other investing activities(832)(802)(953)
Net cash provided by (used for) investing activities(49,897)(37,898)(33,561)
Cash flows from financing activities
Net proceeds from (payments for):
Other secured financings(625)2,794 3,695 
Deposits36,897 75,417 2,513 
Issuance of preferred stock, net of issuance costs1,275 — 497 
Proceeds from issuance of Borrowings90,273 60,726 30,605 
Payments for:
Borrowings(70,124)(50,484)(40,548)
Repurchases of common stock and employee tax withholdings(12,075)(1,890)(5,954)
Cash dividends(4,171)(2,739)(2,627)
Other financing activities97 (40)(147)
Net cash provided by (used for) financing activities41,547 83,784 (11,966)
Effect of exchange rate changes on cash and cash equivalents(3,550)2,828 (271)
Net increase (decrease) in cash and cash equivalents22,071 23,483 (5,025)
Cash and cash equivalents, at beginning of period105,654 82,171 87,196 
Cash and cash equivalents, at end of period$127,725 $105,654 $82,171 
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest$1,303 $4,120 $12,511 
Income taxes, net of refunds4,231 2,591 1,908 
See Notes to Consolidated Financial Statements
75
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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1. Introduction and Basis of Presentation
The Firm
Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley” or the “Firm” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K.
A description of the clients and principal products and services of each of the Firm’s business segments is as follows:
Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.
Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; annuity and insurance products; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.
Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and
corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.
Basis of Financial Information
The financial statements are prepared in accordance with U.S. GAAP, which requires the Firm to make estimates and assumptions regarding the valuations of certain financial instruments, the valuations of goodwill and intangible assets, the outcome of legal and tax matters, deferred tax assets, ACL, and other matters that affect its financial statements and related disclosures. The Firm believes that the estimates utilized in the preparation of its financial statements are prudent and reasonable. Actual results could differ materially from these estimates.
The financial statements reflect the effects of the following reclassifications to prior period amounts. The Provision for credit losses for loans and lending commitments is presented as a separate line in the income statements. Previously, the provision for credit losses for loans was included in Other revenues, and the provision for credit losses for lending commitments was included in Other expenses. In addition, economic hedges of certain held-for-sale and held-for-investment loans, which were previously reported in Trading revenues, are reported in Other revenues.
The Notes are an integral part of the Firm’s financial statements. The Firm has evaluated subsequent events for adjustment to or disclosure in these financial statements through the date of this report and has not identified any recordable or disclosable events not otherwise reported in these financial statements or the notes thereto.
Consolidation
The financial statements include the accounts of the Firm, its wholly owned subsidiaries and other entities in which the Firm has a controlling financial interest, including certain VIEs (see Note 16). Intercompany balances and transactions have been eliminated. For consolidated subsidiaries that are not wholly owned, the third-party holdings of equity interests are referred to as Noncontrolling interests. The net income attributable to Noncontrolling interests for such subsidiaries is presented as Net income applicable to noncontrolling interests in the income statement. The portion of shareholders’ equity that is attributable to noncontrolling interests for such subsidiaries is presented as Noncontrolling interests, a component of Total equity, in the balance sheet.
For entities where the total equity investment at risk is sufficient to enable the entity to finance its activities without additional subordinated financial support and the equity holders bear the residual economic risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Firm consolidates those entities it controls either through a majority voting interest or otherwise. For VIEs (i.e., entities
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that do not meet the aforementioned criteria), the Firm consolidates those entities where it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
For investments in entities in which the Firm does not have a controlling financial interest but has significant influence over operating and financial decisions, it applies the equity method of accounting with net gains and losses recorded within Other revenues (see Note 12) unless the Firm has elected to measure the investment at fair value, in which case net gains and losses are recorded within Investments revenues (see Note 5).
Equity and partnership interests held by entities qualifying for accounting purposes as investment companies are carried at fair value.
The Firm’s significant regulated U.S. and international subsidiaries include:
Morgan Stanley & Co. LLC (“MS&Co.”),
Morgan Stanley Smith Barney LLC (“MSSB”),
Morgan Stanley Europe SE (“MSESE”),
Morgan Stanley & Co. International plc (“MSIP”),
Morgan Stanley Capital Services LLC (“MSCS”),
Morgan Stanley Capital Group Inc. (“MSCG”),
Morgan Stanley MUFG Securities Co., Ltd. (“MSMS”),
Morgan Stanley Bank, N.A. (“MSBNA”),
Morgan Stanley Private Bank, National Association (“MSPBNA”),
E*TRADE Bank (“ETB”),
E*TRADE Savings Bank (“ETSB”) and
E*TRADE Securities LLC.

On January 1, 2022, ETSB merged with and into ETB, and subsequently ETB merged with and into MSPBNA, with MSPBNA as the surviving bank.
2. Significant Accounting Policies
Revenue Recognition
Revenues are recognized when the promised goods or services are delivered to our customers in an amount that is based on the consideration the Firm expects to receive in exchange for those goods or services when such amounts are not probable of significant reversal.
Investment Banking
Revenues from investment banking activities consist of revenues earned from underwriting, primarily equity and fixed income securities and loan syndications, and advisory fees, primarily for mergers, acquisitions and restructurings.
Underwriting revenues are generally recognized on trade date if there is no uncertainty or contingency related to the amount to be paid. Underwriting costs are deferred and recognized in
the relevant non-interest expenses line items when the related underwriting revenues are recorded.
Advisory fees are recognized as advice is provided to the client, based on the estimated progress of work and when revenues are not probable of a significant reversal. Advisory costs are recognized as incurred in the relevant non-interest expenses line items, including those reimbursed.
Commissions and Fees
Commission and fee revenues generally result from transaction-based arrangements in which the client is charged a fee for the execution of transactions. Such revenues primarily arise from transactions in equity securities; services related to sales and trading activities; and sales of mutual funds, alternative funds, futures, insurance products and options, as well as revenues from order flow payments for directing customer orders to broker-dealers, exchanges, and market centers for execution. Commission and fee revenues are recognized on trade date when the performance obligation is satisfied.
Asset Management Revenues
Asset management, distribution and administration fees are generally based on related asset levels being managed, such as the AUM of a customer’s account or the net asset value of a fund. These fees are generally recognized when services are performed and the fees become known. Management fees are reduced by estimated fee waivers and expense caps, if any, provided to the customer.
Performance-based fees not in the form of carried interest are recorded when the annual performance target is met and the revenues are not probable of a significant reversal.
Sales commissions paid by the Firm in connection with the sale of certain classes of shares of its open-end mutual fund products are accounted for as deferred commission assets and amortized to expense over the expected life of the contract. The Firm periodically tests deferred commission assets for recoverability based on cash flows expected to be received in future periods. Other asset management and distribution costs are recognized as incurred in the relevant non-interest expenses line items.
Carried Interest
The Firm is entitled to receive performance-based fees in the form of carried interest when the return in certain funds exceeds specified performance targets. When the Firm earns carried interest from funds as specified performance thresholds are met, that carried interest and any related general or limited partner interest are accounted for under the equity method of accounting and measured based on the Firm’s claim on the NAV of the fund at the reporting date, taking into account the distribution terms applicable to the interest held. Such items are reflected within Investment revenues.
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See Note 23 for information regarding the net cumulative unrealized amount of performance-based fee revenues at risk of reversal. See Note 15 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received.
Other Items
Revenues from certain commodities-related contracts are recognized as the promised goods or services are delivered to the customer.
Receivables from contracts with customers are recognized in Customer and other receivables in the balance sheet when the underlying performance obligations have been satisfied and the Firm has the right per the contract to bill the customer. Contract assets are recognized in Other assets when the Firm has satisfied its performance obligations but customer payment is conditional. Contract liabilities are recognized in Other liabilities when the Firm has collected payment from a customer based on the terms of the contract but the underlying performance obligations are not yet satisfied.
For contracts with a term of less than one year, incremental costs to obtain the contract are expensed as incurred. Revenues are not discounted when payment is expected within one year.
The Firm generally presents, net within revenues, taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Firm from a customer.
Cash and Cash Equivalents
Cash and cash equivalents consist of Cash and due from banks and Interest bearing deposits with banks. Cash equivalents are highly liquid investments with remaining maturities of three months or less from the acquisition date that are readily convertible to cash and are not held for trading purposes.
Cash and cash equivalents also include Restricted cash such as cash segregated in compliance with federal or other regulations, including minimum reserve requirements set by the Federal Reserve Bank and other central banks, and the Firm’s initial margin deposited with clearing organizations.
Fair Value of Financial Instruments
Instruments within Trading assets and Trading liabilities are measured at fair value, either as required or allowed by accounting guidance. These financial instruments primarily represent the Firm’s trading and investment positions and include both cash and derivative products. In addition, securities classified as AFS are measured at fair value.
Gains and losses on instruments carried at fair value are reflected in Trading revenues, Investments revenues or Investment banking revenues in the income statement, except
for gains and losses related to Available-for-Sale (“AFS”) securities (see “AFS Investment Securities” section herein and Note 8) and derivatives accounted for as hedges, as well as economic derivative hedges associated with certain held-for-sale and held-for-investment corporate loans and lending commitments (see “Hedge Accounting” and “Other Hedges” herein and Note 7).
Interest income and interest expense are recorded within the income statement depending on the nature of the instrument and related market conventions. When interest is included as a component of the instruments’ fair value, interest is recorded within Trading revenues or Investments revenues. Otherwise, it is recorded within Interest income or Interest expense. Dividend income is recorded in Trading revenues or Investments revenues depending on the business activity.
The fair value of OTC financial instruments, including derivative contracts related to financial instruments and commodities, is presented in the accompanying balance sheet on a net-by-counterparty basis, when appropriate. Additionally, the Firm nets the fair value of cash collateral paid or received against the fair value amounts recognized for net derivative positions executed with the same counterparty under the same master netting agreement.
Fair Value Option
The Firm has elected to measure certain eligible instruments at fair value, including Securities purchased under agreements to resell, Loans and lending commitments, equity method investments and certain other assets, Deposits, Securities sold under agreements to repurchase, Other secured financings and Borrowings.
Fair Value Measurement—Definition and Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, assumptions are set to reflect those that the Firm believes market participants would use in pricing the asset or liability at the measurement date. Where the Firm manages a group of financial assets, financial liabilities, and nonfinancial items accounted for as derivatives on the basis of its net exposure to either market risks or credit risk, the Firm measures the fair value of that group of financial instruments consistently with how market participants would price the net risk exposure at the measurement date.
In determining fair value, the Firm uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that requires the most observable inputs be used when available.
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Observable inputs are inputs that market participants would use in pricing the asset or liability that were developed based on market data obtained from sources independent of the Firm. Unobservable inputs are inputs that reflect assumptions the Firm believes other market participants would use in pricing the asset or liability that are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the observability of inputs as follows, with Level 1 being the highest and Level 3 being the lowest level:
Level 1.    Valuations based on quoted prices in active markets that the Firm has the ability to access for identical assets or liabilities. Valuation adjustments, block discounts and discounts for entity-specific restrictions that would not transfer to market participants are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2.    Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3.    Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including the type of product, whether the product is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the product. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Firm in determining fair value is greatest for instruments categorized in Level 3 of the fair value hierarchy.
The Firm considers prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3 of the fair value hierarchy.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the total fair value amount is disclosed in the level appropriate for the lowest level input that is significant to the total fair value of the asset or liability.
Valuation Techniques
Many cash instruments and OTC derivative contracts have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that a party is willing to pay for an asset. Ask prices represent the lowest price that a party is
willing to accept for an asset. The Firm carries positions at the point within the bid-ask range that meets its best estimate of fair value. For offsetting positions in the same financial instrument, the same price within the bid-ask spread is used to measure both the long and short positions.
Fair value for many cash instruments and OTC derivative contracts is derived using pricing models. Pricing models take into account the contract terms, as well as multiple inputs, including, where applicable, commodity prices, equity prices, interest rate yield curves, credit curves, correlation, creditworthiness of the counterparty, creditworthiness of the Firm, option volatility and currency rates.
Where appropriate, valuation adjustments are made to account for various factors such as liquidity risk (bid-ask adjustments), credit quality, model uncertainty, and concentration risk and funding in order to arrive at fair value. Adjustments for liquidity risk adjust model-derived mid-market amounts of Level 2 and Level 3 financial instruments for the bid-mid or mid-ask spread required to properly reflect the exit price of a risk position. Bid-mid and mid-ask spreads are marked to levels observed in trade activity, broker quotes or other external third-party data. Where these spreads are unobservable for the particular position in question, spreads are derived from observable levels of similar positions.
The Firm applies credit-related valuation adjustments to its Borrowings for which the fair value option was elected and to OTC derivatives. The Firm considers the impact of changes in its own credit spreads based upon observations of the secondary bond market spreads when measuring the fair value for Borrowings.
For OTC derivatives, the impact of changes in both the Firm’s and the counterparty’s credit rating is considered when measuring fair value. In determining the expected exposure, the Firm simulates the distribution of the future exposure to a counterparty, then applies market-based default probabilities to the future exposure, leveraging external third-party CDS spread data. Where CDS spread data are unavailable for a specific counterparty, bond market spreads, CDS spread data based on the counterparty’s credit rating or CDS spread data that reference a comparable counterparty may be utilized. The Firm also considers collateral held and legally enforceable master netting agreements that mitigate its exposure to each counterparty.
Adjustments for model uncertainty are taken for positions whose underlying models are reliant on significant inputs that are neither directly nor indirectly observable, hence requiring reliance on established theoretical concepts in their derivation. These adjustments are derived by making assessments of the possible degree of variability using statistical approaches and market-based information where possible.
The Firm may apply concentration adjustments to certain of its OTC derivative portfolios to reflect the additional cost of closing out a particularly large risk exposure. Where possible,
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these adjustments are based on observable market information, but in many instances, significant judgment is required to estimate the costs of closing out concentrated risk exposures due to the lack of liquidity in the marketplace.
The Firm applies an FVA in the fair value measurements of OTC uncollateralized or partially collateralized derivatives and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received. In general, FVA reflects a market funding risk premium inherent in the noted derivative instruments. The methodology for measuring FVA leverages the Firm’s existing credit-related valuation adjustment calculation methodologies, which apply to both assets and liabilities.
See Note 5 for a description of valuation techniques applied to the major categories of financial instruments measured at fair value.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
Certain of the Firm’s assets and liabilities are measured at fair value on a non-recurring basis. The Firm incurs losses or gains for any adjustments of these assets or liabilities to fair value.
For assets and liabilities measured at fair value on a non-recurring basis, fair value is determined by using various valuation approaches. The same hierarchy for inputs as described above, which requires that observable inputs be used when available, is used in measuring fair value for these items.
For further information on financial assets and liabilities that are measured at fair value on a recurring and non-recurring basis, see Note 5.
Offsetting of Derivative Instruments
In connection with its derivative activities, the Firm generally enters into master netting agreements and collateral agreements with its counterparties. These agreements provide the Firm with the right, in the event of a default by the counterparty, to net a counterparty’s rights and obligations under the agreement and to liquidate and set off cash collateral against any net amount owed by the counterparty. Derivatives with enforceable master netting agreements are reported net of cash collateral received and posted.
However, in certain circumstances, the Firm may not have such an agreement in place; the relevant insolvency regime may not support the enforceability of the master netting agreement or collateral agreement; or the Firm may not have sought legal advice to support the enforceability of the agreement. In cases where the Firm has not determined an agreement to be enforceable, the related amounts are not offset (see Note 7).
The Firm’s policy is generally to receive cash and/or securities posted as collateral (with rights of rehypothecation), irrespective of the enforceability determination regarding the master netting and collateral agreement. In certain cases, the Firm may agree for such collateral to be posted to a third-party custodian under a control agreement that enables it to take control of such collateral in the event of a counterparty default. The enforceability of the master netting agreement is taken into account in the Firm’s risk management practices and application of counterparty credit limits.
For information related to offsetting of derivatives, see Note 7.
Hedge Accounting
The Firm applies hedge accounting using various derivative financial instruments for the following types of hedges: hedges of changes in the fair value of assets and liabilities due to the risk being hedged (fair value hedges); and hedges of net investments in foreign operations whose functional currency is different from the reporting currency of the Parent Company (net investment hedges). These financial instruments are included within Trading assets—Derivative and other contracts or Trading liabilities—Derivative and other contracts in the balance sheet. For hedges where hedge accounting is being applied, the Firm performs effectiveness testing and other procedures.
Fair Value Hedges—Interest Rate Risk
The Firm’s designated fair value hedges consist of interest rate swaps designated as hedges of changes in the benchmark interest rate of certain fixed rate AFS securities and senior borrowings. The Firm also designates interest rate swaps as fair value hedges of changes in the benchmark interest rate of certain fixed rate deposits. The Firm is permitted to hedge the full, or part of the, contractual term of the hedged instrument. The Firm uses regression analysis to perform an ongoing prospective and retrospective assessment of the effectiveness of these hedging relationships. A hedging relationship is deemed effective if the change in fair value of the hedging instrument (derivative) and the change in fair value of the hedged item (AFS security, deposit liability or borrowing), due to changes in the benchmark interest rate, offset within a range of 80% to 125%. The Firm considers the impact of valuation adjustments related to counterparty credit spreads and its own credit spreads to determine whether they would cause the hedging relationship to be ineffective.
For qualifying fair value hedges of benchmark interest rates, the change in the fair value of the derivative, offset by the change in the fair value attributable to the change in the benchmark interest rate risk of the hedged asset (liability), is recognized in earnings each period as a component of Interest income (expense). For AFS securities, the change in fair value of the hedged item due to changes other than the risk being hedged will continue to be reported in OCI. When a derivative is de-designated as a hedge, any basis adjustment
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remaining on the hedged asset (liability) is amortized to Interest income (expense) over the remaining life of the asset (liability) using the effective interest method.
Net Investment Hedges
The Firm uses forward foreign exchange contracts to manage a portion of the currency exposure relating to its net investments in foreign operations. To the extent that the notional amounts of the hedging instruments equal the portion of the investments being hedged and the underlying exchange rate of the derivative hedging instrument is the same as the exchange rate between the functional currency of the investee and the intermediate parent entity’s functional currency, it is considered to be perfectly effective, with no income statement recognition. The gain or loss from revaluing hedges of net investments in foreign operations at the spot rate is reported within AOCI. The forward points on the hedging instruments are excluded from hedge effectiveness testing and changes in the fair value of this excluded component are recorded currently in Interest income.
Other Hedges
In addition to hedges that are designated and qualify for hedge accounting, the Firm uses derivatives to economically hedge credit risk associated with certain held-for-sale and held-for-investment corporate loans and lending commitments, and the related gains and losses are reported within Other revenues in the income statement.
For further information on derivative instruments and hedging activities, see Note 7.
AFS Investment Securities
AFS securities are reported at fair value in the balance sheet. Interest income, including amortization of premiums and accretion of discounts, is included in Interest income in the income statement. Unrealized gains are recorded in OCI, and unrealized losses are recorded either in OCI or in Other revenues as described below.
AFS securities in an unrealized loss position are first evaluated to determine whether there is an intent to sell or it is more likely than not the Firm will be required to sell before recovery of the amortized cost basis. If so, the amortized cost basis is written down to the fair value of the security such that the entire unrealized loss is recognized in Other revenues, and any previously established ACL is written off.
For all other AFS securities in an unrealized loss position, any portion of unrealized losses representing a credit loss is recognized in Other revenues and as an increase to the ACL for AFS securities, with the remainder of unrealized losses recognized in OCI. A credit loss exists if the Firm does not expect to recover the amortized cost basis of the security. When considering whether a credit loss exists, the Firm considers relevant information, including:
guarantees (implicit or explicit) by the U.S. government;
the extent to which the fair value has been less than the amortized cost basis;
adverse conditions specifically related to the security, its industry or geographic area;
changes in the financial condition of the issuer of the security or, in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors;
the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;
failure of the issuer of the security to make scheduled interest or principal payments;
the current rating and any changes to the rating of the security by a rating agency.
If a credit loss exists, the Firm measures the credit loss as the difference between the present value of cash flows expected to be collected (discounted at the implicit interest rate at acquisition of the security or discounted at the effective yield for securities that incorporate changes in prepayment assumptions) and the amortized cost basis of the security. Changes in prepayment assumptions alone are not considered to result in a credit loss. When estimating the present value of expected cash flows, information utilized includes the remaining payment terms of the security, prepayment speeds, financial condition of the issuer, expected defaults and the value of any underlying collateral.
Presentation of ACL and Provision for Credit Losses
ACLProvision for
Credit Losses
AFS securitiesContra investment securities
Other revenue
Nonaccrual & ACL Charge-offs on AFS Securities
AFS securities follow the same nonaccrual and write-off guidance as discussed in “Allowance for Credit Losses” herein, except as set forth in “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein.
HTM Securities

HTM securities are reported at amortized cost, net of any ACL, in the balance sheet. Refer to “Allowance for Credit Losses” herein for guidance on the ACL determination. Interest income, including amortization of premiums and accretion of discounts on HTM securities, is included in Interest income in the income statement.
Loans
The Firm accounts for loans based on the following categories: loans held for investment; loans held for sale; and loans at fair value.
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Nonaccrual

All loan categories described below follow the same nonaccrual and write-off guidance as discussed in “Allowance for Credit Losses” herein.
Loans Held for Investment
Loans held for investment are reported at outstanding principal adjusted for any charge-offs, the allowance for credit losses, any unamortized deferred fees or costs for originated loans, and any unamortized premiums or discounts for purchased loans.
Interest Income.    Interest income on performing loans held for investment is accrued and recognized as interest income at the contractual rate of interest. Purchase price discounts or premiums, as well as net deferred loan fees or costs, are amortized into interest income over the life of the loan to produce a level rate of return.
Lending Commitments.    The Firm records the liability and related expense for the credit exposure related to commitments to fund loans. For more information regarding loan commitments, standby letters of credit and financial guarantees, see Note 15.

For more information regarding allowance for credit losses, refer to “Allowance for Credit Losses” herein.
Loans Held for Sale
Loans held for sale are measured at the lower of cost or fair value, with valuation changes recorded in Other revenues. The Firm determines the valuation allowance on an individual loan basis, except for residential mortgage loans for which the valuation allowance is determined at the loan product level. Any decreases in fair value below the initial carrying amount and any recoveries in fair value up to the initial carrying amount are recorded in Other revenues. Increases in fair value above initial carrying value are not recognized.
Interest Income. Interest income on loans held for sale is accrued and recognized based on the contractual rate of interest. Loan origination fees or costs and purchase price discounts or premiums are deferred as an adjustment to the loan’s cost basis until the related loan is sold and, as such, are included in the periodic determination of the lower of cost or fair value adjustments and the gain or loss recognized at the time of sale.
Lending Commitments. Commitments to fund mortgage loans held for sale are derivatives and are reported in Trading assets or Trading liabilities in the balance sheet with an offset to Trading revenues in the income statement.
For commitments to fund non-mortgage loans, the Firm records the liability and related expense for the fair value exposure below cost of such commitments in Other liabilities
and accrued expenses in the balance sheet with an offset to Other revenues in the income statement.
Because loans and lending commitments held for sale are recognized at the lower of cost or fair value, the allowance for credit losses and charge-off policies do not apply to these loans.
Loans at Fair Value
Loans for which the fair value option is elected are carried at fair value, with changes in fair value recognized in earnings. Loans carried at fair value are not evaluated for purposes of recording an allowance for credit losses. For further information on loans carried at fair value and classified as Trading assets and Trading liabilities, see Note 5.
Lending Commitments. The Firm records the liability and related expense for the fair value exposure related to commitments to fund loans that will be measured at fair value. The liability is recorded in Trading liabilities in the balance sheet, and the expense is recorded in Trading revenues in the income statement.
Because such loans and lending commitments are reported at fair value, the allowance for credit losses and charge-off policies do not apply to these loans.
For further information on loans, see Note 10.
Allowance for Credit Losses

The ACL for financial instruments measured at amortized cost and certain off-balance sheet exposures (e.g., HFI loans and lending commitments, HTM securities, customer and other receivables and certain guarantees) represents an estimate of expected credit losses over the entire life of the financial instrument.
Factors considered by management when determining the ACL include payment status, fair value of collateral and expected payments of principal and interest, as well as internal or external information relating to past events, current conditions, and reasonable and supportable forecasts. The Firm uses three forecasts that include assumptions about certain macroeconomic variables, including, but not limited to, U.S. gross domestic product (“GDP”), equity market indices and unemployment rates, as well as commercial real estate and home price indices. At the conclusion of the Firm’s reasonable and supportable forecast period of 13 quarters, there is a gradual reversion back to historical averages.

The ACL is measured on a collective basis when similar risk characteristics exist for multiple instruments, considering all available information relevant to assessing the collectability of cash flows. Generally, the Firm applies a probability of default/loss given default model for instruments that are collectively assessed, under which the ACL is calculated as the product of probability of default, loss given default and exposure at default. These parameters are forecast for each
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collective group of assets using a scenario-based statistical model.

If the instrument does not share similar risk characteristics with other instruments, including when it is probable that the Firm will be unable to collect the full payment of principal and interest on the instrument when due, the ACL is measured on an individual basis. The Firm generally applies a discounted cash flow method for instruments that are individually assessed.

The Firm may also elect to use an approach that considers the fair value of the collateral when measuring the ACL if the loan is collateral dependent (i.e., repayment of the loan is expected to be provided substantially by the sale or operation of the underlying collateral and the borrower is experiencing financial difficulty).

Additionally, the Firm can elect to use an approach to measure the ACL that considers the fair value of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. The Firm has elected to use this approach for certain securities-based loans, margin loans, securities purchased under agreements to resell and securities borrowed.

Credit quality indicators considered in developing the ACL include:

Corporate loans, secured lending facilities, commercial real estate loans and securities, and other loans: Internal risk ratings developed by the Credit Risk Management Department that are refreshed at least annually, and more frequently as necessary. These ratings generally correspond to external ratings published by S&P. The Firm also considers transaction structure, including type of collateral, collateral terms and position of the obligation within the capital structure. In addition, for commercial real estate, the Firm considers property type and location, net operating income and LTV ratios, among other factors, as well as commercial real estate price and credit spread indices and capitalization rates.
Residential real estate loans: Loan origination Fair Isaac Corporation (“FICO”) credit scores as determined by independent credit agencies in the U.S. and LTV ratios.
Employee loans: Employment status, which includes those currently employed by the Firm and for which the Firm can deduct any unpaid amounts due to it through certain compensation arrangements; and those no longer employed by the Firm where such arrangements are no longer applicable.
Qualitative and environmental factors such as economic and business conditions, the nature and volume of the portfolio, and lending terms and the volume and severity of past due loans are also considered in the ACL calculations.
Presentation of ACL and Provision for Credit Losses
ACLProvision for
Credit Losses
Held for investment loansContra assetProvision for credit losses
Other instruments measured at amortized cost (e.g., HTM securities and customer and other receivables)
Contra assetOther revenues
Employee loansContra assetCompensation and benefits expenses
Held for investment lending commitmentsOther liabilities and accrued expensesProvision for credit losses
Other off-balance sheet instruments (e.g., certain guarantees)
Other liabilities and accrued expensesOther expenses
Troubled Debt Restructurings

The Firm may modify the terms of certain loans for economic or legal reasons related to a borrower’s financial difficulties by granting one or more concessions that the Firm would not otherwise consider. Such modifications are accounted for and reported as a troubled debt restructuring (“TDR”), except for certain modifications related to the coronavirus disease (“COVID-19”) as noted in “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein. A loan that has been modified in a TDR is generally considered to be impaired and is evaluated individually. TDRs are also generally classified as nonaccrual and may be returned to accrual status only after the Firm expects repayment of the remaining contractual principal and interest and there is sustained repayment performance for a reasonable period.
Nonaccrual

The Firm places financial instruments on nonaccrual status if principal or interest is not expected when contractually due or is past due for a period of 90 days or more unless the obligation is well-secured and is in the process of collection. For borrowers impacted by COVID-19, see “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein for additional considerations.

For any instrument placed on nonaccrual status, the Firm reverses any unpaid interest accrued with an offsetting reduction to Interest income. Principal and interest payments received on nonaccrual instruments are applied to principal if there is doubt regarding the ultimate collectability of principal. If collection of the principal is not in doubt, interest income is realized on a cash basis. If the instrument is brought current and neither principal nor interest collection is in doubt, instruments can generally return to accrual status, and interest income can be recognized.
Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19
In the first quarter of 2020, the Firm elected to apply the guidance issued by Congress in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as well as by the U.S. banking agencies stating that certain concessions granted to borrowers that are current on existing loans, either individually or as part of a program for creditworthy
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Notes to Consolidated Financial Statements
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borrowers who are experiencing short-term financial or operational problems as a result of COVID-19, generally would not be considered TDRs. Additionally, these loans generally would not be considered nonaccrual unless collectability concerns exist despite the modification provided. For loans remaining on accrual status, the Firm elected to continue recognizing interest income during the modification periods. The CARES Act relief expired on January 1, 2022.
ACL Charge-offs
The principal balance of a financial instrument is charged off in the period it is deemed uncollectible, resulting in a reduction in the ACL and in the balance of the financial instrument in the balance sheet. Accrued interest receivable balances that are separately recorded from the related financial instruments are charged off against Interest income when the related financial instrument is placed on nonaccrual status. Accordingly, the Firm elected not to measure an ACL for accrued interest receivables. However, in the case of loans that are modified as a result of COVID-19 and remain on accrual status due to the relief noted in “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein, accrued interest receivable balances are assessed for any required ACL.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when the Firm has relinquished control over the transferred assets. Any related gain or loss on sale is recorded in Net revenues. Transfers that are not accounted for as sales are treated as collateralized financings. Securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase are treated as collateralized financings (see Note 9).
Securities purchased under agreements to resell (“reverse repurchase agreements”) and Securities sold under agreements to repurchase (“repurchase agreements”), including repurchase and reverse repurchase agreements-to-maturity, are carried in the balance sheet at the amount of cash paid or received plus accrued interest except for certain reverse repurchase and repurchase agreements for which the Firm has elected the fair value option (see Note 6). Where appropriate, repurchase agreements and reverse repurchase agreements with the same counterparty are reported on a net basis. Securities borrowed and securities loaned are recorded at the amount of cash collateral advanced or received.
In instances where the Firm is the lender in securities-for-securities transactions and is permitted to sell or repledge these securities, the fair value of the collateral received is reported in Trading assets, and the related obligation to return the collateral is reported in Trading liabilities in the balance sheet. Securities-for-securities transactions where the Firm is the borrower are not included in the balance sheet.
In order to manage credit exposure arising from these transactions, in appropriate circumstances, the Firm enters into master netting agreements and collateral agreements with its counterparties. These agreements provide the Firm with the right, in the event of a default by the counterparty, to net a counterparty’s rights and obligations under the agreement and to liquidate and set off collateral held by the Firm against the net amount owed by the counterparty.
The Firm’s policy is generally to take possession of securities purchased or borrowed in connection with reverse repurchase agreements and securities borrowed transactions, respectively, and to receive cash and/or securities delivered under repurchase agreements or securities loaned transactions (with rights of rehypothecation).
For information related to offsetting of certain collateralized transactions, see Note 9.
Premises, Equipment and Capitalized Software Costs
Premises, equipment and capitalized software costs consist of buildings, leasehold improvements, furniture, fixtures, computer and communications equipment, power generation assets and capitalized software (externally purchased and developed for internal use). Premises, equipment and capitalized software costs are stated at cost less accumulated depreciation and amortization and are included in Other assets in the balance sheet. Depreciation and amortization are provided by the straight-line method over the estimated useful life of the asset.
Estimated Useful Life of Assets
in yearsEstimated Useful Life
Buildings39
Leasehold improvements—Building
term of lease to 25
Leasehold improvements—Other
term of lease to 15
Furniture and fixtures7
Computer and communications equipment
3 to 9
Power generation assets
15 to 29
Capitalized software costs
2 to 10
Premises, equipment and capitalized software costs are tested for impairment whenever events or changes in circumstances suggest that an asset’s carrying value may not be fully recoverable.
Goodwill and Intangible Assets
The Firm tests goodwill and indefinite-lived intangible assets for impairment on an annual basis and on an interim basis when certain events or circumstances exist. The Firm tests goodwill for impairment at the reporting unit level, which is generally at the level of or one level below the asset's business segment. The Firm tests indefinite-lived intangible assets for impairment at the aggregate level of management contracts. For both the annual and interim tests, the Firm has the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is
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Notes to Consolidated Financial Statements
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more likely than not that the fair value is less than its carrying amount, in which case the quantitative test would be performed.
When performing a quantitative impairment test, the Firm compares the fair value with the carrying amount. If the fair value is less than the carrying amount, the impairment loss is equal to the excess of the carrying value over the fair value, limited to the carrying amount.
The estimated fair values are derived based on valuation techniques the Firm believes market participants would use. The estimated fair values are generally determined by utilizing a discounted cash flow methodology or methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies for goodwill impairment testing.
Intangible assets with a finite life are amortized over their estimated useful life and are reviewed for impairment on an interim basis when impairment indicators are present. Impairment losses are recorded within Other expenses in the income statement.
Earnings per Common Share
Basic EPS is computed by dividing earnings available to Morgan Stanley common shareholders by the weighted average number of common shares outstanding for the period. Earnings available to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley reduced by preferred stock dividends. Common shares outstanding include common stock and vested RSUs where recipients have satisfied the relevant vesting terms. Diluted EPS reflects the assumed conversion of all dilutive securities.
Share-based awards that pay dividend equivalents subject to vesting are included in diluted shares outstanding (if dilutive) under the treasury stock method.
The Firm has granted PSUs that vest and convert to shares of common stock only if predetermined performance and market goals are satisfied. Since the issuance of the shares is contingent upon the satisfaction of certain conditions, the PSUs are included in diluted EPS based on the number of shares (if any) that would be issuable if the reporting date was the end of the performance period.
For further information on diluted earnings (loss) per common share, see Note 18 to the financial statements.
Deferred Compensation
Stock-Based Compensation
The Firm measures compensation expense for stock-based awards at fair value. The Firm determines the fair value of RSUs (including PSUs with non-market performance conditions) based on the grant-date fair value of its common stock, measured as the volume-weighted average price on the
date of grant (“VWAP”). The fair value of RSUs not entitled to dividends until conversion is measured at VWAP reduced by the present value of dividends expected to be paid on the underlying shares prior to scheduled conversion date. PSUs that contain market-based conditions are valued using a Monte Carlo valuation model.
Compensation expense is recognized over the vesting period relevant to each separately vesting portion of the award. Compensation expense for awards with performance conditions is recognized based on the probable outcome of the performance condition at each reporting date. Compensation expense for awards with market-based conditions is recognized irrespective of the probability of the market condition being achieved and is not reversed if the market condition is not met. The Firm accounts for forfeitures as they occur.
Stock-based awards generally contain clawback and cancellation provisions. Certain awards provide the Firm discretion to claw back or cancel all or a portion of the award under specified circumstances. Compensation expense for those awards is adjusted for changes in the fair value of the Firm’s common stock or the relevant model valuation, as appropriate, until conversion, exercise or expiration.
Employee Stock Trusts
In connection with certain stock-based compensation plans, the Firm has established employee stock trusts to provide, at its discretion, common stock voting rights to certain RSU holders. Following the grant of an RSU award, when a stock trust is utilized, the Firm contributes shares to be held in the stock trust until the RSUs convert to common shares. The assets of the employee stock trusts are consolidated with those of the Firm and are generally accounted for in a manner similar to treasury stock, where the shares of common stock outstanding reported in Common stock issued to employee stock trusts are offset by an equal amount reported in Employee stock trusts in the balance sheet.
The Firm uses the grant-date fair value of stock-based compensation as the basis for recording the movement of the assets to or from the employee stock trusts. Changes in the fair value are not recognized as the Firm’s stock-based compensation must be settled by delivery of a fixed number of shares of the Firm’s common stock.
Deferred Cash-Based Compensation
Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of the award.
The Firm invests directly, as a principal, in financial instruments and other investments to economically hedge certain of its obligations under its deferred cash-based
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Notes to Consolidated Financial Statements
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compensation plans. Changes in the value of such investments are recorded in Trading revenues and Investments revenues. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the immediate recognition of gains and losses on the Firm’s investments and the deferred recognition of the related compensation expense over the vesting period.
Retirement-Eligible Employee Compensation
For year-end stock-based awards and deferred cash-based compensation awards anticipated to be granted to retirement-eligible employees under award terms that do not contain a future service requirement, the Firm accrues the estimated cost of the awards over the course of the calendar year preceding the grant date, which reflects the period over which the compensation is earned.
Carried Interest Compensation
The Firm generally recognizes compensation expense for any portion of carried interest (both realized and unrealized) that is allocated to employees. For information on performance-based fees in the form of carried interest, which are directly related to carried interest compensation, see “Revenue Recognition—Carried Interest” herein.
Income Taxes
Deferred tax assets and liabilities are recorded based upon the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense (benefit) in the period that includes the enactment date. Such effects are recorded in Provision for income taxes regardless of where deferred taxes were originally recorded.
The Firm recognizes net deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Firm considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations. When performing the assessment, the Firm considers all types of deferred tax assets in combination with each other, regardless of the origin of the underlying temporary difference. If a deferred tax asset is determined to be unrealizable, a valuation allowance is established. If the Firm subsequently determines that it would be able to realize deferred tax assets in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Firm recognizes tax expense associated with Global Intangible Low-Taxed Income as it is incurred as part of the
current income taxes to be paid or refunded for the current period.
Uncertain tax positions are recorded on the basis of a two-step process, whereby (i) the Firm determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet this threshold, the Firm recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with the related tax authority. Interest and penalties related to unrecognized tax benefits are recognized as a component of the provision for income taxes.
Foreign Currencies
Assets and liabilities of operations with non-U.S. dollar functional currencies are translated at year-end rates of exchange. Gains or losses resulting from translating foreign currency financial statements, net of hedge gains or losses and related tax effects, are reflected in AOCI in the balance sheet. Gains or losses resulting from remeasurement of foreign currency transactions are included in net income, and amounts recognized in the income statement are translated at the rate of exchange on the respective date of recognition for each amount.
Accounting Updates Adopted in 2020
Reference Rate Reform

The Firm has adopted the Reference Rate Reform accounting update. There was no impact to the Firm’s financial statements upon initial adoption.
This accounting update provides optional accounting relief to entities with contracts, hedge accounting relationships or other transactions that reference LIBOR or other interest rate benchmarks for which the referenced rate is expected to be discontinued or replaced. The Firm is applying the accounting relief as relevant contract and hedge accounting relationship modifications are made during the course of the reference rate reform transition period. The optional relief generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract and would, therefore, not trigger certain accounting impacts that would otherwise be required. It also allows entities to change certain critical terms of existing hedge accounting relationships that are affected by reference rate reform, and these changes would not require de-designating the hedge accounting relationship. The optional relief currently ends December 31, 2022.
Financial Instruments—Credit Losses
The Firm has adopted the Financial Instruments—Credit Losses accounting update.
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Notes to Consolidated Financial Statements
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This accounting update impacted the impairment model for certain financial assets measured at amortized cost by requiring a CECL methodology to estimate expected credit losses over the entire life of the financial asset, recorded at inception or purchase. CECL replaced the incurred loss model previously applicable to loans held for investment, HTM securities and other receivables carried at amortized cost, such as employee loans.
The update also eliminated the concept of other-than-temporary impairment for AFS securities and instead requires impairments on AFS securities to be recognized in earnings through an allowance when the fair value is less than amortized cost and a credit loss exists, and through a permanent reduction of the amortized cost basis when the securities are expected to be sold before recovery of amortized cost.
At transition on January 1, 2020, the adoption of this accounting standard resulted in an increase in the allowance for credit losses of $131 million with a corresponding reduction in Retained earnings of $100 million, net of tax. The adoption impact was primarily attributable to a $124 million increase in the allowance for credit losses on employee loans.
3. Acquisitions
Acquisition of Eaton Vance
On March 1, 2021, the Firm completed the acquisition of 100% of Eaton Vance Corp. (“Eaton Vance”) in a stock and cash transaction, which increased the scale and breadth of the Investment Management business segment. Total consideration for the transaction was approximately $8.7 billion, which consists of the $5.3 billion fair value of 69 million common shares issued from Common stock held in treasury and cash of approximately $3.4 billion.
Upon acquisition, the assets and liabilities of Eaton Vance were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.
Eaton Vance Purchase Price Allocation
$ in millionsAt
March 1,
2021
Assets
Cash and cash equivalents$691 
Trading assets at fair value:
Loans and lending commitments445 
Investments 299 
Corporate and other debt52 
Customer and other receivables331 
Goodwill5,270 
Intangible assets3,956 
Other assets836 
Total assets$11,880 
Liabilities
Other secured financings$399 
Other liabilities and accrued expenses2,147 
Borrowings678 
Total liabilities$3,224 
Acquired Intangible Assets
$ in millionsWeighted Average Life (Years)At
March 1,
2021
Non-amortizable
Management contractsIndefinite$2,120 
Amortizable
Customer relationships161,455 
Tradenames23221 
Management contracts16160 
Total acquired intangible assets$3,956 
Eaton Vance Net revenues of approximately $1,818 million and Net income of approximately $413 million are included in the Firm’s consolidated results for the period from March 1, 2021 to December 31, 2021.
Morgan Stanley and Eaton Vance Proforma Combined Financial Information (Unaudited)
$ in millions20212020
Net revenues$60,051 $50,371 
Net income 15,220 10,779 
The proforma financial information presented in the previous table was computed by combining the historical financial information of the Firm and Eaton Vance along with the effects of the acquisition method of accounting for business combinations as though the companies were combined on January 1, 2020.
The proforma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues or other factors, and, therefore, does not represent what the actual Net revenues and Net income would have been had the companies actually been combined as of this date.
Acquisition of E*TRADE
On October 2, 2020, the Firm completed the acquisition of 100% of E*TRADE Financial Corporation (“E*TRADE”) in
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Notes to Consolidated Financial Statements
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a stock-for-stock transaction, which increased the scale and breadth of the Wealth Management business segment. Total consideration for the transaction was approximately $11.9 billion, which principally consists of the $11 billion fair value of 233 million common shares issued from Common stock held in treasury, at an exchange ratio of 1.0432 per E*TRADE common share. In addition, the Firm issued Series M and Series N preferred shares with a fair value of approximately $0.7 billion in exchange for E*TRADE’s existing preferred stock.
Upon acquisition, the assets and liabilities of E*TRADE were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, customer attrition rates and discount rates.
E*TRADE Purchase Price Allocation
$ in millionsAt
October 2,
2020
Assets
Cash and cash equivalents$3,807 
Trading assets at fair value:
Loans and lending commitments1,124 
Investments 44 
Investment securities48,855 
Securities borrowed975 
Customer and other receivables12,267 
Loans:
Held for investment462 
Goodwill4,270 
Intangible assets1
3,282 
Other assets1,351 
Total assets$76,437 
Liabilities
Deposits$44,890 
Securities loaned766 
Customer and other payables15,488 
Other liabilities and accrued expenses1,688 
Borrowings1,665 
Total liabilities$64,497 
1.Acquired intangible assets are primarily composed of $2.8 billion related to customer relationships with a weighted-average life of 17 years.
E*TRADE’s results are included in the Firm’s consolidated results for the period from October 2, 2020 to December 31, 2020. For this period, Net revenues were approximately $600 million, and Net income (loss) was not material.
Morgan Stanley and E*TRADE Proforma Combined Financial Information (Unaudited)

$ in millions20202019
Net revenues$50,203 $44,192 
Net income 11,459 9,839 
The proforma financial information presented in the previous table was computed by combining the historical financial information of the Firm and E*TRADE along with the effects of the acquisition method of accounting for business combinations as though the companies were combined on January 1, 2019.
The proforma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues or other factors, and, therefore, does not represent what the actual Net revenues and Net income would have been had the companies actually been combined as of this date.
4. Cash and Cash Equivalents
$ in millionsAt
December 31,
2021
At
December 31,
2020
Cash and due from banks$8,394 $9,792 
Interest bearing deposits with banks119,331 95,862 
Total Cash and cash equivalents$127,725 $105,654 
Restricted cash$40,887 $38,202 
For additional information on cash and cash equivalents, including restricted cash, see Note 2.
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Notes to Consolidated Financial Statements
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5. Fair Values
Recurring Fair Value Measurements    
Assets and Liabilities Measured at Fair Value on a Recurring Basis
At December 31, 2021
$ in millionsLevel 1Level 2Level 3
Netting1
Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities
$45,970 $29,749 $2 $ $75,721 
Other sovereign government obligations
28,041 4,533 211  32,785 
State and municipal securities
 1,905 13  1,918 
MABS
 1,237 344  1,581 
Loans and lending commitments2
 8,821 3,806  12,627 
Corporate and other debt
 27,309 1,973  29,282 
Corporate equities3
91,630 832 115  92,577 
Derivative and other contracts:
Interest rate1,364 153,048 1,153  155,565 
Credit 8,441 509  8,950 
Foreign exchange
28 74,571 132  74,731 
Equity1,562 68,519 251  70,332 
Commodity and other
4,462 20,194 3,057  27,713 
Netting1
(5,696)(241,814)(794)(50,833)(299,137)
Total derivative and other contracts
1,720 82,959 4,308 (50,833)38,154 
Investments4
735 846 1,125  2,706 
Physical commodities
 2,771   2,771 
Total trading assets4
168,096 160,962 11,897 (50,833)290,122 
Investment securities —AFS
59,021 43,809   102,830 
Securities purchased under agreements to resell
 7   7 
Total assets at fair value
$227,117 $204,778 $11,897 $(50,833)$392,959 
At December 31, 2021
$ in millionsLevel 1Level 2Level 3
Netting1
Total
Liabilities at fair value
Deposits$ $1,873 $67 $ $1,940 
Trading liabilities:
U.S. Treasury and agency securities
16,433 319   16,752 
Other sovereign government obligations
20,771 2,062   22,833 
Corporate and other debt
 8,707 16  8,723 
Corporate equities3
75,181 226 45  75,452 
Derivative and other contracts:
Interest rate1,087 145,670 445  147,202 
Credit 9,090 411  9,501 
Foreign exchange
19 73,096 80  73,195 
Equity2,119 77,363 1,196  80,678 
Commodity and other
4,563 16,837 1,528  22,928 
Netting1
(5,696)(241,814)(794)(50,632)(298,936)
Total derivative and other contracts
2,092 80,242 2,866 (50,632)34,568 
Total trading liabilities114,477 91,556 2,927 (50,632)158,328 
Securities sold under agreements to repurchase
 140 651  791 
Other secured financings
 4,730 403  5,133 
Borrowings 74,183 2,157  76,340 
Total liabilities at fair value
$114,477 $172,482 $6,205 $(50,632)$242,532 
At December 31, 2020
$ in millionsLevel 1Level 2Level 3
Netting1
Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities
$43,084 $31,524 $$— $74,617 
Other sovereign government obligations
26,174 5,048 268 — 31,490 
State and municipal securities
— 1,135 — — 1,135 
MABS
— 1,070 322 — 1,392 
Loans and lending commitments2
— 5,389 5,759 — 11,148 
Corporate and other debt
— 30,093 3,435 — 33,528 
Corporate equities3
111,575 1,142 86 — 112,803 
Derivative and other contracts:
Interest rate4,458 227,818 1,210 — 233,486 
Credit— 6,840 701 — 7,541 
Foreign exchange
29 93,770 260 — 94,059 
Equity1,132 65,943 1,369 — 68,444 
Commodity and other
1,818 10,108 2,723 — 14,649 
Netting1
(5,488)(310,534)(1,351)(62,956)(380,329)
Total derivative and other contracts
1,949 93,945 4,912 (62,956)37,850 
Investments4
624 234 828 — 1,686 
Physical commodities
— 3,260 — — 3,260 
Total trading assets4
183,406 172,840 15,619 (62,956)308,909 
Investment securities —AFS
46,354 61,225 2,804 — 110,383 
Securities purchased under agreements to resell
— 12 — 15 
Total assets at fair value
$229,760 $234,077 $18,426 $(62,956)$419,307 
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Notes to Consolidated Financial Statements
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At December 31, 2020
$ in millionsLevel 1Level 2Level 3
Netting1
Total
Liabilities at fair value
Deposits$— $3,395 $126 $— $3,521 
Trading liabilities:
U.S. Treasury and agency securities
10,204 — — 10,205 
Other sovereign government obligations
24,209 1,738 16 — 25,963 
Corporate and other debt
— 8,468 — — 8,468 
Corporate equities3
67,822 172 63 — 68,057 
Derivative and other contracts:
Interest rate4,789 213,321 528 — 218,638 
Credit— 7,500 652 — 8,152 
Foreign exchange
11 94,698 199 — 94,908 
Equity1,245 81,683 3,600 — 86,528 
Commodity and other
1,758 9,418 1,014 — 12,190 
Netting1
(5,488)(310,534)(1,351)(58,105)(375,478)
Total derivative and other contracts
2,315 96,086 4,642 (58,105)44,938 
Total trading liabilities104,550 106,465 4,721 (58,105)157,631 
Securities sold under agreements to repurchase
— 671 444 — 1,115 
Other secured financings
— 11,185 516 — 11,701 
Borrowings— 69,327 4,374 — 73,701 
Total liabilities at fair value
$104,550 $191,043 $10,181 $(58,105)$247,669 
MABS—Mortgage- and asset-backed securities
1.For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Netting.” Positions classified within the same level that are with the same counterparty are netted within that level. For further information on derivative instruments and hedging activities, see Note 7.
2.For a further breakdown by type, see the following Detail of Loans and Lending Commitments at Fair Value table.
3.For trading purposes, the Firm holds or sells short equity securities issued by entities in diverse industries and of varying sizes.
4.Amounts exclude certain investments that are measured based on NAV per share, which are not classified in the fair value hierarchy. For additional disclosure about such investments, see “Net Asset Value Measurements” herein.
Detail of Loans and Lending Commitments at Fair Value
$ in millions
At
December 31, 2021
At
December 31, 2020
Corporate$8 $13 
Secured lending facilities 648 
Commercial real estate863 916 
Residential real estate3,911 2,145 
Securities-based lending and Other loans7,845 7,426 
Total$12,627 $11,148 
Unsettled Fair Value of Futures Contracts1
$ in millions
At
December 31, 2021
At
December 31, 2020
Customer and other receivables, net$948 $434 
1.These contracts are primarily Level 1, actively traded, valued based on quoted prices from the exchange and are excluded from the previous recurring fair value tables.
Valuation Techniques for Assets and Liabilities Measured at Fair Value on a Recurring Basis
U.S. Treasury and Agency Securities
U.S. Treasury Securities
Valuation Technique:
Fair value is determined using quoted market prices.
Valuation Hierarchy Classification:
Level 1—as inputs are observable and in an active market
U.S. Agency Securities
Valuation Techniques:
Non-callable agency-issued debt securities are generally valued using quoted market prices, and callable agency-issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for comparable instruments.
The fair value of agency mortgage pass-through pool securities is model-driven based on spreads of comparable to-be-announced securities.
CMOs are generally valued using quoted market prices and trade data adjusted by subsequent changes in related indices for comparable instruments.
Valuation Hierarchy Classification:
Level 1—on-the-run agency issued debt securities if actively traded and inputs are observable
Level 2—all other agency issued debt securities, agency mortgage pass-through pool securities and CMOs if actively traded and inputs are observable
Level 3—in instances where the trading activity is limited or inputs are unobservable
Other Sovereign Government Obligations
Valuation Techniques:
Fair value is determined using quoted prices in active markets when available. When not available, quoted prices in less active markets are used. In the absence of position-specific quoted prices, fair value may be determined through benchmarking from comparable instruments.
Valuation Hierarchy Classification:
Level 1—if actively traded and inputs are observable
Level 2—if the market is less active or prices are dispersed
Level 3—in instances where the prices are unobservable
State and Municipal Securities
Valuation Techniques:
Fair value is determined using recently executed transactions, market price quotations or pricing models that factor in, where applicable, interest rates, bond or CDS spreads, adjusted for any basis difference between cash and derivative instruments.
Valuation Hierarchy Classification:
Level 2—if value based on observable market data for comparable instruments
Level 3—in instances where market data are not observable
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Notes to Consolidated Financial Statements
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MABS
Valuation Techniques:
Mortgage- and asset-backed securities may be valued based on price or spread data obtained from observed transactions or independent external parties such as vendors or brokers.
When position-specific external price data are not observable, the fair value determination may require benchmarking to comparable instruments, and/or analyzing expected credit losses, default and recovery rates, and/or applying discounted cash flow techniques. When evaluating the comparable instruments for use in the valuation of each security, security collateral-specific attributes, including payment priority, credit enhancement levels, type of collateral, delinquency rates and loss severity, are considered. In addition, for RMBS borrowers, FICO scores and the level of documentation for the loan are considered.
Market standard cash flow models may be utilized to model the specific collateral composition and cash flow structure of each transaction. Key inputs to these models are market spreads, forecasted credit losses, and default and prepayment rates for each asset category.
Valuation levels of RMBS and CMBS indices are used as an additional data point for benchmarking purposes or to price outright index positions.
Valuation Hierarchy Classification:
Level 2—if value based on observable market data for comparable instruments
Level 3—if external prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity related to property type differences, cash flows, performance or other inputs
Loans and Lending Commitments
Valuation Techniques:
Fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, market observable CDS spread levels obtained from independent external parties adjusted for any basis difference between cash and derivative instruments, along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable.
Fair value of contingent corporate lending commitments is determined by using executed transactions on comparable loans and the anticipated market price based on pricing indications from syndicate banks and customers. The valuation of loans and lending commitments also takes into account fee income that is considered an attribute of the contract.
Fair value of mortgage loans is determined using observable prices based on transactional data or third-party pricing for comparable instruments, when available.
Where position-specific external prices are not observable, fair value is estimated based on benchmarking to prices and rates observed in the primary market for similar loan or borrower types or based on the present value of
expected future cash flows using the Firm’s best available estimates of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved or a methodology that utilizes the capital structure and credit spreads of recent comparable securitization transactions.
Fair value of equity margin loans is determined by discounting future interest cash flows, net of potential losses resulting from large downward price movements of the underlying margin loan collateral. The potential losses are modeled using the margin loan rate, which is calibrated from market observable CDS spreads, implied debt yields or volatility metrics of the loan collateral.
Valuation Hierarchy Classification:
Level 2—if value based on observable market data for comparable instruments
Level 3—in instances where prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity
Corporate and Other Debt
Corporate Bonds
Valuation Techniques:
Fair value is determined using recently executed transactions, market price quotations, bond spreads and CDS spreads obtained from independent external parties, such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments.
The spread data used are for the same maturity as the bond. If the spread data do not reference the issuer, then data that reference comparable issuers are used. When position-specific external price data are not observable, fair value is determined based on either benchmarking to comparable instruments or cash flow models with yield curves, bond or single-name CDS spreads and recovery rates or loss given default as significant inputs.
Valuation Hierarchy Classification:
Level 2—if value based on observable market data for comparable instruments
Level 3—in instances where prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity
CDOs
Valuation Techniques:
The Firm holds cash CDOs that typically reference a tranche of an underlying synthetic portfolio of single-name CDS spreads collateralized by corporate bonds (CLN) or cash portfolio of ABS/loans (“asset-backed CDOs”).
Credit correlation, a primary input used to determine the fair value of CLNs, is usually unobservable and derived using a benchmarking technique. Other model inputs such as credit spreads, including collateral spreads and interest rates, are typically observable.
Asset-backed CDOs are valued based on an evaluation of the market and model input parameters sourced from comparable instruments as indicated by market activity. Each asset-backed CDO position is evaluated independently taking into consideration available
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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
comparable market levels, underlying collateral performance and pricing, deal structures and liquidity.
Valuation Hierarchy Classification:
Level 2—when either comparable market transactions are observable or credit correlation input is insignificant
Level 3—when either comparable market transactions are unobservable or the credit correlation input is significant
Equity Contracts with Financing Features
Valuation Techniques:
Fair value of certain equity contracts, which are not classified as OTC derivatives because they do not meet the net investment criteria, is determined by discounting future interest cash flows, inclusive of the estimated value of the embedded optionality. The valuation uses the same derivative pricing models and valuation techniques as described under “OTC Derivative Contracts” herein.
Valuation Hierarchy Classification:
Level 2—when the contract is valued using observable inputs or where the unobservable input is not deemed significant
Level 3—when the contract is valued using an unobservable input that is deemed significant
Corporate Equities
Valuation Techniques:
Exchange-traded equity securities are generally valued based on quoted prices from the exchange.
Unlisted equity securities are generally valued based on an assessment of each security, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable transactions, trading multiples and changes in market outlook, among other factors.
Listed fund units are generally marked to the exchange-traded price if actively traded, or to NAV if not. Unlisted fund units are generally marked to NAV.
Valuation Hierarchy Classification:
Level 1—actively traded exchange-traded securities and fund units
Level 2—if not actively traded, inputs are observable or if undergoing a recent M&A event or corporate action
Level 3—if not actively traded, inputs are unobservable or if undergoing an aged M&A event or corporate action
Derivative and Other Contracts
Exchange-Traded Derivative Contracts
Valuation Techniques:
Exchange-traded derivatives that are actively traded are valued based on quoted prices from the exchange.
Exchange-traded derivatives that are not actively traded are valued using the same techniques as those applied to OTC derivatives as noted below.
Valuation Hierarchy Classification:
Level 1—when actively traded
Level 2—when not actively traded
OTC Derivative Contracts
Valuation Techniques:
OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign
currencies, credit standing of reference entities, equity prices or commodity prices.
Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled using a series of techniques, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, simulation models or a combination thereof. Many pricing models do not entail material subjectivity as the methodologies employed do not necessitate significant judgment since model inputs may be observed from actively quoted markets, as is the case for generic interest rate swaps, many equity, commodity and foreign currency option contracts, and certain CDS. In the case of more established derivative products, the pricing models used by the Firm are widely accepted by the financial services industry.
More complex OTC derivative products are typically less liquid and require more judgment in the implementation of the valuation technique since direct trading activity or quotes are unobservable. This includes certain types of interest rate derivatives with both volatility and correlation exposure, equity, commodity or foreign currency derivatives that are either longer-dated or include exposure to multiple underlyings, and credit derivatives, including CDS on certain mortgage- or asset-backed securities and basket CDS. Where required inputs are unobservable, relationships to observable data points, based on historical and/or implied observations, may be employed as a technique to estimate the model input values. For further information on the valuation techniques for OTC derivative products, see Note 2.
Valuation Hierarchy Classification:
Level 2—when valued using observable inputs or where the unobservable input is not deemed significant
Level 3—if an unobservable input is deemed significant
Investments
Valuation Techniques:
Investments include direct investments in equity securities, as well as various investment management funds, which include investments made in connection with certain employee deferred compensation plans.
Exchange-traded direct equity investments are generally valued based on quoted prices from the exchange.
For direct investments, initially, the transaction price is generally considered by the Firm as the exit price and is its best estimate of fair value.
After initial recognition, in determining the fair value of non-exchange-traded internally and externally managed funds, the Firm generally considers the NAV of the fund provided by the fund manager to be the best estimate of fair value. These investments are included in the Fund Interests table in the "Net Asset Value Measurements" section herein.
For non-exchange-traded investments either held directly or held within internally managed funds, fair value after initial recognition is based on an assessment of each underlying investment, considering rounds of financing
December 2021 Form 10-K
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Notes to Consolidated Financial Statements
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and third-party transactions, discounted cash flow analyses and market-based information, including comparable Firm transactions, trading multiples and changes in market outlook, among other factors.
Valuation Hierarchy Classification:
Level 1—if actively traded
Level 2—when not actively traded and valued based on rounds of financing or third-party transactions
Level 3—when not actively traded and rounds of financing or third-party transactions are not available
Physical Commodities
Valuation Techniques:.
Fair value is determined using observable inputs, including broker quotations and published indices.
Valuation Hierarchy Classification:
Level 2—valued using observable inputs
Investment Securities—AFS Securities
Valuation Techniques:
AFS securities are composed of U.S. government and agency securities (e.g., U.S. Treasury securities, agency-issued debt, agency mortgage pass-through securities and CMOs), CMBS, ABS, state and municipal securities, and corporate bonds. For further information on the determination of fair value, refer to the corresponding asset/liability Valuation Technique described herein for the same instruments.
Valuation Hierarchy Classification:
For further information on the determination of valuation hierarchy classification, see the corresponding Valuation Hierarchy Classification described herein.
Deposits
Valuation Techniques:
The Firm issues FDIC-insured certificates of deposit that pay either fixed coupons or that have repayment terms linked to the performance of debt or equity securities, indices or currencies. The fair value of these certificates of deposit is determined using valuation models that incorporate observable inputs referencing identical or comparable securities, including prices to which the deposits are linked, interest rate yield curves, option volatility and currency rates, equity prices, and the impact of the Firm’s own credit spreads, adjusted for the impact of the FDIC insurance, which is based on vanilla deposit issuance rates.
Valuation Hierarchy Classification:
Level 2—when valuation inputs are observable
Level 3—in instances where an unobservable input is deemed significant
Securities Purchased under Agreements to Resell and Securities Sold under Agreements to Repurchase
Valuation Techniques:
Fair value is computed using a standard cash flow discounting methodology.
The inputs to the valuation include contractual cash flows and collateral funding spreads, which are the incremental
spread over the OIS rate for a specific collateral rate (which refers to the rate applicable to a specific type of security pledged as collateral).
Valuation Hierarchy Classification:
Level 2—when the valuation inputs are observable
Level 3—in instances where an unobservable input is deemed significant
Other Secured Financings
Valuation Techniques:
Other secured financings are composed of short-dated notes secured by Corporate equities, agreements to repurchase Physical commodities, the liabilities related to sales of Loans and lending commitments accounted for as financings, and secured contracts that are not classified as OTC derivatives because they fail net investment criteria. For further information on the determination of fair value, refer to the Valuation Techniques described herein for the corresponding instruments, which are the collateral referenced by the other secured financing liability.
Valuation Hierarchy Classification:
For further information on the determination of valuation hierarchy classification, see the Valuation Hierarchy Classification described herein for the corresponding instruments, which are the collateral referenced by the other secured financing liability.
Borrowings
Valuation Techniques:
The Firm carries certain borrowings at fair value that are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria.
Fair value is determined using valuation models for the derivative and debt portions of the instruments. These models incorporate observable inputs referencing identical or comparable securities, including prices to which the instruments are linked, interest rate yield curves, option volatility and currency rates, and commodity or equity prices.
Independent, external and traded prices are considered, as well as the impact of the Firm’s own credit spreads, which are based on observed secondary bond market spreads.
Valuation Hierarchy Classification:
Level 2—when valued using observable inputs or where the unobservable input is not deemed significant
Level 3—in instances where an unobservable input is deemed significant

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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
$ in millions202120202019
U.S. Treasury and agency securities
Beginning balance$$22 $54 
Realized and unrealized gains (losses) 
Purchases2 — 17 
Sales(9)(22)(54)
Net transfers 
Ending balance$2 $$22 
Unrealized gains (losses)$ $— $
Other sovereign government obligations
Beginning balance$268 $$17 
Realized and unrealized gains (losses)(1)— (3)
Purchases146 265 
Sales(192)(2)(6)
Net transfers(10)— (10)
Ending balance$211 $268 $
Unrealized gains (losses)$ $— $(3)
State and municipal securities
Beginning balance$— $$148 
Purchases4 — — 
Sales(4)— (147)
Net transfers13 (1)— 
Ending balance$13 $— $
Unrealized gains (losses)$ $— $— 
MABS
Beginning balance$322 $438 $354 
Realized and unrealized gains (losses)51 (66)(16)
Purchases254 175 132 
Sales(215)(244)(175)
Settlements — (44)
Net transfers(68)19 187 
Ending balance$344 $322 $438 
Unrealized gains (losses)$(10)$(49)$(57)
Loans and lending commitments
Beginning balance$5,759 $5,073 $6,870 
Realized and unrealized gains (losses)51 (65)38 
Purchases and originations2,446 3,479 2,337 
Sales(2,609)(957)(1,268)
Settlements(1,268)(2,196)(2,291)
Net transfers1
(573)425 (613)
Ending balance$3,806 $5,759 $5,073 
Unrealized gains (losses)$(7)$58 $(9)
Corporate and other debt
Beginning balance$3,435 $1,396 $1,076 
Realized and unrealized gains (losses)(140)318 418 
Purchases and originations1,355 2,623 650 
Sales(785)(617)(729)
Settlements (311)(7)
Net transfers2
(1,892)26 (12)
Ending balance$1,973 $3,435 $1,396 
Unrealized gains (losses)$(25)$311 $361 
$ in millions202120202019
Corporate equities
Beginning balance$86 $97 $95 
Realized and unrealized gains (losses)(8)(55)(8)
Purchases121 36 32 
Sales(50)(17)(271)
Net transfers(34)25 249 
Ending balance$115 $86 $97 
Unrealized gains (losses)$(3)$(39)$
Investments
Beginning balance$828 $858 $757 
Realized and unrealized gains (losses)382 32 78 
Purchases226 61 40 
Sales(115)(106)(41)
Net transfers(196)(17)24 
Ending balance$1,125 $828 $858 
Unrealized gains (losses)$359 $(45)$67 
Investment securities—AFS
Beginning balance$2,804 $— $— 
Realized and unrealized gains (losses)(4)— 
Purchases3
 2,799 — 
Sales(203)— — 
Net transfers3
(2,597)— — 
Ending balance$ $2,804 $ 
Unrealized gains (losses)$ $$— 
Securities purchased under agreements to resell
Beginning balance$$— $— 
Net transfers(3)— 
Ending balance$ $3 $ 
Unrealized gains (losses)$ $— $— 
Net derivatives: Interest rate
Beginning balance$682 $777 $618 
Realized and unrealized gains (losses)284 (150)17 
Purchases67 174 98 
Issuances(52)(44)(16)
Settlements14 40 
Net transfers(287)(115)59 
Ending balance$708 $682 $777 
Unrealized gains (losses)$292 $(34)$87 
Net derivatives: Credit
Beginning balance$49 $124 $40 
Realized and unrealized gains (losses)95 (91)(24)
Purchases18 98 144 
Issuances(46)(112)(190)
Settlements58 94 111 
Net transfers(76)(64)43 
Ending balance$98 $49 $124 
Unrealized gains (losses)$122 $(111)$(17)
December 2021 Form 10-K
94

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
$ in millions202120202019
Net derivatives: Foreign exchange
Beginning balance$61 $(31)$75 
Realized and unrealized gains (losses)(89)156 (295)
Purchases2 
Issuances(15)— — 
Settlements16 (17)
Net transfers77 (51)180 
Ending balance$52 $61 $(31)
Unrealized gains (losses)$(62)$94 $(187)
Net derivatives: Equity
Beginning balance$(2,231)$(1,684)$(1,485)
Realized and unrealized gains (losses)344 72 (260)
Purchases70 179 155 
Issuances(443)(713)(643)
Settlements160 (354)242 
Net transfers2
1,155 269 307 
Ending balance$(945)$(2,231)$(1,684)
Unrealized gains (losses)$(103)$(210)$(194)
Net derivatives: Commodity and other
Beginning balance$1,709 $1,612 $2,052 
Realized and unrealized gains (losses)529 251 73 
Purchases44 89 152 
Issuances(86)(57)(92)
Settlements(599)(183)(611)
Net transfers(68)(3)38 
Ending balance$1,529 $1,709 $1,612 
Unrealized gains (losses)$141 $(309)$(113)
Deposits
Beginning balance$126 $179 $27 
Realized and unrealized losses (gains) 15 20 
Issuances 21 101 
Settlements(10)(17)(15)
Net transfers(49)(72)46 
Ending balance$67 $126 $179 
Unrealized losses (gains)$ $15 $20 
Nonderivative trading liabilities
Beginning balance$79 $37 $16 
Realized and unrealized losses (gains)(21)(18)(21)
Purchases(30)(35)(65)
Sales43 27 38 
Settlements — 
Net transfers(10)65 69 
Ending balance$61 $79 $37 
Unrealized losses (gains)$(21)$(18)$(21)
Securities sold under agreements to repurchase
Beginning balance$444 $— $— 
Realized and unrealized losses (gains)1 (27)— 
Issuances 470 — 
Net transfers206 — 
Ending balance$651 $444 $— 
Unrealized losses (gains)$1 $(27)$— 
$ in millions202120202019
Other secured financings
Beginning balance$516 $109 $208 
Realized and unrealized losses (gains)(17)21 
Issuances449 208 — 
Settlements(518)(217)(8)
Net transfers(27)395 (96)
Ending balance$403 $516 $109 
Unrealized losses (gains)$(16)$21 $
Borrowings
Beginning balance$4,374 $4,088 $3,806 
Realized and unrealized losses (gains)(99)204 728 
Issuances717 980 1,181 
Settlements(448)(461)(950)
Net transfers2
(2,387)(437)(677)
Ending balance$2,157 $4,374 $4,088 
Unrealized losses (gains)$(114)$201 $600 
Portion of unrealized losses (gains) recorded in OCI—Change in net DVA(17)63 182 
1.Net transfers in 2021 reflect the transfer in the third quarter of $895 million of equity margin loans from Level 3 to Level 2 as a result of the reduced significance of the margin loan rate input. Net transfers in 2020 reflect the largely offsetting impacts of equity margin loan transfers of $857 million into Level 3 in the first quarter and $707 million out of Level 3 in the second quarter, both driven by changes in the significance level of the margin loan rate input based on changes in liquidity conditions.
2.Net transfers in 2021 reflect the transfer in the second quarter of $2.0 billion of Corporate and other debt, $1.0 billion of net Equity derivatives and $2.2 billion of Borrowings from Level 3 to Level 2 as the unobservable inputs were not significant to the overall fair value measurements.
3.Net transfers in 2021 reflect the transfer in the first quarter of $2.5 billion of AFS securities from Level 3 to Level 2 due to increased trading activity and observability of pricing inputs. Purchases of AFS investment securities in 2020 relate to securities acquired as part of the E*TRADE transaction. For additional information on the acquisition of E*TRADE, see Note 3.
Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. The realized and unrealized gains or losses for assets and liabilities within the Level 3 category presented in the previous tables do not reflect the related realized and unrealized gains or losses on hedging instruments that have been classified by the Firm within the Level 1 and/or Level 2 categories.
The unrealized gains (losses) during the period for assets and liabilities within the Level 3 category may include changes in fair value during the period that were attributable to both observable and unobservable inputs. Total realized and unrealized gains (losses) are primarily included in Trading revenues in the income statement.
Additionally, in the previous tables, consolidations of VIEs are included in Purchases, and deconsolidations of VIEs are included in Settlements.
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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements
Valuation Techniques and Unobservable Inputs
Balance / Range (Average1)
$ in millions, except inputs
At December 31, 2021At December 31, 2020
Assets at Fair Value on a Recurring Basis
Other sovereign government obligations$211 $268 
Comparable pricing:
Bond price
100 to 140 points (120 points)
106 points
MABS$344 $322 
Comparable pricing:
Bond price
0 to 86 points (59 points)
0 to 80 points (50 points)
Loans and lending
commitments
$3,806 $5,759 
Margin loan model:
Margin loan rate
1% to 4% (3%)
1% to 5% (3%)
Comparable pricing:
Loan price
89 to 101 points (97 points)
75 to 102 points (93 points)
Corporate and
other debt
$1,973 $3,435 
Comparable pricing:
Bond price
50 to 163 points (99 points)
10 to 133 points (101 points)
Discounted cash flow:
Loss given default
54% to 84% (62% / 54%)
40% to 62% (46% / 40%)
Option model:
Equity volatilityN/M
18% to 21% (19%)
Corporate equities$115 $86 
Comparable pricing:
Equity price
100%
100%
Investments$1,125 $828 
Discounted cash flow:
WACC
10% to 16% (15%)
8% to 18% (15%)
Exit multiple
8 to 17 times (12 times)
7 to 17 times (12 times)
Market approach:
EBITDA multiple
8 to 25 times (10 times)
8 to 32 times (11 times)
Comparable pricing:
Equity price
43% to 100% (99%)
45% to 100% (99%)
Investment securities—AFS$ $2,804 
Comparable pricing:
Bond priceN/A
97 to 107 points (101 points)
Net derivative and other contracts:
Interest rate$708 $682 
Option model:
IR volatility skew
39% to 79% (64% / 63%)
0% to 349% (62% / 59%)
IR curve correlation
62% to 98% (83% / 84%)
54% to 99% (87% / 89%)
Bond volatility
5% to 32% (12% / 9%)
6% to 24% (13% / 13%)
Inflation volatility
24% to 65% (44% / 40%)
25% to 66% (45% / 43%)
IR curve
4%
%
Balance / Range (Average1)
$ in millions, except inputs
At December 31, 2021At December 31, 2020
Credit$98 $49 
Credit default swap model:
Cash-synthetic basis
7 points
7 points
Bond price
0 to 83 points (46 points)
0 to 85 points (47 points)
Credit spread
14 to 477 bps (68 bps)
20 to 435 bps (74 bps)
Funding spread
15 to 433 bps (55 bps)
65 to 118 bps (86 bps)
Correlation model:
Credit correlationN/A
27% to 44% (32%)
Foreign exchange2
$52 $61 
Option model:
IR - FX correlation
53% to 56% (55% / 54%)
55% to 59% (56% / 56%)
IR volatility skew
39% to 79% (64% / 63%)
0% to 349% (62% / 59%)
IR curve
-1% to 7% (2% / 0%)
6% to 8% (7% / 8%)
Foreign exchange volatility skew
 -4% to -2% (-3% / -3%)
 -22% to 28% (3% / 1%)
Contingency probability
90% to 95% (94% / 95%)
50% to 95% (83% / 93%)
Equity2
$(945)$(2,231)
Option model:
Equity volatility
5% to 99% (24%)
16% to 97% (43%)
Equity volatility skew
 -4% to 0% (-1%)
 -3% to 0% (-1%)
Equity correlation
5% to 99% (73%)
24% to 96% (74%)
FX correlation
 -85% to 37% (-42%)
 -79% to 60% (-16%)
IR correlation
 13% to 30% (15%)
 -13% to 47% (21% / 20%)
Commodity and other$1,529 $1,709 
Option model:
Forward power price
$4 to $263 ($39) per MWh
$-1 to $157 ($28) per MWh
Commodity volatility
8% to 385% (22%)
8% to 183% (19%)
Cross-commodity correlation
43% to 100% (94%)
43% to 99% (92%)
Liabilities at Fair Value on a Recurring Basis
Deposits$67 $126 
Option model:
 Equity volatility
7%
7% to 22% (8%)
Nonderivative trading liabilities
—Corporate equities
$45 $63 
Comparable pricing:
Equity price
100%
100%
Securities sold under agreements to repurchase$651 $444 
Discounted cash flow:
Funding spread
112 to 127 bps (120 bps)
107 to 127 bps (115 bps)
Other secured financings$403 $516 
Discounted cash flow:
Funding spreadN/A
111 bps (111 bps)
Comparable pricing:
Loan price
30 to 100 points (83 points)
30 to 101 points (56 points)
December 2021 Form 10-K
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Notes to Consolidated Financial Statements
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Balance / Range (Average1)
$ in millions, except inputs
At December 31, 2021At December 31, 2020
Borrowings$2,157 $4,374 
Option model:
Equity volatility
 7% to 85% (20%)
6% to 66% (23%)
Equity volatility skew
 -1% to 0% (0%)
 -2% to 0% (0%)
Equity correlation
41% to 95% (81%)
37% to 95% (78%)
Equity - FX correlation
 -55% to 25% (-30%)
 -72% to 13% (-24%)
IR - FX Correlation
 -26% to 8% (-5% / -5%)
 -28% to 6% (-6% / -6%)
Discounted cash flow:
Loss given default
54% to 84% (62% / 54%)
N/M
Nonrecurring Fair Value Measurement
Loans$1,576 $3,134 
Corporate loan model:
Credit spread
108 to 565 bps (284 bps)
36 to 636 bps (336 bps)
Comparable pricing:
Loan price
40 to 80 points (61 points)
N/M
Warehouse model:
Credit spread
182 to 446 bps (376 bps)
200 to 413 bps (368 bps)
Comparable pricing:
Bond PriceN/M
88 to 99 bps (94 bps)
Points—Percentage of par
IR—Interest rate
FX—Foreign exchange
1.A single amount is disclosed for range and average when there is no significant difference between the minimum, maximum and average. Amounts represent weighted averages except where simple averages and the median of the inputs are more relevant.
2.Includes derivative contracts with multiple risks (i.e., hybrid products).
The previous table provides information on the valuation techniques, significant unobservable inputs, and the ranges and averages for each major category of assets and liabilities measured at fair value on a recurring and nonrecurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory of financial instruments. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm’s inventory. Generally, there are no predictable relationships between multiple significant unobservable inputs attributable to a given valuation technique.
During 2021, there were no significant revisions made to the descriptions of the Firm’s significant unobservable inputs.
An increase (decrease) to the following significant unobservable inputs would generally result in a higher (lower) fair value.
Comparable Bond or Loan Price. A pricing input used when prices for the identical instrument are not available. Significant subjectivity may be involved when fair value is determined using pricing data available for comparable instruments. Valuation using comparable instruments can be done by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable bond or loan, then adjusting that yield (or spread) to derive a value for the bond or loan. The adjustment to yield (or spread)
should account for relevant differences in the bonds or loans such as maturity or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and the bond or loan being valued in order to establish the value of the bond or loan.
Comparable Equity Price. A price derived from equity raises, share buybacks and external bid levels, etc. A discount or premium may be included in the fair value estimate.
Contingency Probability. Probability associated with the realization of an underlying event upon which the value of an asset is contingent.
EBITDA Multiple/Exit Multiple. The ratio of Enterprise Value to EBITDA, where enterprise value is the aggregate value of equity and debt minus cash and cash equivalents. The EBITDA multiple reflects the value of the company in terms of its full-year EBITDA, whereas the exit multiple reflects the value of the company in terms of its full-year expected EBITDA at exit. Either multiple allows comparison between companies from an operational perspective as the effect of capital structure, taxation and depreciation/amortization is excluded.
An increase (decrease) to the following significant unobservable inputs would generally result in a lower (higher) fair value.
Cash-Synthetic Basis. The measure of the price differential between cash financial instruments and their synthetic derivative-based equivalents. The range disclosed in the previous table signifies the number of points by which the synthetic bond equivalent price is higher than the quoted price of the underlying cash bonds.
Funding Spread. The cost of borrowing defined as the incremental spread over the OIS rate for a specific collateral rate (which refers to the rate applicable to a specific type of security pledged as collateral).
Loss Given Default. Amount expressed as a percentage of par that is the expected loss when a credit event occurs.
Margin Loan Rate. The annualized rate that reflects the possibility of losses as a result of movements in the price of the underlying margin loan collateral. The rate is calibrated from the discount rate, credit spreads and/or volatility measures.
WACC. WACC represents the theoretical rate of return required to debt and equity investors. The WACC is used in a discounted cash flow model that calculates the value of the equity. The model assumes that the cash flow assumptions, including projections, are fully reflected in the current equity value, while the debt to equity ratio is held constant.
97
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
An increase (decrease) to the following significant unobservable inputs would generally result in an impact to the fair value, but the magnitude and direction of the impact would depend on whether the Firm is long or short the exposure.
Correlation. A pricing input where the payoff is driven by more than one underlying risk. Correlation is a measure of the relationship between the movement of two variables (i.e., how the change in one variable influences a change in the other variable).
Credit Spread. The credit spread reflects the additional net yield an investor can earn from a security with more credit risk relative to one with less credit risk. The credit spread of a particular security is often quoted in relation to the yield on a credit risk-free benchmark security or reference rate.
Interest Rate Curve. The term structure of interest rates (relationship between interest rates and the time to maturity) and a market’s measure of future interest rates at the time of observation. An interest rate curve is used to set interest rate and foreign exchange derivative cash flows and is a pricing input used in the discounting of any OTC derivative cash flow.
Volatility. The measure of variability in possible returns for an instrument given how much that instrument changes in value over time. Volatility is a pricing input for options, and, generally, the lower the volatility, the less risky the option. The level of volatility used in the valuation of a particular option depends on a number of factors, including the nature of the risk underlying that option, the tenor and the strike price of the option.
Volatility Skew. The measure of the difference in implied volatility for options with identical underliers and expiry dates but with different strikes.

Net Asset Value Measurements
Fund Interests
 At December 31, 2021At December 31, 2020
$ in millionsCarrying
Value
CommitmentCarrying
Value
Commitment
Private equity$2,492 $615 $2,367 $644 
Real estate2,064 248 1,403 136 
Hedge1
191 2 59 — 
Total$4,747 $865 $3,829 $780 
1.Investments in hedge funds may be subject to initial period lock-up or gate provisions, which restrict an investor from withdrawing from the fund during a certain initial period or restrict the redemption amount on any redemption date, respectively.
Amounts in the previous table represent the Firm’s carrying value of general and limited partnership interests in fund investments, as well as any related performance-based income in the form of carried interest. The carrying amounts are measured based on the NAV of the fund taking into account the distribution terms applicable to the interest held. This same measurement applies whether the fund investments are accounted for under the equity method or fair value.
Private Equity.    Funds that pursue multiple strategies, including leveraged buyouts, venture capital, infrastructure growth capital, distressed investments and mezzanine capital. In addition, the funds may be structured with a focus on specific geographic regions.
Real Estate.    Funds that invest in real estate assets such as commercial office buildings, retail properties, multi-family residential properties, developments or hotels. In addition, the funds may be structured with a focus on specific geographic regions.
Investments in private equity and real estate funds generally are not redeemable due to the closed-end nature of these funds. Instead, distributions from each fund will be received as the underlying investments of the funds are disposed and monetized.
Hedge.    Funds that pursue various investment strategies, including long-short equity, fixed income/credit, event-driven and multi-strategy.
See Note 15 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received. See Note 23 for information regarding carried interest at risk of reversal.
Nonredeemable Funds by Contractual Maturity
 Carrying Value at December 31, 2021
$ in millionsPrivate EquityReal Estate
Less than 5 years$982 $403 
5-10 years1,163 1,283 
Over 10 years347 378 
Total$2,492 $2,064 
December 2021 Form 10-K
98

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Nonrecurring Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
 At December 31, 2021
$ in millionsLevel 2
Level 31
Total
Assets
Loans$4,035 $1,576 $5,611 
Other assets—Other investments 8 8 
Other assets—ROU assets16  16 
Total$4,051 $1,584 $5,635 
Liabilities
Other liabilities and accrued expenses—Lending commitments
$173 $70 $243 
Total$173 $70 $243 
 At December 31, 2020
$ in millionsLevel 2
Level 31
Total
Assets
Loans$2,566 $3,134 $5,700 
Other assets—Other investments— 16 16 
Other assets—ROU assets21 — 21 
Total$2,587 $3,150 $5,737 
Liabilities
Other liabilities and accrued expenses—Lending commitments
$193 $72 $265 
Total$193 $72 $265 
1.For significant Level 3 balances, refer to “Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements” section herein for details of the significant unobservable inputs used for nonrecurring fair value measurement.
Gains (Losses) from Nonrecurring Fair Value Remeasurements1
$ in millions202120202019
Assets
Loans2
$(89)$(354)$18 
Goodwill(8)— — 
Intangibles(3)(2)— 
Other assets—Other investments3
(57)(56)(56)
Other assets—Premises, equipment and software4
(14)(45)(22)
Other assets—ROU assets5
(25)(23)— 
Total$(196)$(480)$(60)
Liabilities
Other liabilities and accrued expenses—Lending commitments2
$37 $(5)$87 
Total$37 $(5)$87 
1.Gains and losses for Loans and Other assets—Other investments are classified in Other revenues. For other items, gains and losses are recorded in Other revenues if the item is held for sale; otherwise, they are recorded in Other expenses.
2.Nonrecurring changes in the fair value of loans and lending commitments, which exclude the impact of related economic hedges, are calculated as follows: for the held-for-investment category, based on the value of the underlying collateral; and for the held-for-sale category, based on recently executed transactions, market price quotations, valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and CDS spread levels adjusted for any basis difference between cash and derivative instruments, or default recovery analysis where such transactions and quotations are unobservable.
3.Losses related to Other assets—Other investments were determined using techniques that included discounted cash flow models, methodologies that incorporate multiples of certain comparable companies and recently executed transactions.
4.Losses related to Other assets—Premises, equipment and software generally include impairments as well as write-offs related to the disposal of certain assets.
5.Losses related to Other assets—ROU assets include impairments related to the discontinued use of certain leased properties.
Financial Instruments Not Measured at Fair Value
 At December 31, 2021
 Carrying
Value
Fair Value
$ in millionsLevel 1Level 2Level 3Total
Financial assets
Cash and cash equivalents$127,725 $127,725 $ $ $127,725 
Investment securities—HTM
80,168 29,454 49,352 1,076 79,882 
Securities purchased 
under agreements to resell
119,992  117,922 2,075 119,997 
Securities borrowed129,713  129,713  129,713 
Customer and other receivables91,664  88,091 3,442 91,533 
Loans1
188,134  25,706 163,784 189,490 
Other assets528  528  528 
Financial liabilities
Deposits$345,634 $ $345,911 $ $345,911 
Securities sold under agreements to repurchase61,397  61,419  61,419 
Securities loaned12,299  12,296  12,296 
Other secured financings
4,908  4,910  4,910 
Customer and other payables228,631  228,631  228,631 
Borrowings156,787  162,154 4 162,158 
Commitment
Amount
Lending commitments3
$133,519 $ $890 $470 $1,360 
 At December 31, 2020
 Carrying
Value
Fair Value
$ in millionsLevel 1Level 2Level 3Total
Financial assets
Cash and cash equivalents$105,654 $105,654 $— $— $105,654 
Investment securities—HTM
71,771 31,239 42,281 900 74,420 
Securities purchased 
under agreements to resell
116,219 — 114,046 2,173 116,219 
Securities borrowed112,391 — 112,392 — 112,392 
Customer and other receivables92,907 — 89,832 3,041 92,873 
Loans1
150,597 — 16,635 135,277 151,912 
Other assets485 — 485 — 485 
Financial liabilities
Deposits$307,261 $— $307,807 $— $307,807 
Securities sold under agreements to repurchase
49,472 — 49,315 195 49,510 
Securities loaned7,731 — 7,731 — 7,731 
Other secured financings
4,162 — 4,162 — 4,162 
Customer and other payables224,951 — 224,951 — 224,951 
Borrowings143,378 — 150,824 150,829 
Commitment
Amount
Lending commitments2
$125,498 $— $709 $395 $1,104 
1.Amounts include loans measured at fair value on a nonrecurring basis.
2.Represents Lending commitments accounted for as Held for Investment and Held for Sale. For a further discussion on lending commitments, see Note 15.
The previous tables exclude all non-financial assets and liabilities, such as the value of the long-term relationships with the Firm’s deposit customers, and certain financial instruments, such as equity method investments and certain receivables.
99
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
6. Fair Value Option
The Firm has elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models.
Borrowings Measured at Fair Value on a Recurring Basis
$ in millions
At
December 31, 2021
At
December 31, 2020
Business Unit Responsible for Risk Management
Equity$37,046 $33,952 
Interest rates28,638 31,222 
Commodities7,837 5,078 
Credit1,347 1,344 
Foreign exchange1,472 2,105 
Total$76,340 $73,701 
Net Revenues from Borrowings under the Fair Value Option
$ in millions202120202019
Trading revenues$899 $(5,135)$(6,932)
Interest expense305 341 375 
Net revenues1
$594 $(5,476)$(7,307)
1.Amounts do not reflect any gains or losses from related economic hedges.
Gains (losses) from changes in fair value are recorded in Trading revenues and are mainly attributable to movements in the reference price or index, interest rates or foreign exchange rates.
Gains (Losses) Due to Changes in Instrument-Specific Credit Risk
$ in millionsTrading
Revenues
OCI
2021
Loans and other receivables1
$278 $ 
Lending commitments2  
Deposits 17 
Borrowings(36)901 
2020
Loans and other receivables1
$(116)$— 
Lending commitments(3)— 
Deposits— (19)
Borrowings(26)(1,340)
2019
Loans and other receivables1
$223 $— 
Lending commitments(2)— 
Deposits— (30)
Borrowings(11)(2,140)
Other— — 
$ in millions
At
December 31, 2021
At
December 31, 2020
Cumulative pre-tax DVA gain (loss) recognized in AOCI$(2,439)$(3,357)
1.Loans and other receivables-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses.
Difference between Contractual Principal and Fair Value1
$ in millions
At
December 31, 2021
At
December 31, 2020
Loans and other receivables2
$12,633 $14,042 
Nonaccrual loans2
9,999 11,551 
Borrowings3
(2,106)(3,773)
1.Amounts indicate contractual principal greater than or (less than) fair value.
2.The majority of the difference between principal and fair value amounts for loans and other receivables relates to distressed debt positions purchased at amounts well below par.
3.Excludes borrowings where the repayment of the initial principal amount fluctuates based on changes in a reference price or index.
The previous tables exclude non-recourse debt from consolidated VIEs, liabilities related to transfers of financial assets treated as collateralized financings, pledged commodities and other liabilities that have specified assets attributable to them.
Fair Value Loans on Nonaccrual Status
$ in millions
At
December 31, 2021
At
December 31, 2020
Nonaccrual loans$989 $1,407 
Nonaccrual loans 90 or more
days past due
$363 $239 
7. Derivative Instruments and Hedging Activities
The Firm trades and makes markets globally in listed futures, OTC swaps, forwards, options and other derivatives referencing, among other things, interest rates, equities, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, ABS indices, property indices, mortgage-related and other ABS, and real estate loan products. The Firm uses these instruments for market-making, managing foreign currency and credit exposure, and asset/liability management.
The Firm manages its market-making positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). The Firm manages the market risk associated with its market-making activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis.
December 2021 Form 10-K
100

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Fair Values of Derivative Contracts
 
Assets at December 31, 2021
$ in millionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$594 $1 $ $595 
Foreign exchange191 6  197 
Total785 7  792 
Not designated as accounting hedges
Economic hedges of loans
Credit 15  15 
Other derivatives
Interest rate147,585 7,002 383 154,970 
Credit5,749 3,186  8,935 
Foreign exchange73,276 1,219 39 74,534 
Equity28,877  41,455 70,332 
Commodity and other22,175  5,538 27,713 
Total277,662 11,422 47,415 336,499 
Total gross derivatives$278,447 $11,429 $47,415 $337,291 
Amounts offset
Counterparty netting(201,729)(9,818)(42,883)(254,430)
Cash collateral netting(43,495)(1,212) (44,707)
Total in Trading assets$33,223 $399 $4,532 $38,154 
Amounts not offset1
Financial instruments collateral
(10,457)  (10,457)
Net amounts$22,766 $399 $4,532 $27,697 
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable$6,725 
 
Liabilities at December 31, 2021
$ in millionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$86 $1 $ $87 
Foreign exchange57 50  107 
Total143 51  194 
Not designated as accounting hedges
Economic hedges of loans
Credit17 412  429 
Other derivatives
Interest rate140,770 6,112 233 147,115 
Credit5,609 3,463  9,072 
Foreign exchange71,851 1,196 41 73,088 
Equity39,597  41,081 80,678 
Commodity and other17,188  5,740 22,928 
Total275,032 11,183 47,095 333,310 
Total gross derivatives$275,175 $11,234 $47,095 $333,504 
Amounts offset
Counterparty netting(201,729)(9,818)(42,883)(254,430)
Cash collateral netting(43,305)(1,201) (44,506)
Total in Trading liabilities$30,141 $215 $4,212 $34,568 
Amounts not offset1
Financial instruments collateral
(5,866)(8)(39)(5,913)
Net amounts$24,275 $207 $4,173 $28,655 
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable$6,194 
 
Assets at December 31, 2020
$ in millionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$946 $$— $948 
Foreign exchange— 
Total951 — 955 
Not designated as accounting hedges
Economic hedges of loans
Credit2
51 — 53 
Other derivatives
Interest rate221,895 10,343 300 232,538 
Credit2
5,341 2,147 — 7,488 
Foreign exchange92,334 1,639 79 94,052 
Equity34,278 — 34,166 68,444 
Commodity and other11,095 — 3,554 14,649 
Total364,945 14,180 38,099 417,224 
Total gross derivatives$365,896 $14,184 $38,099 $418,179 
Amounts offset
Counterparty netting(276,682)(11,601)(35,260)(323,543)
Cash collateral netting(54,921)(1,865)— (56,786)
Total in Trading assets$34,293 $718 $2,839 $37,850 
Amounts not offset1
Financial instruments collateral
(13,319)— — (13,319)
Other cash collateral(391)— — (391)
Net amounts$20,583 $718 $2,839 $24,140 
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable$3,743 
 
Liabilities at December 31, 2020
$ in millionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$— $19 $— $19 
Foreign exchange291 99 — 390 
Total291 118 — 409 
Not designated as accounting hedges
Economic hedges of loans
Credit2
18 177 — 195 
Other derivatives
Interest rate210,015 7,965 639 218,619 
Credit2
5,275 2,682 — 7,957 
Foreign exchange92,975 1,500 43 94,518 
Equity49,943 — 36,585 86,528 
Commodity and other8,831 — 3,359 12,190 
Total367,057 12,324 40,626 420,007 
Total gross derivatives$367,348 $12,442 $40,626 $420,416 
Amounts offset
Counterparty netting(276,682)(11,601)(35,260)(323,543)
Cash collateral netting(51,112)(823)— (51,935)
Total in Trading liabilities$39,554 $18 $5,366 $44,938 
Amounts not offset1
Financial instruments collateral
(10,598)— (1,520)(12,118)
Other cash collateral(62)(3)— (65)
Net amounts$28,894 $15 $3,846 $32,755 
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable$6,746 
1.Amounts relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance.
2.Certain prior period amounts have been reclassified to conform to the current presentation.
101
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
See Note 5 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables.
Notionals of Derivative Contracts
 
Assets at December 31, 2021
$ in billionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$4 $104 $ $108 
Foreign exchange8 1  9 
Total12 105  117 
Not designated as accounting hedges
Economic hedges of loans
Credit    
Other derivatives
Interest rate3,488 7,082 570 11,140 
Credit216 105  321 
Foreign exchange3,386 95 10 3,491 
Equity495  407 902 
Commodity and other139  73 212 
Total7,724 7,282 1,060 16,066 
Total gross derivatives$7,736 $7,387 $1,060 $16,183 
 
Liabilities at December 31, 2021
$ in billionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$ $99 $ $99 
Foreign exchange5 3  8 
Total5 102  107 
Not designated as accounting hedges
Economic hedges of loans
Credit1 12  13 
Other derivatives
Interest rate3,827 6,965 445 11,237 
Credit225 106  331 
Foreign exchange3,360 88 12 3,460 
Equity552  735 1,287 
Commodity and other110  81 191 
Total8,075 7,171 1,273 16,519 
Total gross derivatives$8,080 $7,273 $1,273 $16,626 
 
Assets at December 31, 2020
$ in billionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$$123 $— $129 
Foreign exchange— — 
Total123 — 131 
Not designated as accounting hedges
Economic hedges of loans
Credit1
— — 
Other derivatives
Interest rate3,847 6,946 409 11,202 
Credit1
140 87 — 227 
Foreign exchange3,046 103 10 3,159 
Equity444 — 367 811 
Commodity and other107 — 68 175 
Total7,584 7,137 854 15,575 
Total gross derivatives$7,592 $7,260 $854 $15,706 
 
Liabilities at December 31, 2020
$ in billionsBilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate$— $80 $— $80 
Foreign exchange11 — 14 
Total11 83 — 94 
Not designated as accounting hedges
Economic hedges of loans
Credit1
— 
Other derivatives
Interest rate4,000 6,915 511 11,426 
Credit1
142 93 — 235 
Foreign exchange3,180 102 11 3,293 
Equity474 — 591 1,065 
Commodity and other93 — 68 161 
Total7,890 7,115 1,181 16,186 
Total gross derivatives$7,901 $7,198 $1,181 $16,280 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
The notional amounts of derivative contracts generally overstate the Firm’s exposure. In most circumstances, notional amounts are used only as a reference point from which to calculate amounts owed between the parties to the contract. Furthermore, notional amounts do not reflect the benefit of legally enforceable netting arrangements or risk mitigating transactions.
Gains (Losses) on Accounting Hedges
$ in millions202120202019
Fair value hedges—Recognized in Interest income
Interest rate contracts$742 $75 $(10)
Investment Securities—AFS(629)(33)10 
Fair value hedges—Recognized in Interest expense
Interest rate contracts$(4,306)$4,678 $4,212 
Deposits88 (100)
Borrowings4,214 (4,692)(4,288)
Net investment hedges—Foreign exchange contracts
Recognized in OCI$664 $(366)$14 
Forward points excluded from hedge
effectiveness testing—Recognized in
Interest income
(53)16 136 
Fair Value Hedges—Hedged Items
$ in millions
At
December 31, 2021
At
December 31, 2020
Investment securities—AFS
Amortized cost basis currently or previously hedged$17,902 $16,288 
Basis adjustments included in amortized cost1
$(591)$(39)
Deposits
Carrying amount currently or previously hedged$6,279 $15,059 
Basis adjustments included in carrying amount1
$5 $93 
Borrowings
Carrying amount currently or previously hedged$122,919 $114,349 
Basis adjustments included in carrying amount—Outstanding hedges$2,324 $6,575 
Basis adjustments included in carrying amount—Terminated hedges
$(743)$(756)
1.Hedge accounting basis adjustments are primarily related to outstanding hedges.
December 2021 Form 10-K
102

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Gains (Losses) on Economic Hedges of Loans
$ in millions202120202019
Recognized in Other revenues
Credit contracts1
(285)(179)
1.Amounts related to hedges of certain held-for-investment and held-for-sale loans.
Derivatives with Credit Risk-Related Contingencies
Net Derivative Liabilities and Collateral Posted
$ in millions
At
December 31, 2021
At
December 31, 2020
Net derivative liabilities with credit risk-related contingent features$20,548 $30,421 
Collateral posted14,789 23,842 
The previous table presents the aggregate fair value of certain derivative contracts that contain credit risk-related contingent features that are in a net liability position for which the Firm has posted collateral in the normal course of business.
Incremental Collateral and Termination Payments upon Potential Future Ratings Downgrade
$ in millions
At
December 31, 2021
One-notch downgrade$234 
Two-notch downgrade357 
Bilateral downgrade agreements included in the amounts above1
$477 
1.Amount represents arrangements between the Firm and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are used by the Firm to manage the risk of counterparty downgrades.
The additional collateral or termination payments that may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. The previous table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch downgrade scenarios based on the relevant contractual downgrade triggers.
Maximum Potential Payout/Notional of Credit Protection Sold1
 Years to Maturity at December 31, 2021
$ in billions< 11-33-5Over 5Total
Single-name CDS
Investment grade$10 $26 $29 $9 $74 
Non-investment grade5 13 17 2 37 
Total$15 $39 $46 $11 $111 
Index and basket CDS
Investment grade$2 $11 $106 $15 $134 
Non-investment grade9 14 37 12 72 
Total$11 $25 $143 $27 $206 
Total CDS sold$26 $64 $189 $38 $317 
Other credit contracts     
Total credit protection sold$26 $64 $189 $38 $317 
CDS protection sold with identical protection purchased$278 
 Years to Maturity at December 31, 2020
$ in billions< 11-33-5Over 5Total
Single-name CDS
Investment grade$$19 $32 $$69 
Non-investment grade10 17 36 
Total$16 $29 $49 $11 $105 
Index and basket CDS
Investment grade$$$39 $14 $60 
Non-investment grade29 14 58 
Total$$14 $68 $28 $118 
Total CDS sold$24 $43 $117 $39 $223 
Other credit contracts— — — — — 
Total credit protection sold$24 $43 $117 $39 $223 
CDS protection sold with identical protection purchased$196 
Fair Value Asset (Liability) of Credit Protection Sold1
$ in millions
At
December 31, 2021
At
December 31, 2020
Single-name CDS
Investment grade$1,428 $1,230 
Non-investment grade(370)(22)
Total$1,058 $1,208 
Index and basket CDS
Investment grade$1,393 $843 
Non-investment grade(650)(824)
Total$743 $19 
Total CDS sold$1,801 $1,227 
Other credit contracts(3)(4)
Total credit protection sold$1,798 $1,223 
1.Investment grade/non-investment grade determination is based on the internal credit rating of the reference obligation. Internal credit ratings serve as the CRM’s assessment of credit risk and the basis for a comprehensive credit limits framework used to control credit risk. The Firm uses quantitative models and judgment to estimate the various risk parameters related to each obligor.
Protection Purchased with CDS
Notional
$ in billionsAt
December 31,
2021
At
December 31,
2020
Single name$126 $116 
Index and basket204 116 
Tranched index and basket18 14 
Total$348 $246 
Fair Value Asset (Liability)
$ in millionsAt
December 31,
2021
At
December 31,
2020
Single name$(1,338)$(1,452)
Index and basket(563)(57)
Tranched index and basket(451)(329)
Total$(2,352)$(1,838)
The Firm enters into credit derivatives, principally CDS, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Firm’s counterparties for these derivatives are banks, broker-dealers, and insurance and other financial institutions.
The fair value amounts as shown in the previous tables are prior to cash collateral or counterparty netting.
103
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
The purchase of credit protection does not represent the sole manner in which the Firm risk manages its exposure to credit derivatives. The Firm manages its exposure to these derivative contracts through a variety of risk mitigation strategies, which include managing the credit and correlation risk across single-name, non-tranched indices and baskets, tranched indices and baskets, and cash positions. Aggregate market risk limits have been established for credit derivatives, and market risk measures are routinely monitored against these limits. The Firm may also recover amounts on the underlying reference obligation delivered to the Firm under CDS where credit protection was sold.
Single-Name CDS.    A CDS protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a periodic premium (generally quarterly) over the life of the contract and is protected for the period. The Firm, in turn, performs under a CDS if a credit event as defined under the contract occurs. Typical credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay and restructuring of the obligations of the referenced entity.
Index and Basket CDS.    Index and basket CDS are products where credit protection is provided on a portfolio of single-name CDS. Generally, in the event of a default on one of the underlying names, the Firm pays a pro rata portion of the total notional amount of the CDS.
The Firm also enters into tranched index and basket CDS where credit protection is provided on a particular portion of the portfolio loss distribution. The most junior tranches cover initial defaults, and once losses exceed the notional of the tranche, they are passed on to the next most senior tranche in the capital structure.
Other Credit Contracts.    The Firm has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Firm.
8. Investment Securities
AFS and HTM Securities
At December 31, 2021
$ in millions
Amortized
Cost1
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
AFS securities
U.S. Treasury securities$58,974 $343 $296 $59,021 
U.S. agency securities2
26,780 274 241 26,813 
Agency CMBS14,476 289 89 14,676 
State and municipal securities613 37 2 648 
FFELP student loan ABS3
1,672 11 11 1,672 
Total AFS securities102,515 954 639 102,830 
HTM securities
U.S. Treasury securities28,653 882 81 29,454 
U.S. agency securities2
48,195 169 1,228 47,136 
Agency CMBS2,267  51 2,216 
Non-agency CMBS1,053 28 5 1,076 
Total HTM securities80,168 1,079 1,365 79,882 
Total investment securities$182,683 $2,033 $2,004 $182,712 
At December 31, 2020
$ in millions
Amortized
Cost1
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
AFS securities
U.S. Treasury securities$45,345 $1,010 $— $46,355 
U.S. agency securities2
37,389 762 25 38,126 
Agency CMBS19,982 465 20,438 
Corporate bonds1,694 42 — 1,736 
State and municipal securities
1,461 103 1,563 
FFELP student loan ABS3
1,735 26 1,716 
Other ABS449 — — 449 
Total AFS securities108,055 2,389 61 110,383 
HTM securities
U.S. Treasury securities29,346 1,893 — 31,239 
U.S. agency securities2
38,951 704 39,647 
Agency CMBS2,632 2,634 
Non-agency CMBS842 58 — 900 
Total HTM securities71,771 2,659 10 74,420 
Total investment securities$179,826 $5,048 $71 $184,803 
1.Amounts are net of any ACL.
2.U.S. agency securities consist mainly of agency mortgage pass-through pool securities, CMOs and agency-issued debt.
3.Underlying loans are backed by a guarantee, ultimately from the U.S. Department of Education, of at least 95% of the principal balance and interest outstanding.
December 2021 Form 10-K
104

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Investment Securities in an Unrealized Loss Position
 
At December 31,
2021
At December 31,
2020
$ in millionsFair ValueGross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
U.S. Treasury securities
Less than12 months$31,459 $296 $151 $— 
Total31,459 296 151 — 
U.S. agency securities
Less than12 months12,283 219 5,808 22 
12 months or longer1,167 22 1,168 
Total13,450 241 6,976 25 
Agency CMBS
Less than12 months2,872 89 2,779 
12 months or longer10  46 — 
Total2,882 89 2,825 
State and municipal securities
Less than12 months21 2 86 — 
12 months or longer7  36 
Total28 2 122 
FFELP student loan ABS
Less than12 months320 1 — — 
12 months or longer591 10 1,077 26 
Total911 11 1,077 26 
Total AFS securities in an unrealized loss position
Less than12 months46,955 607 8,824 31 
12 months or longer1,775 32 2,358 30 
Total
$48,730 $639 $11,182 $61 

For AFS securities, the Firm believes there are no securities in an unrealized loss position that have credit losses after performing the analysis described in Note 2. Additionally, the Firm does not intend to sell these securities and is not likely to be required to sell these securities prior to recovery of the amortized cost basis. As of December 31, 2021 and December 31, 2020, the securities in an unrealized loss position are predominantly investment grade.
The HTM securities net carrying amounts at December 31, 2021 and December 31, 2020 reflect an ACL of $33 million and $26 million, respectively, related to Non-agency CMBS. See Note 2 for a description of the ACL methodology used for HTM Securities. As of December 31, 2021 and December 31, 2020, Non-Agency CMBS HTM securities were predominantly on accrual status and investment grade.
See Note 16 for additional information on securities issued by VIEs, including U.S. agency mortgage-backed securities, non-agency CMBS, FFELP student loan ABS and other ABS.
Investment Securities by Contractual Maturity
 At December 31, 2021
$ in millions
Amortized
Cost1
Fair
Value
Annualized Average Yield2
AFS securities
U.S. Treasury securities:
Due within 1 year$8,957 $9,017 1.7 %
After 1 year through 5 years41,374 41,350 1.0 %
After 5 years through 10 years8,643 8,654 1.2 %
Total58,974 59,021 
U.S. agency securities:
Due within 1 year1 1 1.2 %
After 1 year through 5 years191 194 1.6 %
After 5 years through 10 years1,231 1,254 1.8 %
After 10 years25,357 25,364 1.6 %
Total26,780 26,813 
Agency CMBS:
Due within 1 year226 227 1.7 %
After 1 year through 5 years2,562 2,598 1.6 %
After 5 years through 10 years9,072 9,302 1.6 %
After 10 years2,616 2,549 1.4 %
Total14,476 14,676 
State and municipal securities:
Due within 1 year4 4 1.8 %
After 1 year through 5 years26 28 1.9 %
After 5 years through 10 years59 68 2.1 %
After 10 years524 548 2.2 %
Total613 648 
FFELP student loan ABS:
Due within 1 year31 30 0.8 %
After 1 year through 5 years162 158 0.8 %
After 5 years through 10 years143 139 0.7 %
After 10 years1,336 1,345 1.1 %
Total1,672 1,672 
Total AFS securities102,515 102,830 1.3 %
105
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
 At December 31, 2021
$ in millions
Amortized
Cost1
Fair
Value
Annualized Average Yield2
HTM securities
U.S. Treasury securities:
Due within 1 year$4,147 $4,181 1.9 %
After 1 year through 5 years17,615 17,927 1.7 %
After 5 years through 10 years5,328 5,662 2.4 %
After 10 years1,563 1,684 2.3 %
Total28,653 29,454 
U.S. agency securities:
After 5 years through 10 years491 503 2.0 %
After 10 years47,704 46,633 1.6 %
Total48,195 47,136 
Agency CMBS:
Due within 1 year45 45 1.1 %
After 1 year through 5 years1,263 1,240 1.3 %
After 5 years through 10 years808 784 1.4 %
After 10 years151 147 1.5 %
Total2,267 2,216 
Non-agency CMBS:
Due within 1 year151 151 4.5 %
After 1 year through 5 years109 111 3.1 %
After 5 years through 10 years753 772 3.5 %
After 10 years40 42 4.2 %
Total1,053 1,076 
Total HTM securities80,168 79,882 1.8 %
Total investment securities$182,683 $182,712 1.5 %
1.Amounts are net of any ACL.
2.Annualized average yield is computed using the effective yield, weighted based on the amortized cost of each security. The effective yield is shown pre-tax and considers the contractual coupon, amortization of premiums and accretion of discounts, and the effect of related hedging derivatives.
Gross Realized Gains (Losses) on Sales of AFS Securities
$ in millions202120202019
Gross realized gains$237 $168 $113 
Gross realized (losses)(27)(31)(10)
Total1
$210 $137 $103 
1.Realized gains and losses are recognized in Other revenues in the income statement.
9. Collateralized Transactions
The Firm enters into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance its inventory positions.
The Firm monitors the fair value of the underlying securities as compared with the related receivable or payable, including accrued interest, and, as necessary, requests additional collateral, as provided under the applicable agreement to ensure such transactions are adequately collateralized, or returns excess collateral.
The risk related to a decline in the market value of collateral pledged or received is managed by setting appropriate market-based margin requirements. Increases in collateral margin calls on secured financing due to market value declines may
be mitigated by increases in collateral margin calls on securities purchased under agreements to resell and securities borrowed transactions with similar quality collateral. Additionally, the Firm may request lower quality collateral pledged be replaced with higher quality collateral through collateral substitution rights in the underlying agreements.
The Firm actively manages its secured financings in a manner that reduces the potential refinancing risk of secured financings of less liquid assets and also considers the quality of collateral when negotiating collateral eligibility with counterparties. The Firm utilizes shorter term secured financing for highly liquid assets and has established longer tenor limits for less liquid assets, for which funding may be at risk in the event of a market disruption.
Offsetting of Certain Collateralized Transactions
 At December 31, 2021
$ in millionsGross
Amounts
Amounts
Offset
Balance Sheet Net Amounts
Amounts
Not Offset1
Net
Amounts
Assets
Securities purchased under agreements to resell
$197,486 $(77,487)$119,999 $(106,896)$13,103 
Securities borrowed
139,395 (9,682)129,713 (124,028)5,685 
Liabilities
Securities sold under agreements to repurchase
$139,675 $(77,487)$62,188 $(53,692)$8,496 
Securities loaned21,981 (9,682)12,299 (12,019)280 
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell$12,514 
Securities borrowed1,041 
Securities sold under agreements to repurchase8,295 
Securities loaned139 
 At December 31, 2020
$ in millionsGross
Amounts
Amounts
Offset
Balance Sheet Net Amounts
Amounts
Not Offset1
Net
Amounts
Assets
Securities purchased under agreements to resell$264,140 $(147,906)$116,234 $(114,108)$2,126 
Securities borrowed124,921 (12,530)112,391 (107,434)4,957 
Liabilities
Securities sold under agreements to repurchase$198,493 $(147,906)$50,587 $(43,960)$6,627 
Securities loaned20,261 (12,530)7,731 (7,430)301 
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell$1,870 
Securities borrowed596 
Securities sold under agreements to repurchase6,282 
Securities loaned128 
1.Amounts relate to master netting agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance.
For information related to offsetting of derivatives, see Note 7.
December 2021 Form 10-K
106

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Gross Secured Financing Balances by Remaining Contractual Maturity
 At December 31, 2021
$ in millionsOvernight and OpenLess than 30 Days30-90 DaysOver 90 DaysTotal
Securities sold under agreements to repurchase
$29,271 $53,987 $17,099 $39,318 $139,675 
Securities loaned11,480 364 650 9,487 21,981 
Total included in the offsetting disclosure
$40,751 $54,351 $17,749 $48,805 $161,656 
Trading liabilities—Obligation to return securities received as collateral30,104    30,104 
Total$70,855 $54,351 $17,749 $48,805 $191,760 
 At December 31, 2020
$ in millionsOvernight and OpenLess than 30 Days30-90 DaysOver 90 DaysTotal
Securities sold under agreements to repurchase$84,349 $60,853 $26,221 $27,070 $198,493 
Securities loaned15,267 247 — 4,747 20,261 
Total included in the offsetting disclosure$99,616 $61,100 $26,221 $31,817 $218,754 
Trading liabilities—Obligation to return securities received as collateral16,389 — — — 16,389 
Total$116,005 $61,100 $26,221 $31,817 $235,143 
Gross Secured Financing Balances by Class of Collateral Pledged
$ in millions
At
December 31, 2021
At
December 31, 2020
Securities sold under agreements to repurchase
U.S. Treasury and agency securities$30,790 $94,662 
Other sovereign government obligations73,063 71,140 
Corporate equities25,881 24,692 
Other9,941 7,999 
Total$139,675 $198,493 
Securities loaned
Other sovereign government obligations$748 $3,430 
Corporate equities20,656 16,536 
Other577 295 
Total$21,981 $20,261 
Total included in the offsetting disclosure$161,656 $218,754 
Trading liabilities—Obligation to return securities received as collateral
Corporate equities$30,048 $16,365 
Other56 24 
Total$30,104 $16,389 
Total$191,760 $235,143 
Carrying Value of Assets Loaned or Pledged without Counterparty Right to Sell or Repledge
$ in millions
At
December 31, 2021
At
December 31, 2020
Trading assets$32,458 $30,954 
The Firm pledges certain of its trading assets to collateralize securities sold under agreements to repurchase, securities loaned, other secured financings and derivatives and to cover customer short sales. Counterparties may or may not have the right to sell or repledge the collateral.
Pledged financial instruments that can be sold or repledged by the secured party are identified as Trading assets (pledged to various parties) in the balance sheet.
Fair Value of Collateral Received with Right to Sell or Repledge
$ in millions
At
December 31, 2021
At
December 31, 2020
Collateral received with right to sell or repledge$672,104 $724,818 
Collateral that was sold or repledged1
510,000 523,648 
1.Does not include securities used to meet federal regulations for the Firm’s U.S. broker-dealers.
The Firm receives collateral in the form of securities in connection with securities purchased under agreements to resell, securities borrowed, securities-for-securities transactions, derivative transactions, customer margin loans and securities-based lending. In many cases, the Firm is permitted to sell or repledge this collateral to secure securities sold under agreements to repurchase, to enter into securities lending and derivative transactions or to deliver to counterparties to cover short positions.
Securities Segregated for Regulatory Purposes
$ in millions
At
December 31, 2021
At
December 31, 2020
Segregated securities1
$20,092 $34,106 
1.Securities segregated under federal regulations for the Firm’s U.S. broker-dealers are sourced from Securities purchased under agreements to resell and Trading assets in the balance sheet.
Concentration Based on the Firm’s Total Assets
At
December 31, 2021
At
December 31, 2020
U.S. government and agency securities and other sovereign government obligations
Trading assets1
9 %10 %
Off balance sheet—Collateral received2
12 %12 %
1.Other sovereign government obligations included in Trading assets primarily consist of obligations of the U.K., Japan and Brazil.
2.Collateral received is primarily related to Securities purchased under agreements to resell and Securities borrowed.
The Firm is subject to concentration risk by holding large positions in certain types of securities, loans or commitments to purchase securities of a single issuer, including sovereign governments and other entities, issuers located in a particular country or geographic area, public and private issuers involving developing countries or issuers engaged in a particular industry.
Positions taken and underwriting and financing commitments, including those made in connection with the Firm’s private equity, principal investment and lending activities, often involve substantial amounts and significant exposure to individual issuers and businesses, including investment grade and non-investment grade issuers.
107
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Customer Margin and Other Lending
$ in millions
At
December 31, 2021
At
December 31, 2020
Margin and other lending$71,532 $74,714 
The Firm provides margin lending arrangements that allow customers to borrow against the value of qualifying securities. Receivables from these arrangements are included within Customer and other receivables in the balance sheet. Under these arrangements, the Firm receives collateral, which includes U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. Margin loans are collateralized by customer-owned securities held by the Firm. The Firm monitors required margin levels and established credit terms daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary.
Margin loans are extended on a demand basis and generally are not committed facilities. Factors considered in the review of margin loans are the amount of the loan, the intended purpose, the degree of leverage being employed in the account and the amount of collateral, as well as an overall evaluation of the portfolio to ensure proper diversification or, in the case of concentrated positions, appropriate liquidity of the underlying collateral or potential hedging strategies to reduce risk. Underlying collateral for margin loans is reviewed with respect to the liquidity of the proposed collateral positions, valuation of securities, historic trading range, volatility analysis and an evaluation of industry concentrations. For these transactions, adherence to the Firm’s collateral policies significantly limits its credit exposure in the event of a customer default. The Firm may request additional margin collateral from customers, if appropriate, and, if necessary, may sell securities that have not been paid for or purchase securities sold but not delivered from customers.
Also included in the amounts in the previous table is non-purpose securities-based lending on non-bank entities in the Wealth Management business segment.
Other Secured Financings
Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Firm is deemed to be the primary beneficiary, and certain ELNs and other secured borrowings. These liabilities are generally payable from the cash flows of the related assets, which are accounted for as Trading assets (see Notes 14 and 16).
10. Loans, Lending Commitments and Related Allowance for Credit Losses
The Firm’s held-for-investment and held-for-sale loan portfolios consist of the following types of loans:
Corporate. Corporate includes revolving lines of credit, term loans and bridge loans made to corporate entities for a variety of purposes.
Secured Lending Facilities. Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets.
Commercial Real Estate.  Commercial real estate loans include owner-occupied loans and income-producing loans.
Residential Real Estate. Residential real estate loans mainly include non-conforming loans and HELOC.
Securities-based Lending and Other.  Securities-based lending includes loans that allow clients to borrow money against the value of qualifying securities for any suitable purpose other than purchasing, trading, or carrying securities or refinancing margin debt. The majority of these loans are structured as revolving lines of credit. Other primarily includes certain loans originated in the tailored lending business within the Wealth Management business segment.
Loans by Type
 At December 31, 2021
$ in millionsHFI LoansHFS LoansTotal Loans
Corporate$5,567 $8,107 $13,674 
Secured lending facilities31,471 3,879 35,350 
Commercial real estate7,227 1,777 9,004 
Residential real estate44,251 7 44,258 
Securities-based lending and Other loans86,440 62 86,502 
Total loans174,956 13,832 188,788 
ACL(654)(654)
Total loans, net$174,302 $13,832 $188,134 
Loans to non-U.S. borrowers, net$24,322 
 At December 31, 2020
$ in millionsHFI LoansHFS LoansTotal Loans
Corporate$6,046 $8,580 $14,626 
Secured lending facilities25,727 3,296 29,023 
Commercial real estate7,346 822 8,168 
Residential real estate35,268 48 35,316 
Securities-based lending and Other loans64,232 67 64,299 
Total loans138,619 12,813 151,432 
ACL(835)(835)
Total loans, net$137,784 $12,813 $150,597 
Loans to non-U.S. borrowers, net$21,081 

December 2021 Form 10-K
108

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Loans by Interest Rate Type
 At December 31, 2021At December 31, 2020
$ in millionsFixed RateFloating or Adjustable RateFixed RateFloating or Adjustable Rate
Corporate$ $13,674 $— $14,626 
Secured lending facilities 35,350 196 28,827 
Commercial real estate343 8,661 574 7,594 
Residential real estate18,966 25,292 13,120 22,196 
Securities-based lending and Other loans22,832 63,670 18,973 45,326 
Total loans, before ACL$42,141 $146,647 $32,863 $118,569 
See Note 5 for further information regarding Loans and lending commitments held at fair value. See Note 15 for details of current commitments to lend in the future.
Credit Quality

The CRM evaluates new obligors before credit transactions are initially approved and at least annually thereafter for corporate and commercial real estate loans. For Corporate, Secured lending facilities and Other loans, credit evaluations typically involve the evaluation of financial statements, assessment of leverage, liquidity, capital strength, asset composition and quality, market capitalization and access to capital markets, cash flow projections and debt service requirements, and the adequacy of collateral, if applicable. The CRM also evaluates strategy, market position, industry dynamics, obligor’s management and other factors that could affect an obligor’s risk profile. 
For Commercial real estate loans, the credit evaluation is focused on property and transaction metrics, including property type, LTV ratio, occupancy levels, debt service ratio, prevailing capitalization rates and market dynamics.
For Residential real estate and Securities-based loans, the initial credit evaluation typically includes, but is not limited to, review of the obligor’s income, net worth, liquidity, collateral, LTV ratio and credit bureau information. Subsequent credit monitoring for residential real estate loans is performed at the portfolio level. Securities-based loan collateral values are monitored on an ongoing basis.
For information related to credit quality indicators considered in developing the ACL, see Note 2.
Loans Held for Investment before Allowance by Origination Year
At December 31, 2021At December 31, 2020
Corporate
$ in millions
IGNIGTotalIGNIGTotal
Revolving
$2,356 $2,328 $4,684 $1,138 $3,231 $4,369 
2021 85 85 
2020111 26 137 585 80 665 
2019 176 176 204 202 406 
2018196  196 195 — 195 
2017 60 60 — 64 64 
Prior
229  229 247 100 347 
Total
$2,892 $2,675 $5,567 $2,369 $3,677 $6,046 
At December 31, 2021At December 31, 2020
Secured Lending Facilities
$ in millions
IGNIGTotalIGNIGTotal
Revolving
$7,603 $20,172 $27,775 $4,711 $14,510 $19,221 
202132 467 499 
202035 160 195 162 253 415 
201943 819 862 260 1,904 2,164 
2018297 703 1,000 614 1,432 2,046 
2017144 266 410 245 581 826 
Prior
 730 730 — 1,055 1,055 
Total
$8,154 $23,317 $31,471 $5,992 $19,735 $25,727 
At December 31, 2021At December 31, 2020
Commercial Real Estate
$ in millions
IGNIGTotalIGNIGTotal
Revolving$3 $149 $152 $— $— $— 
2021423 1,292 1,715 
202091 819 910 95 943 1,038 
2019976 1,266 2,242 1,074 1,848 2,922 
2018527 416 943 746 774 1,520 
201780 439 519 412 387 799 
Prior
109 637 746 100 967 1,067 
Total
$2,209 $5,018 $7,227 $2,427 $4,919 $7,346 
At December 31, 2021
Residential Real Estate
by FICO Scores
by LTV Ratio
Total
$ in millions
≥ 740
680-739
≤ 679
≤ 80%
> 80%
Revolving$65 $27 $4 $96 $ $96 
202112,230 2,638 257 14,116 1,009 15,125 
20207,941 1,648 131 9,210 510 9,720 
20194,690 1,072 140 5,536 366 5,902 
20181,865 497 55 2,231 186 2,417 
20172,157 558 65 2,588 192 2,780 
Prior
5,973 1,919 319 7,485 726 8,211 
Total
$34,921 $8,359 $971 $41,262 $2,989 $44,251 
At December 31, 2020
Residential Real Estate
by FICO Scoresby LTV RatioTotal
$ in millions≥ 740680-739≤ 679≤ 80%> 80%
Revolving$85 $32 $$122 $— $122 
20208,948 1,824 149 10,338 583 10,921 
20195,592 1,265 168 6,584 441 7,025 
20182,320 604 75 2,756 243 2,999 
20172,721 690 89 3,251 249 3,500 
Prior7,789 2,510 402 9,719 982 10,701 
Total$27,455 $6,925 $888 $32,770 $2,498 $35,268 
109
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
At December 31, 2021
Securities-based Lending1
Other2
$ in millions
IGNIG
Total
Revolving
$71,485 $6,170 $858 $78,513 
2021807 708 103 1,618 
2020 651 626 1,277 
201919 1,079 633 1,731 
2018232 273 375 880 
2017 531 217 748 
Prior
16 1,294 363 1,673 
Total
$72,559 $10,706 $3,175 $86,440 
At December 31, 2020
Securities-based Lending1
Other2
$ in millions
IGNIG
Total
Revolving$51,667 $4,816 $555 $57,038 
2020— 1,073 590 1,663 
201918 1,156 623 1,797 
2018232 407 403 1,042 
2017— 654 122 776 
Prior
16 1,632 268 1,916 
Total$51,933 $9,738 $2,561 $64,232 
IG—Investment Grade
NIG—Non-investment Grade
1.Securities-based loans are subject to collateral maintenance provisions, and at December 31, 2021 and December 31, 2020, these loans are predominantly over-collateralized. For more information on the ACL methodology related to securities-based loans, see Note 2.
2. Other loans primarily include certain loans originated in the tailored lending business within the Wealth Management business segment.
Past Due Loans Held for Investment before Allowance1
$ in millions
At December 31, 2021At December 31, 2020
Residential real estate$209 $332 
Securities-based lending and Other loans 31 
Total
$209 $363 
1.The majority of the amounts are past due for a period of less than 60 days.
Nonaccrual Loans Held for Investment before Allowance
$ in millionsAt
December 31, 2021
At
December 31, 2020
Corporate$34 $164 
Secured lending facilities375 — 
Commercial real estate195 152 
Residential real estate138 97 
Securities-based lending and Other loans151 178 
Total1
$893 $591 
Nonaccrual loans without an ACL$356 $90 
1.Includes all loans held for investment that are 90 days or more past due as of December 31, 2021 and December 31, 2020.
Troubled Debt Restructurings
$ in millions
At
December 31, 2021
At
December 31, 2020
Loans, before ACL$49 $167 
Lending commitments 27 
Allowance for credit losses8 36 
Troubled debt restructurings typically include modifications of interest rates, collateral requirements, other loan covenants and payment extensions. See Note 2 for further information
on TDR guidance issued by Congress in the CARES Act, as well as by the U.S. banking agencies.
Allowance for Credit Losses Rollforward and Allocation—Loans
$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal
December 31, 2020$309 $198 $211 $59 $58 $835 
Gross charge-offs(23)(67)(27)(1)(8)(126)
Provision (release)(119)34 25 1 11 (48)
Other(2)(2)(3)1 (1)(7)
December 31, 2021$165 $163 $206 $60 $60 $654 
Percent of loans to total loans1
3 %18 %4 %25 %50 %100 %
$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal
December 31, 2019$115 $101 $75 $25 $33 $349 
Effect of CECL adoption(2)(42)34 21 (2)
Gross charge-offs(39)— (64)(1)(1)(105)
Recoveries— — — 
Net (charge-offs) recoveries(35)— (64)(1)(97)
Provision (release)224 136 197 14 (13)558 
Other(31)— 37 16 
December 31, 2020$309 $198 $211 $59 $58 $835 
Percent of loans to total loans1
%19 %%26 %46 %100 %
$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal
December 31, 2018$62 $60 $67 $20 $29 $238 
Gross charge-offs— — — (2)— (2)
Provision (release)58 42 119 
Other(5)(1)— — — (6)
December 31, 2019$115 $101 $75 $25 $33 $349 
Percent of loans to total loans1
%21 %%25 %43 %100 %
CRE—Commercial real estate
SBL—Securities-based lending
1.Percent of loans to total loans represents loans held for investment by loan type to total loans held for investment.
Allowance for Credit Losses Rollforward—Lending Commitments
$ in millions
Corporate
Secured Lending Facilities
CRE
Residential Real Estate
SBL and Other
Total
December 31, 2020$323 $38 $11 $$23 $396 
Provision (release)37 2 10  3 52 
Other(4)1 (1)  (4)
December 31, 2021$356 $41 $20 $1 $26 $444 
$ in millions
Corporate
Secured Lending Facilities
CRE
Residential Real Estate
SBL and Other
Total
December 31, 2019$201 $27 $$— $$241 
Effect of CECL adoption(41)(11)(1)(50)
Provision (release)161 22 (1)14 203 
Other— (4)— 
December 31, 2020$323 $38 $11 $$23 $396 
December 2021 Form 10-K
110

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
$ in millions
Corporate
Secured Lending Facilities
CRE
Residential Real Estate
SBL and Other
Total
December 31, 2018$177 $16 $$— $$203 
Provision (release)27 11 — — 42 
Other(3)— — — (1)(4)
December 31, 2019$201 $27 $$— $$241 
The aggregate allowance for credit losses for loans and lending commitments decreased in 2021, primarily reflecting charge-offs. The provision for credit losses on loans and lending commitments was flat, primarily as a result of portfolio growth, offset by the impact of changes in loan quality mix. The base scenario used in our ACL models as of December 31, 2021 was generated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models, and assumes continued growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product.
See Note 2 for a description of the ACL calculated under the CECL methodology, including credit quality indicators, used for held-for-investment loans beginning in 2020 and for a summary of the differences compared with the Firm’s ACL methodology under the prior incurred loss model.
Selected Credit Ratios
At
December 31, 2021
At
December 31, 2020
ACL to total loans1
0.4 %0.6 %
Nonaccrual loans to total loans2
0.5 %0.4 %
ACL to nonaccrual loans3
73.2 %141.3 %
1.Allowance for credit losses for loans to total loans held for investment.
2.Nonaccrual loans held for investment, which are loans that are 90 days or more past due, to total loans held for investment.
3.Allowance for credit losses for loans to nonaccrual loans held for investment.
Employee Loans
$ in millions
At
December 31, 2021
At
December 31, 2020
Currently employed by the Firm1
$3,613 $3,100 
No longer employed by the Firm2
113 140 
Employee loans$3,726 $3,240 
ACL(153)(165)
Employee loans, net of ACL$3,573 $3,075 
Remaining repayment term, weighted average in years5.75.3
1.These loans are predominantly current.
2.These loans are predominantly past due for a period of 90 days or more.
Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management representatives, are full recourse and generally require periodic repayments, and are due in full upon termination of employment with the Firm. These loans are recorded in Customer and other receivables in the balance sheet. See Note 2 for a description of the CECL allowance methodology, including credit quality indicators, for employee loans.
11. Goodwill and Intangible Assets
Goodwill Rollforward
$ in millionsISWMIMTotal
At December 31, 2019¹$261 $6,001 $881 $7,143 
Foreign currency and other15 — 22 
Acquired2
200 4,270 — 4,470 
At December 31, 2020¹$476 $10,278 $881 $11,635 
Foreign currency and other(1)(68)(3)(72)
Acquired3
 115 5,155 5,270 
At December 31, 2021¹$475 $10,325 $6,033 $16,833 
Accumulated impairments4
$673 $— $27 $700 
1.Balances represent the amount of the Firm’s goodwill after accumulated impairments.
2.The Wealth Management business segment amount reflects the impact of the Firm's acquisition of E*TRADE on October 2, 2020.
3.The Investment Management and Wealth Management business segments’ amounts reflect the impact of the Firm's acquisition of Eaton Vance on March 1, 2021.
4.There were no impairments recorded in 2021, 2020 or 2019.
Intangible Assets Rollforward
$ in millionsISWMIM Total
At December 31, 2019$227 $1,828 $52 $2,107 
Acquired1
14 3,309 — 3,323 
Disposals(79)— — (79)
Amortization expense(35)(330)(8)(373)
Other— — 
At December 31, 2020$127 $4,809 $44 $4,980 
Acquired2
 134 3,844 3,978 
Disposals (36) (36)
Amortization expense(23)(495)(94)(612)
Other 51 (1)50 
At December 31, 2021$104 $4,463 $3,793 $8,360 
1.The Wealth Management amount principally reflects the impact of the Firm's acquisition of E*TRADE on October 2, 2020.
2.The Investment Management and Wealth Management amounts principally reflect the impact of the Firm's acquisition of Eaton Vance on March 1, 2021, which includes $2.1 billion of non-amortizable intangible assets.
Intangible Assets by Type
Non-amortizableAmortizable
$ in millionsGross
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
At December 31, 2021
Management contracts$2,120 $291 $95 
Customer relationships 8,851 3,515 
Tradenames 737 117 
Other 180 92 
Total$2,120 $10,059 $3,819 
At December 31, 2020
Management contracts$— $178 $120 
Customer relationships 7,420 2,984 
Tradenames 460 82 
Other 187 79 
Total$— $8,245 $3,265 
Estimated annual amortization expense for the next five years$530 
The Firm’s annual goodwill and non-amortizable intangible asset impairment testing as of July 1, 2021 did not indicate any impairment. For more information, see Note 2.
111
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
12. Other Assets—Equity Method Investments and Leases
Equity Method Investments
$ in millions
At
December 31, 2021
At
December 31, 2020
Investments$2,214 $2,410 
$ in millions202120202019
Income (loss)1
$104 $— $(81)
1.Includes impairments of the Investment Management business segment’s equity method investments of $41 million in the fourth quarter of 2019 related to a third-party asset manager.
Equity method investments, other than investments in certain fund interests, are summarized above and are included in Other assets in the balance sheet with related income or loss included in Other revenues in the income statement. See “Net Asset Value Measurements—Fund Interests” in Note 5 for the carrying value of certain of the Firm’s fund interests, which are composed of general and limited partnership interests, as well as any related carried interest.
Japanese Securities Joint Venture
$ in millions202120202019
Income from investment in MUMSS$168 $80 $17 
The Firm and Mitsubishi UFJ Financial Group, Inc. (“MUFG”) formed a joint venture in Japan comprising their respective investment banking and securities businesses by forming two joint venture companies, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”) and Morgan Stanley MUFG Securities Co., Ltd. (“MSMS”) (the “Joint Venture”). The Firm owns a 40% economic interest in the Joint Venture, and MUFG owns the other 60%.
The Firm’s 40% voting interest in MUMSS is accounted for under the equity method within the Institutional Securities business segment and is included in the equity method investment balances above. The Firm consolidates MSMS into the Institutional Securities business segment, based on its 51% voting interest.
The Firm engages in transactions in the ordinary course of business with MUFG and its affiliates; for example, investment banking, financial advisory, sales and trading, derivatives, investment management, lending, securitization and other financial services transactions. Such transactions are on substantially the same terms as those that would be available to unrelated third parties for comparable transactions.
Leases
The Firm’s leases are principally non-cancelable operating real estate leases.
Balance Sheet Amounts Related to Leases
$ in millions
At
December 31, 2021
At
December 31, 2020
Other assets—ROU assets$4,268 $4,419 
Other liabilities and accrued expenses—Lease liabilities5,157 5,327 
Weighted average:
Remaining lease term, in years
8.99.5
Discount rate
3.1 %3.2 %
Lease Liabilities
$ in millions
At
December 31, 2021
At
December 31, 2020
2021$841 
2022$886 793 
2023834 740 
2024711 639 
2025593 532 
2026527 467 
Thereafter2,387 2,218 
Total undiscounted cash flows5,938 6,230 
Imputed interest
(781)(903)
Amount on balance sheet$5,157 $5,327 
Committed leases not yet commenced
$480 $278 
Lease Costs
$ in millions202120202019
Fixed costs$852 $762 $670 
Variable costs1
187 154 152 
Less: Sublease income(6)(5)(6)
Total lease cost, net$1,033 $911 $816 
1.Includes common area maintenance charges and other variable costs not included in the measurement of ROU assets and lease liabilities.
Cash Flows Statement Supplemental Information
$ in millions202120202019
Cash outflows—Lease liabilities
$879 $765 $685 
Non-cash—ROU assets recorded for new and modified leases
578 991 514 
Occupancy lease agreements, in addition to base rentals, generally provide for rent and operating expense escalations resulting from increased assessments for real estate taxes and other charges.
13. Deposits
Deposits
$ in millions
At
December 31, 2021
At
December 31, 2020
Savings and demand deposits$332,747 $279,221 
Time deposits14,827 31,561 
Total$347,574 $310,782 
Deposits subject to FDIC insurance$230,894 $234,211 
Deposits not subject to FDIC insurance$116,680 $76,571 
Time deposits that equal or exceed the
FDIC insurance limit
$ $16 
December 2021 Form 10-K
112

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Time Deposit Maturities
$ in millions
At
December 31, 2021
2022$6,404 
20234,087 
20242,815 
2025821 
2026311 
Thereafter389 
Total$14,827 
Uninsured Non-U.S. Time Deposit Maturities
$ in millionsAt
December 31, 2021
Less than 3 months$756 
3 - 6 months377 
6 - 12 months231 
Total$1,364 
Deposits in U.S. Bank Subsidiaries from non-U.S. Depositors
$ in millionsAt December 31, 2021At December 31, 2020
Deposits in U.S. bank subsidiaries from non-U.S. depositors$963 $910 
14. Borrowings and Other Secured Financings
Maturities and Terms of Borrowings
Parent CompanySubsidiaries
At
December 31, 2021
At
December 31, 2020
$ in millions
Fixed Rate1
Variable Rate2
Fixed Rate1
Variable Rate2
Original maturities of one year or less:
Next 12 months$ $1,300 $915 $3,549 $5,764 $3,691 
Original maturities greater than one year:
2021$24,241 
2022$6,665 $571 $963 $5,998 $14,197 22,209 
202310,882 6,319 287 6,298 23,786 22,890 
202416,455 4,051 587 8,073 29,166 21,727 
202514,662 4,408 1,607 4,884 25,561 18,636 
202617,679 417 612 5,318 24,026 22,042 
Thereafter81,134 5,506 8,576 15,411 110,627 81,643 
Total$147,477 $21,272 $12,632 $45,982 $227,363 $213,388 
Total borrowings
$147,477 $22,572 $13,547 $49,531 $233,127 $217,079 
Weighted average coupon at period end3
2.9 %0.9 %4.0 %N/M2.7 %2.9 %
1.Fixed rate borrowings include instruments with step-up, step-down and zero coupon features.
2.Variable rate borrowings include those that bear interest based on a variety of indices, including LIBOR, federal funds rates and SOFR, in addition to certain notes carried at fair value with various payment provisions, including notes linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures.
3.Only includes borrowings with original maturities greater than one year. Weighted average coupon is calculated utilizing U.S. and non-U.S. dollar interest rates and excludes financial instruments for which the fair value option was elected. Virtually all of the variable rate notes issued by subsidiaries are carried at fair value so a weighted average coupon is not meaningful.
Borrowings with Original Maturities Greater than One Year
$ in millions
At
December 31, 2021
At
December 31, 2020
Senior$213,776 $202,305 
Subordinated13,587 11,083 
Total$227,363 $213,388 
Weighted average stated maturity, in years7.77.3
Certain senior debt securities are denominated in various non-U.S. dollar currencies and may be structured to provide a return that is linked to equity, credit, commodity or other indices (e.g., the consumer price index). Senior debt also may be structured to be callable by the Firm or extendible at the option of holders of the senior debt securities.
The Firm’s Borrowings include notes carried and managed on a fair value basis. These include instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria. To minimize the exposure from such instruments, the Firm has entered into various swap contracts and purchased options that effectively convert the borrowing costs into floating rates. The swaps and purchased options used to economically hedge the embedded features are derivatives and also are carried at fair value. Changes in fair value related to the notes and economic hedges are reported in Trading revenues. See Notes 2 and 6 for further information on borrowings carried at fair value.
Senior Debt Subject to Put Options or Liquidity Obligations
$ in millions
At
December 31, 2021
At
December 31, 2020
Put options embedded in debt agreements$174 $94 
Liquidity obligations1
$1,622 $1,483 
1.Includes obligations to support secondary market trading.
Subordinated Debt
20212020
Contractual weighted average coupon4.0 %4.5 %

Subordinated debt generally is issued to meet the capital requirements of the Firm or its regulated subsidiaries and primarily is U.S. dollar denominated. Maturities of subordinated debt range from 2022 to 2036.
Rates for Borrowings with Original Maturities Greater than One Year
 At December 31,
202120202019
Contractual weighted average coupon1
2.7 %2.9 %3.4 %
Effective weighted average coupon after swaps1.6 %1.7 %2.9 %
1.Weighted average coupon was calculated utilizing U.S. and non-U.S. dollar interest rates and excludes financial instruments for which the fair value option was elected.
113
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
In general, other than securities inventories and customer balances financed by secured funding sources, the majority of the Firm’s assets are financed with a combination of deposits, short-term funding, floating rate long-term debt or fixed rate long-term debt swapped to a floating rate. The Firm uses interest rate swaps to more closely match these borrowings to the duration, holding period and interest rate characteristics of the assets being funded and to manage interest rate risk. These swaps effectively convert certain of the Firm’s fixed rate borrowings into floating rate obligations. In addition, for non-U.S. dollar currency borrowings that are not used to fund assets in the same currency, the Firm has entered into currency swaps that effectively convert the borrowings into U.S. dollar obligations.
The Firm’s use of swaps for asset and liability management affects its effective average borrowing rate.
Other Secured Financings
$ in millions
At
December 31, 2021
At
December 31, 2020
Original maturities:
One year or less$4,573 $10,453 
Greater than one year5,468 5,410 
Total$10,041 $15,863 
Transfers of assets accounted for as secured financings
1,556 1,529 
Maturities and Terms of Other Secured Financings1
 At December 31, 2021At
December 31,
2020
$ in millionsFixed
Rate
Variable
Rate2
Total
Original maturities of one year or less:
Next 12 months$ $3,754 $3,754 $10,453 
Original maturities greater than one year:
2021$1,655 
2022$14 $2,272 $2,286 1,405 
2023181 1,623 1,804 279 
2024 233 233 96 
202539  39 38 
2026   — 
Thereafter24 345 369 408 
Total$258 $4,473 $4,731 $3,881 
Weighted average coupon at period-end3
N/M0.7 %0.7 %0.6 %
1.Excludes transfers of assets accounted for as secured financings. See subsequent table.
2.Variable rate other secured financings bear interest based on a variety of indices, including LIBOR and federal funds rates. Amounts include notes carried at fair value with various payment provisions, including notes linked to equity, credit, commodity or other indices.
3.Includes only other secured financings with original maturities greater than one year. Weighted average coupon is calculated utilizing U.S. and non-U.S. dollar interest rates and excludes other secured financings that are linked to non-interest indices and for which the fair value option was elected.
Other secured financings include the liabilities related to certain ELNs, transfers of financial assets that are accounted for as financings rather than sales, pledged commodities, consolidated VIEs where the Firm is deemed to be the primary beneficiary and other secured borrowings. These liabilities are generally payable from the cash flows of the related assets accounted for as Trading assets. See Note 16 for
further information on other secured financings related to VIEs and securitization activities.
Maturities of Transfers of Assets Accounted for as Secured Financings1
$ in millions
At
December 31, 2021
At
December 31, 2020
2021$303 
2022$846 159 
2023586 626 
2024 14 
20257 — 
202634 69 
Thereafter83 358 
Total$1,556 $1,529 
1.Excludes Securities sold under agreements to repurchase and Securities loaned.
For transfers of assets that fail to meet accounting criteria for a sale, the Firm continues to record the assets and recognizes the associated liabilities in the balance sheet.
15. Commitments, Guarantees and Contingencies
Commitments
Years to Maturity at December 31, 2021
$ in millionsLess than 11-33-5Over 5Total
Lending:
Corporate$12,649 $32,475 $48,232 $9,729 $103,085 
Secured lending facilities5,807 5,108 1,819 682 13,416 
Commercial and Residential real estate1,213 945 28 254 2,440 
Securities-based lending and Other11,989 2,970 530 504 15,993 
Forward-starting secured financing receivables45,969    45,969 
Central counterparty300   11,870 12,170 
Investment activities1,195 184 50 372 1,801 
Letters of credit and other financial guarantees26   3 29 
Total$79,148 $41,682 $50,659 $23,414 $194,903 
Lending commitments participated to third parties$7,753 
Forward-starting secured financing receivables settled within three business days$32,847 

Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
Types of Commitments
Lending Commitments.  Lending commitments primarily represent the notional amount of legally binding obligations to provide funding to clients for different types of loan transactions. For syndications that are led by the Firm, the lending commitments accepted by the borrower but not yet closed are net of the amounts agreed to by counterparties that will participate in the syndication. For syndications that the Firm participates in and does not lead, lending commitments
December 2021 Form 10-K
114

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
accepted by the borrower but not yet closed include only the amount that the Firm expects it will be allocated from the lead syndicate bank. Due to the nature of the Firm’s obligations under the commitments, these amounts include certain commitments participated to third parties.
Forward-Starting Secured Financing Receivables.  This amount includes securities purchased under agreements to resell and securities borrowed that the Firm has entered into prior to the balance sheet date that will settle after the balance sheet date. These transactions are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations when they are funded.
Central Counterparty.  These commitments relate to the Firm’s membership in certain clearinghouses and are contingent upon the default of a clearinghouse member or other stress events.
Underwriting Commitments.  The Firm provides underwriting commitments in connection with its capital raising sources to a diverse group of corporate and other institutional clients.
Investment Activities.  The Firm sponsors several non-consolidated investment management funds for third-party investors where it typically acts as general partner of, and investment advisor to, these funds and typically commits to invest a minority of the capital of such funds, with subscribing third-party investors contributing the majority. The Firm has contractual capital commitments, guarantees and counterparty arrangements with respect to these investment management funds.
Letters of Credit and Other Financial Guarantees.  The Firm has outstanding letters of credit and other financial guarantees issued by third-party banks to certain of the Firm’s counterparties. The Firm is contingently liable for these letters of credit and other financial guarantees, which are primarily used to provide collateral for securities and commodities traded and to satisfy various margin requirements in lieu of depositing cash or securities with these counterparties.
Guarantees
 At December 31, 2021
 Maximum Potential Payout/Notional of Obligations by Years to MaturityCarrying
Amount
Asset
(Liability)
$ in millionsLess than 11-33-5Over 5
Non-credit derivatives1
1,217,083 918,456 332,329 845,220 (48,231)
Standby letters of credit and other financial guarantees issued2
1,354 1,068 862 2,701 45 
Market value guarantees88 2    
Liquidity facilities4,100    5 
Whole loan sales guarantees  77 23,104  
Securitization representations and warranties3
   79,437 (42)
General partner guarantees341 11 32 152 (77)
Client clearing guarantees51     
1.The carrying amounts of derivative contracts that meet the accounting definition of a guarantee are shown on a gross basis. For further information on derivative contracts, see Note 7.
2.These amounts include certain issued standby letters of credit participated to third parties, totaling $0.7 billion of notional and collateral/recourse, due to the nature of the Firm’s obligations under these arrangements. As of December 31, 2021, the carrying amount of standby letters of credit and other financial guarantees issued includes an allowance for credit losses of $84 million.
3.Related to commercial and residential mortgage securitizations.
Types of Guarantees
Non-Credit Derivatives. Certain derivative contracts meet the accounting definition of a guarantee, including certain written options, contingent forward contracts and CDS (see Note 7 regarding credit derivatives in which the Firm has sold credit protection to the counterparty which are excluded from the previous table). For non-credit derivative contracts that meet the accounting definition of a guarantee the notional amount is used as the maximum potential payout for certain derivative contracts, such as written interest rate caps and written foreign currency options. The Firm evaluates collateral requirements for all derivatives, including derivatives that do not meet the accounting definition of a guarantee. For the effects of cash collateral and counterparty netting, see Note 7.
In certain situations, collateral may be held by the Firm for those contracts that meet the definition of a guarantee. Generally, the Firm sets collateral requirements by counterparty so that the collateral covers various transactions and products and is not allocated specifically to individual contracts. Also, the Firm may recover amounts related to the underlying asset delivered to the Firm under the derivative contract.
Standby Letters of Credit and Other Financial Guarantees Issued. In connection with its corporate lending business and other corporate activities, the Firm provides standby letters of credit and other financial guarantees to counterparties. Such arrangements represent obligations to make payments to third parties if the counterparty fails to fulfill its obligation under a borrowing arrangement or other contractual obligation. A majority of the Firm’s standby letters of credit are provided on behalf of counterparties that are investment grade. If the counterparty fails to fulfill its contractual obligation, the Firm has access to collateral or recourse that would approximate its obligation.
115
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Market Value Guarantees. Market value guarantees are issued to guarantee timely payment of a specified return to investors in certain affordable housing tax credit funds. These guarantees are designed to return an investor’s contribution to a fund and the investor’s share of tax losses and tax credits expected to be generated by a fund.
Liquidity Facilities. The Firm has entered into liquidity facilities with SPEs and other counterparties, whereby the Firm is required to make certain payments if losses or defaults occur. Primarily, the Firm acts as liquidity provider to municipal bond securitization SPEs and for standalone municipal bonds in which the holders of beneficial interests issued by these SPEs or the holders of the individual bonds, respectively, have the right to tender their interests for purchase by the Firm on specified dates at a specified price. The Firm often may have recourse to the underlying assets held by the SPEs in the event payments are required under such liquidity facilities, as well as make-whole or recourse provisions with the trust sponsors. The recourse amount often exceeds the maximum potential payout amount of the guarantee. Substantially all of the underlying assets in the SPEs are investment grade. Liquidity facilities provided to municipal tender option bond trusts are classified as derivatives.
Whole Loan Sales Guarantees. The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain whole loan sales. Under certain circumstances, the Firm may be required to repurchase such assets or make other payments related to such assets if such representations and warranties are breached. The Firm’s maximum potential payout related to such representations and warranties is equal to the current UPB of such loans. Since the Firm no longer services these loans, it has no information on the current UPB of those loans, and, accordingly, the amount included in the previous table represents the UPB at the time of the whole loan sale or at the time when the Firm last serviced any of those loans. The current UPB balances could be substantially lower than the maximum potential payout amount included in the previous table. The related liability primarily relates to sales of loans to the federal mortgage agencies.
Securitization Representations and Warranties. As part of the Firm’s Institutional Securities business segment’s securitizations and related activities, the Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Firm. The extent and nature of the representations and warranties, if any, vary among different securitizations. Under certain circumstances, the Firm may be required to repurchase certain assets or make other payments related to such assets if such representations and warranties are breached. The maximum potential amount of future payments the Firm could be required to make would be equal to the current outstanding balances of, or losses associated with, the assets subject to breaches of such representations and warranties. The amount included in the
previous table for the maximum potential payout includes the current UPB or historical losses where known and the UPB at the time of sale when the current UPB is not known.
General Partner Guarantees. As a general partner in certain investment management funds, the Firm receives certain distributions from the partnerships when the return exceeds specified performance targets according to the provisions of the partnership agreements. The Firm may be required to return all or a portion of such distributions to the limited partners in the event the limited partners do not achieve a certain return as specified in the various partnership agreements, subject to certain limitations.
Client Clearing Guarantees. The Firm is a sponsoring member of the Government Securities Division of the FICC's Sponsored Clearing Model. Clients of the Firm, as sponsored members, can transact in overnight and term securities repurchase and resale agreements, which are cleared through the FICC. As sponsoring member, the Firm guarantees to the FICC the prompt and full payment and performance of its clients’ obligations. In 2020, the FICC’s sponsored clearing model was updated such that the Firm could be responsible for liquidation of a sponsored member’s account and guarantees any resulting loss to the FICC in the event the sponsored member fails to fully pay any net liquidation amount due from the sponsored member to the FICC. Accordingly, the Firm’s maximum potential payout amount reflects the total of the estimated net liquidation amounts for sponsored member accounts. The Firm minimizes credit exposure under this guarantee by obtaining a security interest in its sponsored member clients’ collateral and their contractual rights under sponsored member transactions. Therefore, the Firm's exposure is estimated to be an amount substantially lower than the maximum potential payout amount. The collateral amount in which the Firm has a security interest is approximately equal to the maximum potential payout amount of the guarantee.
Other Guarantees and Indemnities
In the normal course of business, the Firm provides guarantees and indemnifications in a variety of transactions. These provisions generally are standard contractual terms. Certain of these guarantees and indemnifications are described below:
Indemnities. The Firm provides standard indemnities to counterparties for certain contingent exposures and taxes, including U.S. and foreign withholding taxes, on interest and other payments made on derivatives, securities and stock lending transactions, certain annuity products and other financial arrangements. These indemnity payments could be required based on a change in the tax laws, a change in interpretation of applicable tax rulings or a change in factual circumstances. Certain contracts contain provisions that enable the Firm to terminate the agreement upon the occurrence of such events. The maximum potential amount of future payments that the Firm could be
December 2021 Form 10-K
116

 
Notes to Consolidated Financial Statements
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required to make under these indemnifications cannot be estimated.
Exchange/Clearinghouse Member Guarantees. The Firm is a member of various exchanges and clearinghouses that trade and clear securities and/or derivative contracts. Associated with its membership, the Firm may be required to pay a certain amount as determined by the exchange or the clearinghouse in case of a default of any of its members or pay a proportionate share of the financial obligations of another member that may default on its obligations to the exchange or the clearinghouse. While the rules governing different exchange or clearinghouse memberships and the forms of these guarantees may vary, in general the Firm’s obligations under these rules would arise only if the exchange or clearinghouse had previously exhausted its resources.
In addition, some clearinghouse rules require members to assume a proportionate share of losses resulting from the clearinghouse’s investment of guarantee fund contributions and initial margin and of other losses unrelated to the default of a clearing member, if such losses exceed the specified resources allocated for such purpose by the clearinghouse.
The maximum potential payout under these rules cannot be estimated. The Firm has not recorded any contingent liability in its financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote.
Merger and Acquisition Guarantees. The Firm may, from time to time, in its role as investment banking advisor be required to provide guarantees in connection with certain European merger and acquisition transactions. If required by the regulating authorities, the Firm provides a guarantee that the acquirer in the transaction has or will have sufficient funds to complete the transaction and would then be required to make the acquisition payments in the event the acquirer’s funds are insufficient at the completion date of the transaction. These arrangements generally cover the time frame from the transaction offer date to its closing date and, therefore, are generally short term in nature. The Firm believes the likelihood of any payment by the Firm under these arrangements is remote given the level of its due diligence in its role as investment banking advisor.
In addition, in the ordinary course of business, the Firm guarantees the debt and/or certain trading obligations (including obligations associated with derivatives, foreign exchange contracts and the settlement of physical commodities) of certain subsidiaries. These guarantees generally are entity or product specific and are required by investors or trading counterparties. The activities of the Firm’s subsidiaries covered by these guarantees (including any related debt or trading obligations) are included in the financial statements.
Contingencies
Legal
In addition to the matters described in the following paragraphs, in the normal course of business, the Firm has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. These actions have included, but are not limited to, antitrust, false claims act, residential mortgage and credit crisis-related matters.
While the Firm has identified below any individual proceedings where the Firm believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that have not yet been asserted or those where potential losses have not yet been determined to be probable or possible and reasonably estimable.
The Firm contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and the Firm can reasonably estimate the amount of that loss, the Firm accrues the estimated loss by a charge to income.
$ in millions202120202019
Legal expenses$157 $336 $221 
The Firm’s legal expenses can, and may in the future, fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Firm.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss, or range of loss or additional range of loss, can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or
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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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unsettled legal questions relevant to the proceedings or investigations in question.
For certain other legal proceedings and investigations, the Firm can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued but does not believe, based on current knowledge and after consultation with counsel, that such losses could have a material adverse effect on the Firm’s financial statements as a whole, other than the matters referred to in the following paragraphs.
On September 23, 2014, Financial Guaranty Insurance Company (“FGIC”) filed a complaint against the Firm in the Supreme Court of the State of New York County (“Supreme Court of NY”) styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. relating to the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and that defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys’ fees, interest and costs. On January 23, 2017, the court denied the Firm’s motion to dismiss the complaint. On September 13, 2018, the Appellate Division, First Department (“First Department”) affirmed in part and reversed in part the lower court’s order denying the Firm’s motion to dismiss the complaint. On December 20, 2018, the First Department denied plaintiff’s motion for leave to appeal to the New York Court of Appeals (“Court of Appeals”) or, in the alternative, for re-argument. On July 30, 2021, the Firm filed a motion for summary judgment. On February 4, 2022, the parties entered into a confidential settlement agreement, which is conditioned on consummation of the Firm’s agreement to settle Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $277 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands from a certificate holder and FGIC that the Firm did not repurchase, plus pre- and post- judgment interest, fees and costs, as well as claim payments that FGIC has made and will make in the future. In addition, plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Firm styled Deutsche Bank National Trust Company
solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys’ fees, costs and other related expenses, and interest. On December 11, 2015, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On October 19, 2018, the court granted the Firm’s motion for leave to amend its answer and to stay the case pending resolution of Deutsche Bank National Trust Company’s appeal to the Court of Appeals in another case, styled Deutsche Bank National Trust Company v. Barclays Bank PLC, regarding the applicable statute of limitations. On January 17, 2019, the First Department reversed the trial court’s order to the extent that it had granted in part the Firm’s motion to dismiss the complaint. On June 4, 2019, the First Department granted the Firm’s motion for leave to appeal its January 17, 2019 decision to the Court of Appeals. On March 19, 2020, the Firm filed a motion for partial summary judgment. On December 22, 2020, the Court of Appeals reversed the First Department and reinstated the trial court's order to the extent it had granted in part the Firm's motion to dismiss the complaint. On February 4, 2022, the parties entered into an agreement to settle the litigation, which is conditioned on approval by either certificateholders in a consent solicitation or a court in a trust instructional proceeding. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $277 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands from a certificate holder and a monoline insurer that the Firm did not repurchase, plus pre- and post-judgment interest, fees and costs, but plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.
Tax
In matters styled Case number 15/3637 and Case number 15/4353, the Dutch Tax Authority (“Dutch Authority”) is challenging in the Dutch courts the prior set-off by the Firm of approximately €124 million (approximately $141 million) plus accrued interest of withholding tax credits against the Firm’s corporation tax liabilities for the tax years 2007 to 2012. The Dutch Authority alleges that the Firm was not entitled to receive the withholding tax credits on the basis, inter alia, that a Firm subsidiary did not hold legal title to certain securities subject to withholding tax on the relevant dates. The Dutch Authority has also alleged that the Firm failed to provide certain information to the Dutch Authority and to keep adequate books and records. On April 26, 2018,
December 2021 Form 10-K
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Notes to Consolidated Financial Statements
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the District Court in Amsterdam issued a decision dismissing the Dutch Authority’s claims with respect to certain of the tax years in dispute. On May 12, 2020, the Court of Appeal in Amsterdam granted the Dutch Authority’s appeal in matters re-styled Case number 18/00318 and Case number 18/00319. On June 22, 2020, the Firm filed an appeal against the decision of the Court of Appeal in Amsterdam before the Dutch High Court. On January 29, 2021, the Advocate General of the Dutch High Court issued an advisory opinion on the Firm’s appeal, which rejected the Firm’s principal grounds of appeal. On February 11, 2021, the Firm and the Dutch Authority each responded to this opinion. On June 22, 2021, Dutch criminal authorities sought various documents in connection with an investigation of the Firm related to the civil claims asserted by the Dutch Authority concerning the accuracy of the Firm subsidiary’s tax returns and the maintenance of its books and records for 2007 to 2012.
16. Variable Interest Entities and Securitization Activities
Overview
The Firm is involved with various SPEs in the normal course of business. In most cases, these entities are deemed to be VIEs.
The Firm’s variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Firm’s involvement with VIEs arises primarily from:
Interests purchased in connection with market-making activities, securities held in its Investment securities portfolio and retained interests held as a result of securitization activities, including re-securitization transactions.
Guarantees issued and residual interests retained in connection with municipal bond securitizations.
Loans made to and investments in VIEs that hold debt, equity, real estate or other assets.
Derivatives entered into with VIEs.
Structuring of CLNs or other asset-repackaging notes designed to meet the investment objectives of clients.
Other structured transactions designed to provide tax-efficient yields to the Firm or its clients.
The Firm determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE’s structure and activities, the power to make significant economic decisions held by the Firm and by other parties, and the variable interests owned by the Firm and other parties.
The power to make the most significant economic decisions may take a number of different forms in different types of
VIEs. The Firm considers servicing or collateral management decisions as representing the power to make the most significant economic decisions in transactions such as securitizations or CDOs. As a result, the Firm does not consolidate securitizations or CDOs for which it does not act as the servicer or collateral manager unless it holds certain other rights to replace the servicer or collateral manager or to require the liquidation of the entity. If the Firm serves as servicer or collateral manager, or has certain other rights described in the previous sentence, the Firm analyzes the interests in the VIE that it holds and consolidates only those VIEs for which it holds a potentially significant interest in the VIE.
For many transactions, such as re-securitization transactions, CLNs and other asset-repackaging notes, there are no significant economic decisions made on an ongoing basis. In these cases, the Firm focuses its analysis on decisions made prior to the initial closing of the transaction and at the termination of the transaction. The Firm concluded in most of these transactions that decisions made prior to the initial closing were shared between the Firm and the initial investors based upon the nature of the assets, including whether the assets were issued in a transaction sponsored by the Firm and the extent of the information available to the Firm and to investors, the number, nature and involvement of investors, other rights held by the Firm and investors, the standardization of the legal documentation and the level of continuing involvement by the Firm, including the amount and type of interests owned by the Firm and by other investors. The Firm focused its control decision on any right held by the Firm or investors related to the termination of the VIE. Most re-securitization transactions, CLNs and other asset-repackaging notes have no such termination rights.
Consolidated VIE Assets and Liabilities by Type of Activity1
 At December 31, 2021At December 31, 2020
$ in millionsVIE AssetsVIE LiabilitiesVIE AssetsVIE Liabilities
MABS2
$1,177 $409 $590 $17 
Investment vehicles3
717 294 776 355 
Operating entities508 39 504 39 
Other510 286 248 
Total$2,912 $1,028 $2,118 $414 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
2.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets and may be in loan or security form. The value of assets is determined based on the fair value of the liabilities and the interests owned by the Firm in such VIEs as the fair values for the liabilities and interests owned are more observable.
3.Amounts include investment funds and CLOs.
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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Consolidated VIE Assets and Liabilities by Balance Sheet Caption
$ in millions
At
December 31, 2021
At
December 31, 2020
Assets
Cash and cash equivalents$341 $269 
Trading assets at fair value1,965 1,445 
Investment securities37 — 
Securities purchased under agreements to resell200 — 
Customer and other receivables31 23 
Intangible assets85 98 
Other assets253 283 
Total$2,912 $2,118 
Liabilities
Other secured financings$767 $366 
Other liabilities and accrued expenses261 48 
Total$1,028 $414 
Noncontrolling interests$115 $196 
Consolidated VIE assets and liabilities are presented in the previous tables after intercompany eliminations. Generally, most assets owned by consolidated VIEs cannot be removed unilaterally by the Firm and are not available to the Firm while the related liabilities issued by consolidated VIEs are non-recourse to the Firm. However, in certain consolidated VIEs, the Firm either has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.
In general, the Firm’s exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE net assets recognized in its financial statements, net of amounts absorbed by third-party variable interest holders.
Non-consolidated VIEs
 At December 31, 2021
$ in millions
MABS1
CDOMTOBOSF
Other2
VIE assets (UPB)$146,071 $667 $6,089 $2,086 $52,111 
Maximum exposure to loss3
Debt and equity interests
$18,062 $129 $ $1,459 $10,339 
Derivative and other contracts
  4,100  5,599 
Commitments, guarantees and other771    1,005 
Total$18,833 $129 $4,100 $1,459 $16,943 
Carrying value of variable interests—Assets
Debt and equity interests
$18,062 $129 $ $1,459 $10,339 
Derivative and other contracts
  5  2,006 
Total$18,062 $129 $5 $1,459 $12,345 
Additional VIE assets owned4
$15,392 
Carrying value of variable interests—Liabilities
Derivative and other contracts
$ $ $ $ $362 
 At December 31, 2020
$ in millions
MABS1
CDOMTOBOSF
Other2
VIE assets (UPB)$184,153 $3,527 $6,524 $2,161 $48,241 
Maximum exposure to loss3
Debt and equity interests
$26,247 $257 $— $1,187 $11,008 
Derivative and other contracts
— — 4,425 — 5,639 
Commitments, guarantees and other
929 — — — 749 
Total$27,176 $257 $4,425 $1,187 $17,396 
Carrying value of variable interests—Assets
Debt and equity interests
$26,247 $257 $— $1,187 $11,008 
Derivative and other contracts
— — — 851 
Total$26,247 $257 $$1,187 $11,859 
Additional VIE assets owned4
$20,019 
Carrying value of variable interests—Liabilities
Derivative and other contracts
$— $— $— $— $222 
MTOB—Municipal tender option bonds
1.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets, and may be in loan or security form.
2.Other primarily includes exposures to commercial real estate property and investment funds.
3.Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value recorded by the Firm.
4.Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s maximum exposure to loss generally equals the fair value of the assets owned. These assets are primarily included in Trading assets and Investment securities and are measured at fair value (see Note 5). The Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives.
The majority of the VIEs included in the previous tables are sponsored by unrelated parties; examples of the Firm’s involvement with these VIEs include its secondary market-making activities and the securities held in its Investment securities portfolio (see Note 8).
The Firm’s maximum exposure to loss is dependent on the nature of the Firm’s variable interest in the VIE and is limited to the notional amounts of certain liquidity facilities and other credit support, total return swaps and written put options, as well as the fair value of certain other derivatives and investments the Firm has made in the VIE.
The Firm’s maximum exposure to loss in the previous tables does not include the offsetting benefit of hedges or any reductions associated with the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.
Liabilities issued by VIEs generally are non-recourse to the Firm.
Detail of Mortgage- and Asset-Backed Securitization Assets
 At December 31, 2021At December 31, 2020
$ in millionsUPBDebt and
Equity
Interests
UPBDebt and
Equity
Interests
Residential mortgages$15,216 $2,182 $17,775 $3,175 
Commercial mortgages68,503 4,092 62,093 4,131 
U.S. agency collateralized
mortgage obligations
57,972 9,835 99,182 17,224 
Other consumer or commercial loans
4,380 1,953 5,103 1,717 
Total$146,071 $18,062 $184,153 $26,247 
December 2021 Form 10-K
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Notes to Consolidated Financial Statements
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Securitization Activities
In a securitization transaction, the Firm transfers assets (generally commercial or residential mortgage loans or securities) to an SPE, sells to investors most of the beneficial interests, such as notes or certificates, issued by the SPE, and, in many cases, retains other beneficial interests. The purchase of the transferred assets by the SPE is financed through the sale of these interests.
In many securitization transactions involving commercial mortgage loans, the Firm transfers a portion of the assets to the SPE with unrelated parties transferring the remaining assets. In addition, mainly in securitization transactions involving residential mortgage loans, the Firm may also enter into derivative transactions, primarily interest rate swaps or interest rate caps, with the SPE.
Although not obligated, the Firm generally makes a market in the securities issued by SPEs in securitization transactions. As a market maker, the Firm offers to buy these securities from, and sell these securities to, investors. Securities purchased through these market-making activities are not considered to be retained interests; these beneficial interests generally are included in Trading assets—Corporate and other debt and are measured at fair value.
The Firm enters into derivatives, generally interest rate swaps and interest rate caps, with a senior payment priority in many securitization transactions. The risks associated with these and similar derivatives with SPEs are essentially the same as similar derivatives with non-SPE counterparties and are managed as part of the Firm’s overall exposure. See Note 7 for further information on derivative instruments and hedging activities.
Investment Securities
The Firm holds securities issued by VIEs within the Investment securities portfolio. These securities are composed of those related to transactions sponsored by the federal mortgage agencies and predominantly the most senior securities issued by VIEs backed by student loans and commercial mortgage loans. Transactions sponsored by the federal mortgage agencies include an explicit or implicit guarantee provided by the U.S. government. Additionally, the Firm holds certain commercial mortgage-backed securities issued by VIEs retained as a result of the Firm's securitization activities. See Note 8 for further information on the Investment securities portfolio.
Municipal Tender Option Bond Trusts
In a municipal tender option bond trust transaction, the client transfers a municipal bond to a trust. The trust issues short-term securities that the Firm, as the remarketing agent, sells to investors. The client generally retains a residual interest. The short-term securities are supported by a liquidity facility pursuant to which the investors may put their short-term interests. In most programs, a third-party provider will
provide such liquidity facility; in some programs, the Firm provides this liquidity facility.
The Firm may, in lieu of purchasing short-term securities for remarketing, decide to extend a temporary loan to the trust. The client can generally terminate the transaction at any time. The liquidity provider can generally terminate the transaction upon the occurrence of certain events. When the transaction is terminated, the municipal bond is generally sold or returned to the client. Any losses suffered by the liquidity provider upon the sale of the bond are the responsibility of the client. This obligation is generally collateralized. Liquidity facilities provided to municipal tender option bond trusts are classified as derivatives. The Firm consolidates any municipal tender option bond trusts in which it holds the residual interest.
Credit Protection Purchased through Credit-Linked Notes
CLN transactions are designed to provide investors with exposure to certain credit risk on referenced assets. In these transactions, the Firm transfers assets (generally high-quality securities or money market investments) to an SPE, enters into a derivative transaction in which the SPE sells protection on an unrelated referenced asset or group of assets, through a credit derivative, and sells the securities issued by the SPE to investors. In some transactions, the Firm may also enter into interest rate or currency swaps with the SPE. Depending on the structure, the assets and liabilities of the SPE may be consolidated and recognized in the Firm’s balance sheet or accounted for as a sale of assets.
Upon the occurrence of a credit event related to the referenced asset, the SPE will deliver securities collateral as payment to the Firm, which exposes the Firm to changes in the collateral’s value.
Derivative payments by the SPE are collateralized. The risks associated with these and similar derivatives with SPEs are essentially the same as those with non-SPE counterparties and are managed as part of the Firm’s overall exposure.
Other Structured Financings
The Firm invests in interests issued by entities that develop and own low-income communities (including low-income housing projects) and entities that construct and own facilities that will generate energy from renewable resources. The interests entitle the Firm to a share of tax credits and tax losses generated by these projects. In addition, the Firm has issued guarantees to investors in certain low-income housing funds. The guarantees are designed to return an investor’s contribution to a fund and the investor’s share of tax losses and tax credits expected to be generated by the fund. The Firm is also involved with entities designed to provide tax-efficient yields to the Firm or its clients.
Collateralized Loan and Debt Obligations
CLOs and CDOs are SPEs that purchase a pool of assets consisting of corporate loans, corporate bonds, ABS or
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December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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synthetic exposures on similar assets through derivatives and issue multiple tranches of debt and equity securities to investors. The Firm underwrites the securities issued in certain CLO transactions on behalf of unaffiliated sponsors and provides advisory services to these unaffiliated sponsors. The Firm sells corporate loans to many of these SPEs, in some cases representing a significant portion of the total assets purchased. Although not obligated, the Firm generally makes a market in the securities issued by SPEs in these transactions and may retain unsold securities. These beneficial interests are included in Trading assets and are measured at fair value.
Equity-Linked Notes
ELN transactions are designed to provide investors with exposure to certain risks related to the specific equity security, equity index or other index. In an ELN transaction, the Firm typically transfers to an SPE either a note issued by the Firm, the payments on which are linked to the performance of a specific equity security, equity index or other index, or debt securities issued by other companies and a derivative contract, the terms of which will relate to the performance of a specific equity security, equity index or other index. These ELN transactions with SPEs were not consolidated at December 31, 2021 or December 31, 2020.
Transferred Assets with Continuing Involvement
 At December 31, 2021
$ in millionsRMLCMLU.S. Agency
CMO
CLN and
Other1
SPE assets (UPB)2
$6,802 $94,276 $28,697 $13,121 
Retained interests
Investment grade$72 $638 $465 $ 
Non-investment grade19 586  69 
Total$91 $1,224 $465 $69 
Interests purchased in the secondary market
Investment grade$18 $118 $33 $ 
Non-investment grade38 53  4 
Total$56 $171 $33 $4 
Derivative assets $ $ $ $891 
Derivative liabilities    284 
 At December 31, 2020
$ in millionsRMLCMLU.S. Agency
CMO
CLN and
Other1
SPE assets (UPB)2
$7,515 $84,674 $21,061 $12,978 
Retained interests
Investment grade$49 $822 $615 $— 
Non-investment grade16 195 — 114 
Total$65 $1,017 $615 $114 
Interests purchased in the secondary market
Investment grade$— $96 $116 $— 
Non-investment grade43 80 — 21 
Total$43 $176 $116 $21 
Derivative assets $— $— $— $400 
Derivative liabilities — — — 436 
 Fair Value at December 31, 2021
$ in millionsLevel 2Level 3Total
Retained interests
Investment grade$536 $2 $538 
Non-investment grade40 40 80 
Total$576 $42 $618 
Interests purchased in the secondary market
Investment grade$168 $1 $169 
Non-investment grade70 25 95 
Total$238 $26 $264 
Derivative assets$891 $ $891 
Derivative liabilities194 90 284 
 Fair Value at December 31, 2020
$ in millionsLevel 2Level 3Total
Retained interests
Investment grade$663 $— $663 
Non-investment grade63 69 
Total$669 $63 $732 
Interests purchased in the secondary market
Investment grade$196 $16 $212 
Non-investment grade62 82 144 
Total$258 $98 $356 
Derivative assets$388 $12 $400 
Derivative liabilities435 436 
RML—Residential mortgage loans
CML—Commercial mortgage loans
1.Amounts include CLO transactions managed by unrelated third parties.
2.Amounts include assets transferred by unrelated transferors.
The previous tables include transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment. The transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the income statement. The Firm may act as underwriter of the beneficial interests issued by these securitization vehicles, for which Investment banking revenues are recognized. The Firm may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are generally carried at fair value in the balance sheet with changes in fair value recognized in the income statement. Fair value for these interests is measured using techniques that are consistent with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Notes 2 and 5. Further, as permitted by applicable guidance, certain transfers of assets where the Firm’s only continuing involvement is a derivative are only reported in the following Assets Sold with Retained Exposure table.
Proceeds from New Securitization Transactions and Sales of Loans
$ in millions202120202019
New transactions1
$57,528 $51,814 $34,464 
Retained interests8,822 9,346 7,403 
Sales of corporate loans to CLO SPEs1, 2
169 763 
1.Net gains on new transactions and sales of corporate loans to CLO entities at the time of the sale were not material for all periods presented.
2.Sponsored by non-affiliates.
The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets
December 2021 Form 10-K
122

 
Notes to Consolidated Financial Statements
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transferred in securitization transactions sponsored by the Firm (see Note 15).
Assets Sold with Retained Exposure
$ in millionsAt
December 31,
2021
At
December 31,
2020
Gross cash proceeds from sale of assets1
$67,930 $45,051 
Fair value
Assets sold$68,992 $46,609 
Derivative assets recognized in the balance sheet1,195 1,592 
Derivative liabilities recognized in the balance sheet132 64 
1.The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.
The Firm enters into transactions in which it sells securities, primarily equities, and contemporaneously enters into bilateral OTC derivatives with the purchasers of the securities, through which it retains exposure to the sold securities.
17. Regulatory Requirements
Regulatory Capital Framework
The Firm is an FHC under the Bank Holding Company Act of 1956, as amended, and is subject to the regulation and oversight of the Board of Governors of the Federal Reserve System (“Federal Reserve”). The Federal Reserve establishes capital requirements for the Firm, including “well-capitalized” standards, and evaluates the Firm’s compliance with such capital requirements. The OCC establishes similar capital requirements and standards for the Firm’s U.S. bank subsidiaries, including, among others, MSBNA and MSPBNA. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee on Banking Supervision and also implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, many of the Firm’s regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants.
Regulatory Capital Requirements
The Firm is required to maintain minimum risk-based and leverage-based capital ratios under regulatory capital requirements. A summary of the calculations of regulatory capital and RWA follows.
Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus the Firm’s capital buffer requirement. Capital requirements require certain adjustments to, and
deductions from, capital for purposes of determining these ratios.

CECL Deferral. In 2020, the U.S. banking agencies adopted a final rule, consistent with an interim final rule that was effective March 31, 2020, altering, for purposes of the regulatory capital rules, the required adoption time period for CECL. As of December 31, 2021 and December 31, 2020, the risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure are calculated excluding the effect of the adoption of CECL based on the Firm’s election to defer this effect over a five-year transition period that began on January 1, 2020 in accordance with the final rule. The deferral impacts begin to phase back in at 25% per year beginning in 2022 and become fully phased-in beginning in 2025.
Capital Buffer Requirements
At December 31, 2021 and December 31, 2020
StandardizedAdvanced
Capital buffers
Capital conservation buffer2.5%
SCB5.7%N/A
G-SIB capital surcharge3.0%3.0%
CCyB1
0%0%
Capital buffer requirement8.7%5.5%
1.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.

The capital buffer requirement represents the amount of Common Equity Tier 1 capital the Firm must maintain above the minimum risk-based capital requirements in order to avoid restrictions on the Firm’s ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. The Firm’s Standardized Approach capital buffer requirement is equal to the sum of the SCB, G-SIB capital surcharge and CCyB, and the Advanced Approach capital buffer requirement is equal to the 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.
Risk-Based Regulatory Capital Ratio Requirements
At December 31, 2021 and December 31, 2020
Regulatory Minimum
StandardizedAdvanced
Required ratios1
Common Equity Tier 1 capital ratio4.5 %13.2%10.0%
Tier 1 capital ratio6.0 %14.7%11.5%
Total capital ratio8.0 %16.7%13.5%
1.Required ratios represent the regulatory minimum plus the capital buffer requirement.
Risk-Weighted Assets
RWA reflects both the Firm’s on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:
Credit Risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to the Firm;
123
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Market Risk: Adverse changes in the level of one or more market prices, rates, indices, volatilities, correlations or other market factors, such as market liquidity; and
Operational Risk: Inadequate or failed processes or systems from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).
The Firm’s risk-based capital ratios are computed under both (i) the standardized approaches for calculating credit risk and market risk RWA (“Standardized Approach”) and (ii) the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“Advanced Approach”). The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2021 and December 31, 2020, the differences between the actual and required ratio were lower under the Standardized Approach.
Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.
The Firm’s Regulatory Capital and Capital Ratios
$ in millions
Required
Ratio
1
At December 31, 2021At December 31, 2020
Risk-based capital
Common Equity Tier 1 capital$75,742 $78,650 
Tier 1 capital83,348 88,079 
Total capital93,166 97,213 
Total RWA2
471,921 453,106 
Common Equity Tier 1 capital ratio13.2 %16.0 %17.4 %
Tier 1 capital ratio14.7 %17.7 %19.4 %
Total capital ratio16.7 %19.7 %21.5 %
$ in millions
Required
Ratio1
At December 31, 2021At December 31, 2020
Leverage-based capital
Adjusted average assets3
$1,169,939 $1,053,510 
Tier 1 leverage ratio4.0 %7.1 %8.4 %
Supplementary leverage exposure4, 5
$1,476,962 $1,192,506 
SLR5
5.0 %5.6 %7.4 %
1.Required ratios are inclusive of any buffers applicable as of the date presented.
2.The Firm early adopted the Standardized Approach for Counterparty Credit Risk (“SA-CCR”) on December 1, 2021. SA-CCR replaced the current exposure method used to measure derivatives counterparty exposure within the Standardized Approach RWA and Supplementary Leverage Ratio exposure calculations. As a result of the adoption, as of December 31, 2021, the Firm's risk-weighted assets under the Standardized Approach increased by $25 billion, and the Firm's Standardized Common Equity Tier 1 capital ratio decreased by 90 basis points.
3.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in the Firm’s own capital instruments, certain defined tax assets and other capital deductions.
4.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection, offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.
5.The Firm’s SLR and Supplementary leverage exposure as of December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks based on a Federal Reserve interim final rule that was in effect until March 31, 2021.
Certain U.S. Bank Subsidiaries’ Regulatory Capital and Capital Ratios
The OCC establishes capital requirements for the Firm’s U.S. bank subsidiaries, which as of December 31, 2021 and December 31, 2020 include, among others, Morgan Stanley Bank, N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”), and evaluates their compliance with such capital requirements. Regulatory capital requirements for MSBNA and MSPBNA are calculated in a similar manner to the Firm’s regulatory capital requirements, although G-SIB capital surcharge and SCB requirements do not apply to the U.S. bank subsidiaries.
The OCC’s regulatory capital framework includes Prompt Corrective Action (“PCA”) standards, including “well-capitalized” PCA standards that are based on specified regulatory capital ratio minimums. For the Firm to remain an FHC, its U.S. bank subsidiaries must remain well-capitalized in accordance with the OCC’s PCA standards. In addition, failure by the U.S. bank subsidiaries to meet minimum capital requirements may result in certain mandatory and discretionary actions by regulators that, if undertaken, could
December 2021 Form 10-K
124

 
Notes to Consolidated Financial Statements
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have a direct material effect on the U.S. bank subsidiaries’ and the Firm’s financial statements.
At December 31, 2021 and December 31, 2020, MSBNA and MSPBNA risk-based capital ratios are based on the Standardized Approach rules. At December 31, 2021 and December 31, 2020, the risk-based and leverage-based capital amounts and ratios are calculated excluding the effect of the adoption of CECL based on MSBNA’s and MSPBNA’s election to defer this effect over a five-year transition period, which began on January 1, 2020. The deferral impacts begin to phase back in at 25% per year beginning in 2022 and become fully phased-in beginning in 2025.
MSBNA’s Regulatory Capital1
Well-Capitalized
Requirement
Required
Ratio2
At December 31, 2021At December 31, 2020
$ in millions
Amount
RatioAmount Ratio
Risk-based capital
Common Equity Tier 1 capital6.5 %7.0 %$18,960 20.5 %$17,238 18.7 %
Tier 1 capital8.0 %8.5 %18,960 20.5 %17,238 18.7 %
Total capital10.0 %10.5 %19,544 21.1 %17,882 19.4 %
Leverage-based capital
Tier 1 leverage5.0 %4.0 %$185,120 10.2 %$17,238 10.1 %
SLR
6.0 %3.0 %233,358 8.1 %17,238 8.0 %
MSPBNA’s Regulatory Capital1
Well-Capitalized
Requirement
Required
Ratio2
At December 31, 2021At December 31, 2020
$ in millions
Amount
Ratio
AmountRatio
Risk-based capital
Common Equity Tier 1 capital6.5 %7.0 %$10,293 24.3 %$8,213 21.3 %
Tier 1 capital8.0 %8.5 %10,293 24.3 %8,213 21.3 %
Total capital10.0 %10.5 %10,368 24.5 %8,287 21.5 %
Leverage-based capital
Tier 1 leverage5.0 %4.0 %$149,375 6.9 %$8,213 7.2 %
SLR
6.0 %3.0 %153,810 6.7 %8,213 6.9 %
1.MSBNA and MSPBNA early adopted SA-CCR on December 1, 2021. The adoption did not have a material impact on either of the bank's capital ratios or SLR.
2.Required ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the ability to make capital distributions, including the payment of dividends.
Additionally, MSBNA is conditionally registered with the SEC as a security-based swap dealer and is provisionally registered with the CFTC as a swap dealer. However, as MSBNA is prudentially regulated as a bank, its capital requirements continue to be determined by its banking regulators.
Other Regulatory Capital Requirements
MS&Co. Regulatory Capital
$ in millions
At
December 31, 2021
At
December 31, 2020
Net capital$18,383 $12,869 
Excess net capital14,208 9,034 
MS&Co. is registered as a broker-dealer and a futures commission merchant with the SEC and the CFTC,
respectively, and provisionally registered as a swap dealer with the CFTC.
As an Alternative Net Capital broker-dealer, and in accordance with Securities Exchange Act of 1934 (“Exchange Act”) Rule 15c3-1, Appendix E, MS&Co. is subject to minimum net capital and tentative net capital requirements and operates with capital in excess of its regulatory capital requirements. As a futures commission merchant and provisionally-registered swap dealer, MS&Co. is subject to CFTC capital requirements. In addition, MS&Co. must notify the SEC if its tentative net capital falls below certain levels. At December 31, 2021 and December 31, 2020, MS&Co. exceeded its net capital requirement and had tentative net capital in excess of the minimum and notification requirements.
Other Regulated Subsidiaries
The following subsidiaries are also subject to various regulatory capital requirements and operated with capital in excess of their respective regulatory capital requirements as of December 31, 2021 and December 31, 2020, as applicable:
MSSB, a registered U.S. broker-dealer and introducing broker for the futures business, is subject to, respectively, the minimum net capital requirements of the SEC and CFTC capital requirements.
MSIP, a London-based broker-dealer subsidiary, is subject to the capital requirements of the PRA. MSIP is also conditionally registered with the SEC as a security-based swap dealer and provisionally registered with the CFTC as a swap dealer, but is currently complying with home-country capital requirements in lieu of SEC and CFTC capital requirements pursuant to applicable substituted compliance rules and interim no-action relief.
Morgan Stanley Europe Holdings SE Group (“MSEHSE Group”), including MSESE, a Germany-based broker-dealer, is subject to the capital requirements of the European Central Bank, BaFin and the German Central Bank. MSESE is also conditionally registered with the SEC as a security-based swap dealer and provisionally registered with the CFTC as a swap dealer, but is currently complying with home-country capital requirements in lieu of SEC and CFTC capital requirements pursuant to interim no-action relief.
MSMS, a Tokyo-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Agency. MSMS is also provisionally registered with the CFTC as a swap dealer but is currently complying with home-country capital requirements in lieu of CFTC capital requirements pursuant to interim no-action relief.
MSCS, a U.S. entity and the Firm’s primary non-bank security-based swap dealer, is conditionally registered with the SEC as a security-based swap dealer, registered with the SEC as an OTC derivatives dealer and provisionally registered with the CFTC as a swap dealer. MSCS is subject to the capital requirements of both regulators.
125
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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MSCG, a U.S. entity, is provisionally registered with the CFTC as a swap dealer and is subject to its capital requirements.
E*TRADE Bank and E*TRADE Savings Bank are subject to the capital requirements of the OCC. For additional information on E*TRADE Bank and E*TRADE Savings Bank, see Note 1.
E*TRADE Securities LLC, a registered broker-dealer, is subject to the minimum net capital requirements of the SEC.
Certain other U.S. and non-U.S. subsidiaries of the Firm are subject to various securities, commodities and banking regulations, and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries have also consistently operated with capital in excess of their local capital adequacy requirements.
Restrictions on Payments
The regulatory capital requirements referred to above, and certain covenants contained in various agreements governing indebtedness of the Firm, may restrict the Firm’s ability to withdraw capital from its subsidiaries. The following table represents net assets of consolidated subsidiaries that may be restricted as to the payment of cash dividends and advances to the Parent Company.
$ in millionsAt
December 31,
2021
At
December 31,
2020
Restricted net assets$49,516 $40,502 
18. Total Equity
Morgan Stanley Shareholders’ Equity
Preferred Stock
 Shares
Outstanding
 Carrying Value
$ in millions, except per share data
At
December 31,
2021
Liquidation
Preference
per Share
At
December 31,
2021
At
December 31,
2020
Series
A44,000 $25,000 $1,100 $1,100 
C1
519,882 1,000 408 408 
E34,500 25,000 862 862 
F34,000 25,000 850 850 
H2
   1,300 
I40,000 25,000 1,000 1,000 
J3
   1,500 
K40,000 25,000 1,000 1,000 
L20,000 25,000 500 500 
M400,000 1,000 430 430 
N3,000 100,000 300 300 
O4
52,000 25,000 1,300 — 
Total$7,750 $9,250 
Shares authorized30,000,000 
1.Series C preferred stock is held by MUFG.
2.On November 19, 2021, the Firm announced the redemption in whole of its outstanding Series H preferred stock. On notice of redemption, the amount due to holders of Series H Preferred Stock was reclassified to Borrowings, and on January 18, 2022, the redemption settled at the carrying value of $1.3 billion.
3.On March 15, 2021, the Firm announced the redemption in whole of its outstanding Series J preferred stock. On notice of redemption, the amount due to holders of Series J Preferred Stock was reclassified to Borrowings, and on April 15, 2021, the redemption settled at the carrying value of $1.5 billion.
4.The Firm issued Series O Preferred Stock on October 25, 2021.
The Firm’s preferred stock has a preference over its common stock upon liquidation. The Firm’s preferred stock qualifies as and is included in Tier 1 capital in accordance with regulatory capital requirements (see Note 17).
On November 25, 2019, the Firm announced the redemption in whole of its outstanding Series G preferred stock. On notice of redemption, the amount due to holders of Series G Preferred Stock was reclassified to Borrowings, and on January 15, 2020, the redemption settled at the carrying value of $500 million.
December 2021 Form 10-K
126

 
Notes to Consolidated Financial Statements
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Description of Preferred Stock as of December 31, 2021
  Depositary
Shares
per Share
Redemption
Series1, 2
Shares
Issued
Price
per Share3
Date4
A44,000 1,000 $25,000 Currently redeemable
C5
1,160,791 N/A1,100 Currently redeemable
E34,500 1,000 25,000 October 15, 2023
F34,000 1,000 25,000 January 15, 2024
I40,000 1,000 25,000 October 15, 2024
K40,000 1,000 25,000 April 15, 2027
L6
20,000 1,000 25,000 January 15, 2025
M7
400,000 N/A1,000 September 15, 2026
N7
3,000 100 100,000 October 2, 2025
O52,000 1,000 25,000 January 15, 2027
1.All shares issued are non-cumulative. Each share has a par value of $0.01, except Series C.
2.Dividends on Series A are based on a floating rate, and dividends on Series C, L and O are based on a fixed rate. Dividends on all other Series are based on a fixed-to-floating rate.
3.Series A and C are redeemable at the redemption price plus accrued and unpaid dividends, regardless of whether dividends are actually declared, up to but excluding the date of redemption. All other Series are redeemable at the redemption price plus any declared and unpaid dividends, up to but excluding the date fixed for redemption.
4.Series A and C are currently redeemable at the Firm’s option, in whole or in part, from time to time. All other Series are redeemable, at the Firm’s option (i) in whole or in part, from time to time, on any dividend payment date on or after the redemption date or (ii) in whole but not in part at any time within 90 days following a regulatory capital treatment event (as described in the terms of that series).
5.Series C is non-voting perpetual preferred stock. Dividends on the Series C preferred stock are payable, on a non-cumulative basis, as and if declared by the Board of Directors, in cash, at the rate of 10% per annum of the liquidation preference of $1,000 per share.
6.Series L Preferred Stock was issued on November 25, 2019.
7.Series M and N Preferred Stock were issued on October 2, 2020 as part of the acquisition of E*TRADE.
Common Stock
Rollforward of Common Stock Outstanding
in millions20212020
Shares outstanding at beginning of period1,810 1,594 
Treasury stock purchases1
(134)(39)
Issuance for the acquisition of Eaton Vance69 — 
Issuance for the acquisition of E*TRADE 233 
Other2
27 22 
Shares outstanding at end of period1,772 1,810 
1.The Firm’s Board of Directors has authorized the repurchase of the Firm’s outstanding stock under a share repurchase program (“Share Repurchase Program”). In addition to the Firm’s Share Repurchase Program, Treasury stock purchases include repurchases of common stock for employee tax withholding.
2.Other includes net shares issued to and forfeited from employee stock trusts and issued for RSU conversions.
Share Repurchases
$ in millions20212020
Repurchases of common stock under the Firm’s
Share Repurchase Program
$11,464 $1,347 
On June 28, 2021, the Firm announced that its Board of Directors authorized the repurchase of up to $12 billion of outstanding common stock from July 1, 2021 through June 30, 2022, from time to time as conditions warrant, which supersedes the previous common stock repurchase authorization.
Pursuant to the Share Repurchase Program, the Firm considers, among other things, business segment capital needs, as well as stock-based compensation and benefit plan
requirements. Share repurchases under the program will be exercised from time to time at prices the Firm deems appropriate subject to various factors, including the Firm’s capital position and market conditions. The share repurchases may be effected through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans, and may be suspended at any time.
Common Shares Outstanding for Basic and Diluted EPS
in millions202120202019
Weighted average common shares outstanding, basic1,785 1,603 1,617 
Effective of dilutive RSUs and PSUs29 21 23 
Weighted average common shares outstanding and common stock equivalents, diluted1,814 1,624 1,640 
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS)
 
Dividends
$ in millions, except per share data
202120202019
Per
Share1
Total
Per
Share1
Total
Per
Share1
Total
Preferred Stock Series
A$1,022 $44 $1,017 $44 $1,014 $44 
C100 52 100 52 100 52 
E1,781 60 1,781 60 1,781 60 
F1,719 60 1,719 60 1,719 60 
G2
  — — 1,242 24 
H3
719 38 1,143 60 1,418 74 
I1,594 64 1,594 64 1,594 64 
J4
253 15 1,213 74 1,388 84 
K1,463 59 1,463 59 1,463 59 
L1,219 24 1,219 23 169 
M5
59 24 — — — — 
N6
5,300 16 — — — — 
O7
236 12 — — — — 
Total Preferred stock$468 $496 $524 
Common stock$2.10 $3,818 $1.40 $2,295 $1.30 $2,161 
1.Common and Preferred Stock dividends are payable quarterly unless otherwise noted.
2.Series G preferred stock was redeemed during the first quarter of 2020. Dividends declared on Series G following the issuance of the notice of redemption were recognized as Interest expense and are excluded from the 2019 amounts.
3.A notice of redemption was issued for Series H preferred stock on November 19, 2021. Dividends declared on Series H following the issuance of the notice of redemption were recognized as Interest expense and are excluded from the 2021 amounts.
4.Series J was payable semiannually until July 15, 2020, after which it was payable quarterly until its redemption.
5.Series M is payable semiannually until September 15, 2026 and thereafter will be payable quarterly.
6.Series N is payable semiannually until March 15, 2023 and thereafter will be payable quarterly.
7.Series O is payable semiannually until January 15, 2027 and thereafter will be payable quarterly.
127
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
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Accumulated Other Comprehensive Income (Loss)1
$ in millionsCTAAFS 
Securities
Pensions
and Other
DVATotal
December 31, 2018$(889)$(930)$(578)$105 $(2,292)
OCI during the period(8)1,137 (66)(1,559)(496)
December 31, 2019(897)207 (644)(1,454)(2,788)
OCI during the period102 1,580 146 (1,002)826 
December 31, 2020(795)1,787 (498)(2,456)(1,962)
OCI during the period(207)(1,542)(53)662 (1,140)
December 31, 2021$(1,002)$245 $(551)$(1,794)$(3,102)
CTA—Cumulative foreign currency translation adjustments
1.Amounts are net of tax and noncontrolling interests.
Components of Period Changes in OCI
 2021
$ in millionsPre-tax
Gain
(Loss)
Income Tax Benefit (Provision)After-tax
Gain
(Loss)
Non-
controlling
Interests
Net
CTA
OCI activity$(140)$(191)$(331)$(124)$(207)
Reclassified to earnings     
Net OCI$(140)$(191)$(331)$(124)$(207)
Change in net unrealized gains (losses) on AFS securities
OCI activity$(1,803)$422 $(1,381)$ $(1,381)
Reclassified to earnings(210)49 (161) (161)
Net OCI$(2,013)$471 $(1,542)$ $(1,542)
Pension and other
OCI activity$(101)$26 $(75)$ $(75)
Reclassified to earnings31 (9)22  22 
Net OCI$(70)$17 $(53)$ $(53)
Change in net DVA
OCI activity$882 $(213)$669 $34 $635 
Reclassified to earnings36 (9)27  27 
Net OCI$918 $(222)$696 $34 $662 
 2020
$ in millionsPre-tax
Gain
(Loss)
Income Tax Benefit (Provision)After-tax
Gain
(Loss)
Non-
controlling
Interests
Net
CTA
OCI activity$74 $99 $173 $68 $105 
Reclassified to earnings(3)— (3)— (3)
Net OCI$71 $99 $170 $68 $102 
Change in net unrealized gains (losses) on AFS securities
OCI activity$2,194 $(508)$1,686 $— $1,686 
Reclassified to earnings(137)31 (106)— (106)
Net OCI$2,057 $(477)$1,580 $— $1,580 
Pension and other
OCI activity$162 $(34)$128 $— $128 
Reclassified to earnings23 (5)18 — 18 
Net OCI$185 $(39)$146 $— $146 
Change in net DVA
OCI activity$(1,385)$337 $(1,048)$(26)$(1,022)
Reclassified to earnings26 (6)20 — 20 
Net OCI$(1,359)$331 $(1,028)$(26)$(1,002)
 2019
$ in millionsPre-tax
Gain
(Loss)
Income Tax Benefit (Provision)After-tax
Gain
(Loss)
Non-
controlling
Interests
Net
CTA
OCI activity$$(3)$$11 $(8)
Reclassified to earnings— — — — — 
Net OCI$$(3)$$11 $(8)
Change in net unrealized gains (losses) on AFS securities
OCI activity$1,588 $(373)$1,215 $— $1,215 
Reclassified to earnings(103)25 (78)— (78)
Net OCI$1,485 $(348)$1,137 $— $1,137 
Pension and other
OCI activity$(98)$25 $(73)$— $(73)
Reclassified to earnings12 (5)— 
Net OCI$(86)$20 $(66)$— $(66)
Change in net DVA
OCI activity$(2,181)$533 $(1,648)$(80)$(1,568)
Reclassified to earnings11 (2)— 
Net OCI$(2,170)$531 $(1,639)$(80)$(1,559)
Cumulative Foreign Currency Translation Adjustments
$ in millionsAt
December 31,
2021
At
December 31,
2020
Associated with net investments in subsidiaries with a non-U.S. dollar functional currency$(2,277)$(1,406)
Hedges, net of tax1,275 611 
Total$(1,002)$(795)
Carrying value of net investments in non-U.S. dollar functional currency subsidiaries subject to hedges
$15,605 $15,746 
Cumulative foreign currency translation adjustments include gains or losses resulting from translating foreign currency financial statements from their respective functional currencies to U.S. dollars, net of hedge gains or losses and related tax effects. The Firm uses foreign currency contracts to manage the currency exposure relating to its net investments in non-U.S. dollar functional currency subsidiaries and determines the amount of exposure to hedge on a pre-tax basis. The Firm may also elect not to hedge its net investments in certain foreign operations due to market conditions or other reasons, including the availability of various currency contracts at acceptable costs. Information relating to the effects on cumulative foreign currency translation adjustments that resulted from the translation of foreign currency financial statements and from gains and losses from hedges of the Firm’s net investments in non-U.S. dollar functional currency subsidiaries is summarized in the previous table.
December 2021 Form 10-K
128

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
19. Interest Income and Interest Expense
$ in millions202120202019
Interest income
Investment securities$2,759 $2,282 $2,175 
Loans4,209 4,142 4,783 
Securities purchased under agreements to resell1,2
(181)458 2,281 
Securities borrowed1,3
(1,017)(652)1,204 
Trading assets, net of Trading liabilities2,038 2,417 2,899 
Customer receivables and Other4
1,603 1,515 3,756 
Total interest income$9,411 $10,162 $17,098 
Interest expense
Deposits$409 $953 $1,885 
Borrowings2,725 3,250 5,052 
Securities sold under agreements to repurchase1,5
93 564 1,967 
Securities loaned1,6
401 419 642 
Customer payables and Other7
(2,262)(1,337)2,858 
Total interest expense$1,366 $3,849 $12,404 
Net interest$8,045 $6,313 $4,694 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
2.Includes interest paid on Securities purchased under agreements to resell.
3.Includes fees paid on Securities borrowed.
4.Includes interest from Cash and cash equivalents.
5.Includes interest received on Securities sold under agreements to repurchase.
6.Includes fees received on Securities loaned.
7.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements.
Interest income and Interest expense are classified in the income statement based on the nature of the instrument and related market conventions. When included as a component of the instrument’s fair value, interest is included within Trading revenues or Investments revenues. Otherwise, it is included within Interest income or Interest expense.
Accrued Interest
$ in millionsAt
December 31,
2021
At
December 31,
2020
Customer and other receivables$1,800 $1,652 
Customer and other payables2,164 2,119 
20. Deferred Compensation Plans and Carried Interest Compensation
Stock-Based Compensation Plans
Certain current and former employees of the Firm participate in the Firm’s stock-based compensation plans. These plans include RSUs and PSUs, the details of which are further outlined below.
Stock-Based Compensation Expense
$ in millions202120202019
RSUs$1,834 $1,170 $1,064 
PSUs251 142 89 
Total$2,085 $1,312 $1,153 
Retirement-eligible awards1
$192 $157 $111 
1.Total expense includes stock-based compensation anticipated to be awarded in January of the following year that does not contain a future service requirement.
Tax Benefit Related to Stock-Based Compensation Expense
$ in millions202120202019
Tax benefit1
$432 $270 $243 
1.Excludes income tax consequences related to employee share-based award conversions.
Unrecognized Compensation Cost Related to Stock-Based Awards Granted
$ in millions
At
December 31,
20211
To be recognized in:
2022$653 
2023287 
Thereafter60 
Total$1,000 
1.Amounts do not include forfeitures, future adjustments to fair value for certain awards or 2021 performance year compensation awarded in January 2022, which will begin to be amortized in 2022.
In connection with awards under its stock-based compensation plans, the Firm is authorized to issue shares of common stock held in treasury or newly issued shares.
The Firm generally uses treasury shares, if available, to deliver shares to employees or employee stock trusts and has an ongoing repurchase authorization that includes repurchases in connection with awards under its stock-based compensation plans.
Common Shares Available for Future Awards under Stock-Based Compensation Plans
in millionsAt
December 31,
2021
Shares149 
See Note 18 for additional information on the Firm’s Share Repurchase Program.
Restricted Stock Units
RSUs are subject to vesting over time, generally one to seven years from the date of award, contingent upon continued employment and subject to restrictions on sale, transfer or assignment until conversion to common stock. All or a portion of an award may be forfeited if employment is terminated before the end of the relevant vesting period or canceled after the relevant vesting period in certain situations. Recipients of RSUs may have voting rights, at the Firm’s discretion, and generally receive dividend equivalents if the awards vest.
129
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Vested and Unvested RSU Activity
 2021
shares in millionsNumber of
Shares
Weighted
Average
Award Date
Fair Value
RSUs at beginning of period60 $49.82 
Awarded29 77.28 
Conversions to common stock(20)53.32 
Forfeited(2)60.14 
RSUs at end of period1
67 $60.27 
Aggregate intrinsic value of RSUs at end of period
(dollars in millions)
$6,547 
Weighted average award date fair value
RSUs awarded in 202055.01 
RSUs awarded in 201943.05 
1.At December 31, 2021, the weighted average remaining term until delivery for the outstanding RSUs was approximately 1.2 years.
Unvested RSU Activity
 2021
shares in millionsNumber of
Shares
Weighted
Average
Award Date
Fair Value
Unvested RSUs at beginning of period33 $51.27 
Awarded29 77.28 
Vested(21)59.33 
Forfeited(2)60.14 
Unvested RSUs at end of period1
39 $65.58 
1.Unvested RSUs represent awards where recipients have yet to satisfy either the explicit vesting terms or retirement-eligible requirements.
Fair Value of RSU Activity1
$ in millions202120202019
Conversions to common stock$1,539 $1,295 $1,497 
Vested1,647 1,289 1,292 
1. Fair value of converted stock is based on the share price on conversion. Fair value of vested stock is based on the share price at date of vesting.
Performance-Based Stock Units
PSUs will vest and convert to shares of common stock only if the Firm satisfies predetermined performance and market-based conditions over a three-year performance period. The number of PSUs that will vest ranges from 0% to 150% of the target award, based on the extent to which the Firm achieves the specified performance goals. One-half of the award is earned based on the Firm’s average return on equity, excluding certain adjustments (“MS Adjusted ROE”). For all awards granted beginning in 2021, this performance measure was updated and is now based on the Firm’s average return on tangible common equity excluding certain adjustments (“MS Adjusted ROTCE”). The other half of the award will be earned based on the Firm’s total shareholder return, relative to the total shareholder return of the S&P 500 Financials Sector Index (“Relative MS TSR”). PSUs have vesting, restriction and cancellation provisions that are generally similar to those of RSUs. At December 31, 2021, approximately 3 million PSUs were outstanding.
PSU Fair Value on Award Date
202120202019
MS Adjusted ROTCE/ROE$74.87 $57.05 $43.29 
Relative MS TSR83.70 65.31 48.28 
The Relative MS TSR fair values on the award date were estimated using a Monte Carlo simulation and the following assumptions.
Monte Carlo Simulation Assumptions
Risk-Free
Interest Rate
Expected
Stock Price
Volatility
Correlation
Coefficient
Award year
20210.2 %39.0 %0.92 
20201.6 %24.0 %0.88 
20192.6 %26.5 %0.89 
The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined using historical volatility. The correlation coefficient was developed based on historical price data of the Firm and the S&P 500 Financials Sector Index. The model uses an expected dividend yield equivalent to reinvesting dividends.
Deferred Cash-Based Compensation Plans
Deferred cash-based compensation plans generally provide a return to the plan participants based upon the performance of each participant’s referenced investments.
Deferred Cash-Based Compensation Expense
$ in millions202120202019
Deferred cash-based awards$810 $1,263 $1,233 
Return on referenced investments526 856 645 
Total$1,336 $2,119 $1,878 
Retirement-eligible awards1
$253 $194 $195 
1.Total expense includes deferred cash-based compensation anticipated to be awarded in January of the following year that does not contain a future service requirement.
Carried Interest Compensation
The Firm generally recognizes compensation expense for any portion of carried interest (both realized and unrealized) that is allocated to employees.
Carried Interest Compensation Expense
$ in millions202120202019
Expense$346 $215 $534 
December 2021 Form 10-K
130

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
21. Employee Benefit Plans
Pension Plans
Components of Net Periodic Benefit Expense (Income)
 Pension Plans
$ in millions202120202019
Service cost, benefits earned during the period
$19 $17 $16 
Interest cost on projected benefit obligation104 121 139 
Expected return on plan assets(48)(77)(114)
Net amortization of prior service cost1 
Net amortization of actuarial loss34 26 13 
Net periodic benefit expense$110 $88 $55 

Certain current and former U.S. employees of the Firm and its U.S. affiliates who were hired before July 1, 2007 are covered by the U.S. pension plan, a non-contributory defined benefit pension plan that is qualified under Section 401(a) of the Internal Revenue Code (“U.S. Qualified Plan”). The U.S. Qualified Plan has ceased future benefit accruals.
Unfunded supplementary plans (“Supplemental Plans”) cover certain executives. Liabilities for benefits payable under the Supplemental Plans are accrued by the Firm and are funded when paid. The Morgan Stanley Supplemental Executive Retirement and Excess Plan (“SEREP”), a non-contributory defined benefit plan that is not qualified under Section 401(a) of the Internal Revenue Code, has ceased future benefit accruals.
Certain of the Firm’s non-U.S. subsidiaries also have defined benefit pension plans covering their eligible current and former employees.
The Firm’s pension plans generally provide pension benefits that are based on each employee’s years of credited service and on compensation levels specified in the plans.
Rollforward of Pre-tax AOCI
 Pension Plans
$ in millions202120202019
Beginning balance$(691)$(877)$(779)
Net gain (loss)(112)161 (112)
Prior service cost (2)— 
Amortization of prior service cost1 
Amortization of net loss 34 26 13 
Changes recognized in OCI(77)186 (98)
Ending balance$(768)$(691)$(877)
The Firm generally amortizes into net periodic benefit expense (income) the unrecognized net gains and losses exceeding 10% of the greater of the projected benefit obligation or the market-related value of plan assets. The U.S. pension plans amortize the unrecognized net gains and losses over the average life expectancy of participants. The remaining plans generally amortize the unrecognized net gains and losses and prior service credit over the average remaining service period of active participants.
Weighted Average Assumptions Used to Determine Net Periodic Benefit Expense (Income)
 Pension Plans
202120202019
Discount rate2.43 %3.08 %4.01 %
Expected long-term rate of return on plan assets
1.42 %2.35 %3.52 %
Rate of future compensation increases 3.25 %3.28 %3.34 %
 
The accounting for pension plans involves certain assumptions and estimates. The expected long-term rate of return for the U.S. Qualified Plan was estimated by computing a weighted average of the underlying long-term expected returns based on the investment managers’ target allocations.
Benefit Obligation and Funded Status
Rollforward of the Benefit Obligation and Fair Value of Plan Assets
 Pension Plans
$ in millions20212020
Rollforward of projected benefit obligation
Benefit obligation at beginning of year
$4,334 $4,026 
Service cost19 17 
Interest cost104 121 
Actuarial (gain) loss1
(122)362 
Plan amendments(1)
Plan settlements(16)(2)
Benefits paid(217)(222)
Other2
(20)30 
Benefit obligation at end of year
$4,081 $4,334 
Rollforward of fair value of plan assets
Fair value of plan assets at beginning of year
$3,985 $3,553 
Actual return on plan assets(186)600 
Employer contributions38 35 
Benefits paid(217)(222)
Plan settlements(15)(2)
Other2
 21 
Fair value of plan assets at end of year
$3,605 $3,985 
Funded (unfunded) status$(476)$(349)
Amounts recognized in the balance sheet
Assets
$117 $283 
Liabilities(593)(632)
Net amount recognized$(476)$(349)
1.Primarily reflects the impact of year-over-year discount rate fluctuations and changes in mortality assumptions.
2.Includes the impact of foreign currency exchange rate changes and transfers into plan assets.
Accumulated Benefit Obligation
$ in millionsAt
December 31,
2021
At
December 31,
2020
Pension plans$4,065 $4,318 
131
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Pension Plans with Projected Benefit Obligations in Excess of the Fair Value of Plan Assets
$ in millionsAt
December 31,
2021
At
December 31,
2020
Projected benefit obligation$3,768 $708 
Accumulated benefit obligation3,753 692 
Fair value of plan assets3,175 76 
The pension plans included in the table above may differ based on their funding status as of December 31 of each year. December 31, 2021 includes the U.S. Qualified Plan.
Weighted Average Assumptions Used to Determine Projected Benefit Obligation
 Pension Plans
At
December 31,
2021
At
December 31,
2020
Discount rate2.80 %2.43 %
Rate of future compensation increase
3.36 %3.25 %
The discount rates used to determine the benefit obligation were selected by the Firm, in consultation with its independent actuary. The U.S. pension plans use a pension discount yield curve based on the characteristics of the plans, each determined independently. The pension discount yield curve represents spot discount yields based on duration implicit in a representative broad-based Aa-rated corporate bond universe of high-quality fixed income investments. For all non-U.S. pension plans, the assumed discount rates based on the nature of liabilities, local economic environments and available bond indices.
Plan Assets
Fair Value of Plan Assets
At December 31, 2021
$ in millionsLevel 1Level 2Level 3Total
Assets
Cash and cash equivalents1
$9 $ $ $9 
U.S. government and agency securities2,759 314  3,073 
Corporate and other debt—CDO 1  1 
Derivative contracts 3  3 
Other investments  65 65 
Other receivables1
 2  2 
Total$2,768 $320 $65 $3,153 
Assets Measured at NAV
Commingled trust funds:
Money market33 
Foreign funds:
Fixed income162 
Liquidity39 
Targeted cash flow235 
Total$469 
Liabilities
Other payables1
 (17) (17)
Total liabilities$ $(17)$ $(17)
Fair value of plan assets$3,605 
At December 31, 2020
$ in millionsLevel 1Level 2Level 3Total
Assets
Cash and cash equivalents1
$$— $— $
U.S. government and agency securities3,038 321 — 3,359 
Corporate and other debt—CDO— — 
Derivative contracts— — 
Other investments— — 61 61 
Other receivables1
— 53 — 53 
Total$3,042 $380 $61 $3,483 
Assets Measured at NAV
Commingled trust funds:
Money market48 
Foreign funds:
Fixed income169 
Liquidity54 
Targeted cash flow250 
Total$521 
Liabilities
Other payables1
— (19)— (19)
Total liabilities$— $(19)$— $(19)
Fair value of plan assets$3,985 
1.Cash and cash equivalents, other receivables and other payables are valued at their carrying value, which approximates fair value.
Rollforward of Level 3 Plan Assets
$ in millions20212020
Balance at beginning of period$61 $53 
Realized and unrealized gains1 
Purchases, sales and settlements, net3 
Balance at end of period$65 $61 
There were no transfers between levels during 2021 and 2020.
The U.S. Qualified Plan’s assets represent 86% of the Firm’s total pension plan assets. The U.S. Qualified Plan uses a combination of active and risk-controlled fixed income investment strategies. The fixed income asset allocation consists primarily of fixed income securities and related derivative instruments designed to approximate the expected cash flows of the plan’s liabilities in order to help reduce plan exposure to interest rate variation and to better align assets with the obligation. The longer-duration fixed income allocation is expected to help protect the plan’s funded status and maintain the stability of plan contributions over the long run. The investment portfolio performance is assessed by comparing actual investment performance with changes in the estimated present value of the U.S. Qualified Plan’s benefit obligation.
Derivative instruments are permitted in the U.S. Qualified Plan’s investment portfolio only to the extent that they comply with all of the plan’s investment policy guidelines and are consistent with the plan’s risk and return objectives.
As a fundamental operating principle, any restrictions on the underlying assets apply to the respective derivative product. This includes percentage allocations and credit quality. Derivatives are used solely for the purpose of enhancing
December 2021 Form 10-K
132

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
investment returns in the underlying assets and not to circumvent portfolio restrictions.
Plan assets are measured at fair value using valuation techniques that are consistent with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Notes 2 and 5. OTC derivative contracts consist of investments in interest rate swaps and total return swaps. Other investments consist of insurance contracts held by non-U.S.-based plans. The insurance contracts are valued based on the premium reserve of the insurer for a guarantee that the insurer has given to the employee benefit plan that approximates fair value. The insurance contracts are categorized in Level 3 of the fair value hierarchy.
Commingled trust funds are privately offered funds regulated, supervised and subject to periodic examination by a U.S. federal or state agency and available to institutional clients. The trust must be maintained for the collective investment or reinvestment of assets contributed to it from U.S. tax-qualified employee benefit plans maintained by more than one employer or controlled group of corporations. The sponsor of the commingled trust funds values the funds based on the fair value of the underlying securities. Commingled trust funds are redeemable at NAV at the measurement date or in the near future.
Some non-U.S.-based plans hold foreign funds that consist of investments in fixed income funds, target cash flow funds and liquidity funds. Fixed income funds invest in individual securities quoted on a recognized stock exchange or traded in a regulated market. Certain fixed income funds aim to produce returns consistent with certain Financial Times Stock Exchange indexes. Target cash flow funds are designed to provide a series of fixed annual cash flows achieved by investing in government bonds and derivatives. Liquidity funds place a high priority on capital preservation, stable value and a high liquidity of assets. Foreign funds are readily redeemable at NAV.
The Firm generally considers the NAV of commingled trust funds and foreign funds provided by the fund manager to be the best estimate of fair value.
Expected Contributions
The Firm’s policy is to fund at least the amount sufficient to meet minimum funding requirements under applicable employee benefit and tax laws. At December 31, 2021, the Firm expected to contribute approximately $40 million to its pension plans in 2022 based upon the plans’ current funded status and expected asset return assumptions for 2022.
Expected Future Benefit Payments
 At December 31, 2021
$ in millionsPension Plans
2022$148 
2023153 
2024156 
2025163 
2026170 
2027-2031938 
401(k) Plans
$ in millions202120202019
Expense$357 $293 $280 
U.S. employees meeting certain eligibility requirements may participate in the Firm’s 401(k) plans.
Morgan Stanley 401(k) Plan
Eligible employees receive discretionary 401(k) matching cash contributions as determined annually by the Firm. The Firm matched eligible employee contributions up to the IRS limit at 4%, or 5% up to a certain compensation level, in 2021 and 4% in 2020 and 2019. Eligible employees with eligible pay less than or equal to $100,000 also received a fixed contribution equal to 2% of eligible pay. Transition contributions relating to acquired entities or frozen employee benefit plans were allocated to certain eligible employees through 2020. Contributions are invested among available funds according to each participant’s investment direction and are included in the Firm’s 401(k) expense.
Non-U.S. Defined Contribution Pension Plans
$ in millions202120202019
Expense$149 $130 $121 
The Firm maintains separate defined contribution pension plans that cover eligible employees of certain non-U.S. subsidiaries. Under such plans, benefits are generally determined based on a fixed rate of base salary with certain vesting requirements.
133
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
22. Income Taxes
Components of Provision for Income Taxes
$ in millions202120202019
Current
U.S.:
Federal$2,554 $1,641 $873 
State and local475 399 260 
Non-U.S.:
U.K.551 395 166 
Japan105 185 177 
Hong Kong192 185 82 
Other1
667 684 341 
Total$4,544 $3,489 $1,899 
Deferred
U.S.:
Federal$(11)$(249)$185 
State and local33 (38)46 
Non-U.S.:
U.K.(37)(2)
Japan4 12 11 
Hong Kong(9)(3)— 
Other1
24 30 (82)
Total$4 $(250)$165 
Provision for income taxes$4,548 $3,239 $2,064 
1.Other Non-U.S. tax provisions for 2021, 2020 and 2019 primarily include Brazil, Singapore and the Netherlands.
Reconciliation of the U.S. Federal Statutory Income Tax Rate to the Effective Income Tax Rate
202120202019
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
U.S. state and local income taxes, net of
U.S. federal income tax benefits
2.1 2.0 2.2 
Domestic tax credits and tax exempt income(0.6)(0.8)(1.6)
Non-U.S. earnings1.4 1.7 (0.8)
Employee share-based awards(0.6)(0.7)(1.1)
Other(0.2)(0.7)(1.4)
Effective income tax rate23.1 %22.5 %18.3 %
The Firm’s effective tax rate for 2019 includes net discrete tax benefits of $475 million, primarily associated with remeasurement of reserves and related interest as a result of new information pertaining to the resolution of multi-jurisdiction tax examinations, as well as benefits related to conversion of employee share-based awards.
Deferred Tax Assets and Liabilities
$ in millionsAt
December 31,
2021
At
December 31,
2020
Gross deferred tax assets
Net operating loss and tax credit carryforwards$276 $330 
Employee compensation and benefit plans2,430 2,248 
Allowance for credit losses and other reserves599 669 
Valuation of inventory, investments and receivables474 19 
Other15 43 
Total deferred tax assets3,794 3,309 
Deferred tax assets valuation allowance208 236 
Deferred tax assets after valuation allowance
$3,586 $3,073 
Gross deferred tax liabilities
Fixed assets1,287 1,130 
Intangibles and goodwill2,046 1,156 
Total deferred tax liabilities$3,333 $2,286 
Net deferred tax assets$253 $787 
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse.
The Firm believes the recognized net deferred tax assets (after valuation allowance) at December 31, 2021 are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which it operates.
The earnings of certain foreign subsidiaries are indefinitely reinvested due to regulatory and other capital requirements in foreign jurisdictions. As of December 31, 2021, the unrecognized deferred tax liability attributable to indefinitely reinvested earnings is immaterial.
Rollforward of Unrecognized Tax Benefits
$ in millions202120202019
Balance at beginning of period$755 $755 $1,080 
Increase based on tax positions related to the current period
201 139 57 
Increase based on tax positions related to prior periods
74 178 61 
Increase based on the acquisition of E*TRADE 26 — 
Decrease based on tax positions related to prior periods
(37)(297)(419)
Decreases related to settlements with taxing authorities
(10)(36)(17)
Decreases related to lapse of statute of limitations
(12)(10)(7)
Balance at end of period$971 $755 $755 
Net unrecognized tax benefits1
$860 $665 $549 
1.Represent ending unrecognized tax benefits adjusted for the impact of the federal benefit of state issues, competent authority arrangements and foreign tax credit offsets. If recognized, these net benefits would favorably impact the effective tax rate in future periods.
It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount
December 2021 Form 10-K
134

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
of unrecognized tax benefits and the impact on the Firm’s effective tax rate over the next 12 months.
Interest Expense (Benefit) Associated with Unrecognized Tax Benefits, Net of Federal and State Income Tax Benefits
$ in millions202120202019
Recognized in income statement$14 $56 $
Accrued at end of period142 134 92 
Interest and penalties related to unrecognized tax benefits are recognized as a component of the provision for income taxes. Penalties related to unrecognized tax benefits for the years mentioned above were immaterial.
Earliest Tax Year Subject to Examination in Major Tax Jurisdictions
JurisdictionTax Year
U.S.2017
New York State and New York City2010
U.K.2011
Japan2015
Hong Kong2015
The Firm is under continuous examination by the IRS and other tax authorities in certain countries, such as Japan and the U.K., and in states and localities in which it has significant business operations, such as New York.
The Firm believes that the resolution of these tax examinations will not have a material effect on the annual financial statements, although a resolution could have a material impact in the income statement and on the effective tax rate for any period in which such resolutions occur.
23. Segment, Geographic and Revenue Information
The Firm structures its segments primarily based upon the nature of the financial products and services provided to customers and its management organization. The Firm provides a wide range of financial products and services to its customers in each of its business segments: Institutional Securities, Wealth Management and Investment Management. For a further discussion of the business segments, see Note 1.
Revenues and expenses directly associated with each respective business segment are included in determining its operating results. Other revenues and expenses that are not directly attributable to a particular business segment are generally allocated based on each business segment’s respective net revenues, non-interest expenses or other relevant measures.
As a result of revenues and expenses from transactions with other operating segments being treated as transactions with external parties for purposes of segment disclosures, the Firm includes an Intersegment Eliminations category to reconcile the business segment results to the consolidated results.
Selected Financial Information by Business Segment
 2021
$ in millionsISWMIMI/ETotal
Investment banking$10,272 $822 $ $(100)$10,994 
Trading12,353 418 (53)92 12,810 
Investments607 48 721  1,376 
Commissions and fees1
2,878 3,019 1 (377)5,521 
Asset management1, 2
583 13,966 5,576 (158)19,967 
Other495 577 (20)(10)1,042 
Total non-interest revenues27,188 18,850 6,225 (553)51,710 
Interest income3,752 5,821 31 (193)9,411 
Interest expense1,107 428 36 (205)1,366 
Net interest2,645 5,393 (5)12 8,045 
Net revenues$29,833 $24,243 $6,220 $(541)$59,755 
Provision for credit losses$(7)$11 $ $ $4 
Compensation and benefits9,165 13,090 2,373  24,628 
Non-compensation expenses8,861 4,961 2,169 (536)15,455 
Total non-interest expenses$18,026 $18,051 $4,542 $(536)$40,083 
Income before provision for income taxes$11,814 $6,181 $1,678 $(5)$19,668 
Provision for income taxes2,746 1,447 356 (1)4,548 
Net income9,068 4,734 1,322 (4)15,120 
Net income applicable to noncontrolling interests
111  (25) 86 
Net income applicable to Morgan Stanley
$8,957 $4,734 $1,347 $(4)$15,034 
 2020
$ in millionsISWMIMI/ETotal
Investment banking$7,204 $559 $— $(89)$7,674 
Trading3
13,097 844 (34)76 13,983 
Investments166 12 808 — 986 
Commissions and fees1
2,935 2,291 (376)4,851 
Asset management1, 2
461 10,955 3,013 (157)14,272 
Other3
323 403 (39)(9)678 
Total non-interest revenues
24,186 15,064 3,749 (555)42,444 
Interest income5,809 4,771 14 (432)10,162 
Interest expense3,519 749 29 (448)3,849 
Net interest2,290 4,022 (15)16 6,313 
Net revenues3
$26,476 $19,086 $3,734 $(539)$48,757 
Provision for credit losses3
$731 $30 $— $— $761 
Compensation and benefits8,342 10,970 1,542 — 20,854 
Non-compensation expenses3
8,252 3,699 1,322 (549)12,724 
Total non-interest expenses3
$16,594 $14,669 $2,864 $(549)$33,578 
Income before provision for income taxes$9,151 $4,387 $870 $10 $14,418 
Provision for income taxes2,040 1,026 171 3,239 
Net income7,111 3,361 699 11,179 
Net income applicable to noncontrolling interests
99 — 84 — 183 
Net income applicable to Morgan Stanley
$7,012 $3,361 $615 $$10,996 
135
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
 2019
$ in millionsISWMIMI/ETotal
Investment banking$5,734 $509 $— $(80)$6,163 
Trading3
10,497 734 (8)51 11,274 
Investments325 1,213 — 1,540 
Commissions and fees1
2,484 1,726 (292)3,919 
Asset management1,2
413 10,199 2,629 (158)13,083 
Other3
563 354 (46)(6)865 
Total non-interest revenues
20,016 13,524 3,789 (485)36,844 
Interest income12,193 5,467 20 (582)17,098 
Interest expense11,713 1,245 46 (600)12,404 
Net interest480 4,222 (26)18 4,694 
Net revenues3
$20,496 $17,746 $3,763 $(467)$41,538 
Provision for credit losses3
$151 $10 $— $— $161 
Compensation and benefits7,433 9,774 1,630 — 18,837 
Non-compensation expenses3
7,422 3,130 1,148 (461)11,239 
Total non-interest expenses3
$14,855 $12,904 $2,778 $(461)$30,076 
Income before provision for income taxes4
$5,490 $4,832 $985 $(6)$11,301 
Provision for income taxes769 1,104 193 (2)2,064 
Net income4,721 3,728 792 (4)9,237 
Net income applicable to noncontrolling interests
122 — 73 — 195 
Net income applicable to Morgan Stanley
$4,599 $3,728 $719 $(4)$9,042 
I/E–Intersegment Eliminations
1.Substantially all revenues are from contracts with customers.
2.Includes certain fees that may relate to services performed in prior periods.
3.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.
4.The fourth quarter of 2019 included specific severance-related costs of approximately $172 million, which are included in Compensation and benefits expenses in the Income statement. These costs were recorded in the business segments approximately as follows: Institutional Securities $124 million, Wealth Management $37 million and Investment Management $11 million.

Detail of Investment Banking Revenues
$ in millions202120202019
Institutional Securities—Advisory$3,487 $2,008 $2,116 
Institutional Securities—Underwriting6,785 5,196 3,618 
Firm Investment banking revenues from contracts with customers91 %92 %90 %
Trading Revenues by Product Type1
$ in millions202120202019
Interest rate$740 $2,978 $2,773 
Foreign exchange1,008 902 395 
Equity2
7,331 6,200 5,246 
Commodity and other2,599 1,762 1,617 
Credit1,132 2,141 1,243 
Total$12,810 $13,983 $11,274 
1.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.
2.Dividend income is included within equity contracts.
The previous table summarizes realized and unrealized gains and losses, from derivative and non-derivative financial instruments, included in Trading revenues in the income statement. The Firm generally utilizes financial instruments across a variety of product types in connection with its market-making and related risk management strategies. The trading revenues presented in the table are not representative of the manner in which the Firm manages its business activities and are prepared in a manner similar to the
presentation of trading revenues for regulatory reporting purposes.
Investment Management Investments Revenues—Net Cumulative Unrealized Carried Interest
$ in millionsAt
December 31,
2021
At
December 31,
2020
Net cumulative unrealized performance-based fees at risk of reversing
$802 $735 
The Firm’s portion of net cumulative performance-based fees in the form of unrealized carried interest, for which the Firm is not obligated to pay compensation, is at risk of reversing when the return in certain funds fall below specified performance targets. See Note 15 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received.
Investment Management Asset Management Revenues—Reduction of Fees Due to Fee Waivers
$ in millions202120202019
Fee waivers$516 $135 $43 
The Firm waives a portion of its fees in the Investment Management business segment from certain registered money market funds that comply with the requirements of Rule 2a-7 of the Investment Company Act of 1940.
Certain Other Fee Waivers
Separately, the Firm’s employees, including its senior officers, may participate on the same terms and conditions as other investors in certain funds that the Firm sponsors primarily for client investment, and the Firm may waive or lower applicable fees and charges for its employees.
Other ExpensesTransaction Taxes
$ in millions202120202019
Transaction taxes$969 $699 $489 
Transaction taxes are composed of securities transaction taxes and stamp duties, which are levied on the sale or purchase of securities listed on recognized stock exchanges in certain markets. These taxes are imposed mainly on trades of equity securities in Asia and EMEA. Similar transaction taxes are levied on trades of listed derivative instruments in certain countries.
Net Revenues by Region1
$ in millions202120202019
Americas$44,605 $35,459 $30,324 
EMEA7,699 6,549 6,078 
Asia7,451 6,749 5,136 
Total$59,755 $48,757 $41,538 
1.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.
December 2021 Form 10-K
136

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Income before Provision for Income Taxes
$ in millions202120202019
U.S.$14,082 $10,027 $9,464 
Non-U.S.1
5,586 4,391 1,837 
Total$19,668 $14,418 $11,301 
1.Non-U.S. income is defined as income generated from operations located outside the U.S.
The Firm operates in both U.S. and non-U.S. markets. The Firm’s non-U.S. business activities are principally conducted and managed through EMEA and Asia locations. The net revenues disclosed in the previous table reflect the regional view of the Firm’s consolidated net revenues on a managed basis, based on the following methodology:
Institutional Securities: Client location for advisory and equity underwriting, syndicate desk location for debt underwriting, trading desk location for sales and trading.
Wealth Management: Americas, where representatives operate.
Investment Management: Client location, except certain closed-end funds, which are based on asset location.
Revenues Recognized from Prior Services
$ in millions202120202019
Non-interest revenues
$2,391 $2,298 $2,705 
The previous table includes revenues from contracts with customers recognized where some or all services were performed in prior periods. For the year ended December 31, 2021, these revenues primarily include investment banking advisory fees, and for the years ended December 31, 2020 and 2019, these revenues primarily include investment banking advisory fees and distribution fees.
Receivables from Contracts with Customers
$ in millionsAt
December 31,
2021
At
December 31,
2020
Customer and other receivables$3,591 $3,200 
Receivables from contracts with customers, which are included within Customer and other receivables in the balance sheet, arise when the Firm has both recorded revenues and the right per the contract to bill the customer.
Assets by Business Segment
$ in millionsAt
December 31,
2021
At
December 31,
2020
Institutional Securities$792,135 $753,322 
Wealth Management378,438 355,595 
Investment Management17,567 6,945 
Total1
$1,188,140 $1,115,862 
1. Parent assets have been fully allocated to the business segments.
Total Assets by Region
$ in millionsAt
December 31,
2021
At
December 31,
2020
Americas$848,001 $815,048 
EMEA204,083 194,598 
Asia136,056 106,216 
Total$1,188,140 $1,115,862 
24. Parent Company
Parent Company Only—Condensed Income Statement and Comprehensive Income Statement
$ in millions202120202019
Revenues
Dividends from bank subsidiaries$ $2,811 $3,531 
Dividends from BHC and non-bank subsidiaries
8,898 1,170 1,998 
Total dividends from subsidiaries8,898 3,981 5,529 
Trading229 (244)(54)
Other4 51 80 
Total non-interest revenues9,131 3,788 5,555 
Interest income2,648 3,666 5,121 
Interest expense2,822 3,087 4,661 
Net interest(174)579 460 
Net revenues8,957 4,367 6,015 
Non-interest expenses443 387 300 
Income before income taxes8,514 3,980 5,715 
Provision for (benefit from) income taxes(203)(109)(73)
Net income before undistributed gain of subsidiaries8,717 4,089 5,788 
Undistributed gain of subsidiaries6,317 6,907 3,254 
Net income15,034 10,996 9,042 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(207)102 (8)
Change in net unrealized gains (losses) on available-for-sale securities(1,542)1,580 1,137 
Pensions and other(53)146 (66)
Change in net debt valuation adjustment662 (1,002)(1,559)
Comprehensive income$13,894 $11,822 $8,546 
Net income$15,034 $10,996 $9,042 
Preferred stock dividends and other468 496 530 
Earnings applicable to Morgan Stanley common shareholders
$14,566 $10,500 $8,512 

137
December 2021 Form 10-K

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Parent Company Only—Condensed Balance Sheet
$ in millions, except share dataAt
December 31,
2021
At
December 31,
2020
Assets
Cash and cash equivalents$15,342 $7,102 
Trading assets at fair value5,298 6,862 
Investment securities (includes $21,246 and $20,037 at fair value; $16,573 and $24,248 were pledged to various parties)
39,707 39,225 
Securities purchased under agreement to resell to affiliates21,116 34,698 
Advances to subsidiaries:
Bank and BHC59,757 22,692 
Non-bank96,202 121,731 
Equity investments in subsidiaries:
Bank and BHC69,059 52,951 
Non-bank48,481 47,450 
Other assets1,109 454 
Total assets$356,071 $333,165 
Liabilities
Trading liabilities at fair value$1,688 $1,623 
Securities sold under agreements to repurchase from affiliates16,928 24,349 
Payables to and advances from subsidiaries
59,960 43,252 
Other liabilities and accrued expenses1,859 2,181 
Borrowings (includes $15,894 and $18,804 at fair value)
170,195 159,979 
Total liabilities250,630 231,384 
Commitments and contingent liabilities (see Note 15)
Equity
Preferred stock7,750 9,250 
Common stock, $0.01 par value:
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,772,226,530 and 1,809,624,144
20 20 
Additional paid-in capital28,841 25,546 
Retained earnings89,432 78,694 
Employee stock trusts3,955 3,043 
Accumulated other comprehensive income (loss)
(3,102)(1,962)
Common stock held in treasury at cost, $0.01 par value (266,667,449 and 229,269,835 shares)
(17,500)(9,767)
Common stock issued to employee stock
trusts
(3,955)(3,043)
Total shareholders’ equity105,441 101,781 
Total liabilities and equity$356,071 $333,165 
Parent Company Only—Condensed Cash Flow Statement
$ in millions202120202019
Net cash provided by (used for) operating
activities
$4,257 $14,202 $24,175 
Cash flows from investing activities
Proceeds from (payments for):
Investment securities:
Purchases(9,297)(9,310)(22,408)
Proceeds from sales2,611 2,013 4,671 
Proceeds from paydowns and maturities5,636 5,651 3,157 
Securities purchased under agreements to resell with affiliates13,581 (24,584)15,422 
Securities sold under agreements to repurchase with affiliates(7,422)19,719 4,631 
Advances to and investments in subsidiaries(17,083)(13,832)(9,210)
Net cash provided by (used for) investing activities(11,974)(20,343)(3,737)
Cash flows from financing activities
Proceeds from:
Issuance of preferred stock, net of issuance costs1,275 — 497 
Issuance of Borrowings42,098 25,587 8,337 
Payments for:
Borrowings(28,592)(22,105)(24,282)
Repurchases of common stock and employee tax withholdings(12,075)(1,890)(5,954)
Cash dividends(4,171)(2,739)(2,627)
Net change in advances from subsidiaries17,042 7,194 4,378 
Other financing activities (498)12 
Net cash provided by (used for) financing activities15,577 5,549 (19,639)
Effect of exchange rate changes on cash and cash equivalents
380 (316)(271)
Net increase (decrease) in cash and cash equivalents8,240 (908)528 
Cash and cash equivalents, at beginning of period7,102 8,010 7,482 
Cash and cash equivalents, at end of period$15,342 $7,102 $8,010 
Cash and cash equivalents:
Cash and due from banks$100 $20 $
Deposits with bank subsidiaries15,242 7,082 8,001 
Cash and cash equivalents, at end of period$15,342 $7,102 $8,010 
Restricted cash$441 $381 $— 
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest$2,970 $3,472 $4,677 
Income taxes, net of refunds1
2,775 1,364 1,186 
1.Represents total payments, net of refunds, made to various tax authorities and includes taxes paid on behalf of certain subsidiaries that are subsequently settled between the Parent Company and these subsidiaries. The settlements received from subsidiaries were $3.0 billion, $1.6 billion and $1.6 billion for 2021, 2020 and 2019, respectively.
 
For information on the Parent Company’s preferred stock, see Note 18.
Parent Company’s Borrowings with Original Maturities Greater than One Year
$ in millionsAt
December 31,
2021
At
December 31,
2020
Senior$155,304 $148,885 
Subordinated13,591 11,094 
Total$168,895 $159,979 
December 2021 Form 10-K
138

 
Notes to Consolidated Financial Statements
ms-20211231_g1.jpg
Transactions with Subsidiaries
The Parent Company has transactions with its consolidated subsidiaries determined on an agreed-upon basis and has guaranteed certain unsecured lines of credit and contractual obligations on certain of its consolidated subsidiaries.
Guarantees
In the normal course of its business, the Parent Company guarantees certain of its subsidiaries’ obligations on a transaction-by-transaction basis under various financial arrangements. The Parent Company has issued guarantees on behalf of its subsidiaries to various U.S. and non-U.S. exchanges and clearinghouses that trade and clear securities and/or futures contracts. Under these guarantee arrangements, the Parent Company may be required to pay the financial obligations of its subsidiaries related to business transacted on or with the exchanges and clearinghouses in the event of a subsidiary’s default on its obligations to the exchange or the clearinghouse. The Parent Company has not recorded any contingent liability in its condensed financial statements for these arrangements and believes that any potential requirements to make payments under these arrangements are remote.
The Parent Company also, in the normal course of business, provides standard indemnities to counterparties on behalf of its subsidiaries for taxes, including U.S. and foreign withholding taxes, on interest and other payments made on derivatives, securities and stock lending transactions, and certain annuity products, and may also provide indemnities to or on behalf of affiliates from time to time for other arrangements. These indemnity payments could be required, as applicable, based on a change in the tax laws, change in interpretation of applicable tax rulings or claims arising from contractual relationships between affiliates. Certain contracts contain provisions that enable the Parent Company to terminate the agreement upon the occurrence of such events. The maximum potential amount of future payments that the Parent Company could be required to make under these indemnifications cannot be estimated. The Parent Company has not recorded any contingent liability in its condensed financial statements for these indemnifications and believes that the occurrence of any events that would trigger payments under these contracts is remote.
Guarantees of Debt Instruments and Warrants Issued by Subsidiaries
$ in millionsAt
December 31,
2021
At
December 31,
2020
Aggregate balance$47,129 $39,745 
Guarantees under Subsidiary Lease Obligations
$ in millionsAt
December 31,
2021
At
December 31,
2020
Aggregate balance1
$610 $865 
1.Amounts primarily relate to the U.K.
Finance Subsidiary
The Parent Company fully and unconditionally guarantees the securities issued by Morgan Stanley Finance LLC, a wholly owned finance subsidiary. No other subsidiary of the Parent Company guarantees these securities.
Resolution and Recovery Planning
As indicated in the Firm’s 2021 targeted resolution plan submitted to the Federal Reserve and the FDIC, the Parent Company has amended and restated its support agreement with its material entities (including its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”) and certain other subsidiaries), as defined in the Firm’s 2021 targeted resolution plan. Under the secured, amended and restated support agreement, in the event of a resolution scenario, the Parent Company would be obligated to contribute all of its material assets that can be contributed under the terms of the amended and restated support agreement (other than shares in subsidiaries of the Parent Company and certain other assets) (“Contributable Assets”) to the material entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to the material entities.
139
December 2021 Form 10-K

 
Financial Data Supplement (Unaudited)
ms-20211231_g1.jpg
Average Balances and Interest Rates and Net Interest Income
 20212020
$ in millionsAverage
Daily
Balance
InterestAverage
Rate
Average
Daily
Balance
InterestAverage
Rate
Interest earning assets
Investment securities1
$182,896 $2,759 1.5 %$136,502 $2,282 1.7 %
Loans1
166,675 4,209 2.5 143,350 4,142 2.9 
Securities purchased under agreements to resell2,3:
U.S.55,274 86 0.2 44,964 545 1.2 
Non-U.S.53,323 (267)(0.5)42,064 (87)(0.2)
Securities borrowed2,4:
U.S.99,667 (825)(0.8)85,561 (490)(0.6)
Non-U.S.17,387 (192)(1.1)17,035 (162)(1.0)
Trading assets, net of Trading liabilities5:
U.S.
77,916 1,644 2.1 76,273 2,000 2.6 
Non-U.S.
19,559 394 2.0 22,604 417 1.8 
Customer receivables and Other6:
U.S.
135,005 1,409 1.0 87,775 1,188 1.4 
Non-U.S.
74,068 194 0.3 63,301 327 0.5 
Total$881,770 $9,411 1.1 %$719,429 $10,162 1.4 %
Interest bearing liabilities
Deposits1
$325,500 $409 0.1 %$241,487 $953 0.4 %
Borrowings1, 7
224,657 2,725 1.2 202,498 3,250 1.6 
Securities sold under agreements to repurchase2,8,10:
U.S.29,383 157 0.5 27,085 483 1.8 
Non-U.S.27,374 (64)(0.2)21,752 81 0.4 
Securities loaned2,9,10:
U.S.4,816 29 0.6 2,898 49 1.7 
Non-U.S.5,514 372 6.7 6,611 370 5.6 
Customer payables and Other11:
U.S.132,899 (1,825)(1.4)125,982 (1,176)(0.9)
Non-U.S.76,185 (437)(0.6)64,958 (161)(0.2)
Total$826,328 $1,366 0.2 %$693,271 $3,849 0.6 %
Net interest income and net interest rate spread$8,045 0.9 %$6,313 0.8 %

Effect of Volume and Rate Changes on Net Interest Income
 2021 versus 2020
 Increase (Decrease)
Due to Change in:
 
$ in millionsVolumeRateNet Change
Interest earning assets
Investment
securities1
$776 $(299)$477 
Loans1
674 (607)67 
Securities purchased under agreements to resell3:
U.S.125 (584)(459)
Non-U.S.(23)(157)(180)
Securities borrowed4:
U.S.(81)(254)(335)
Non-U.S.(3)(27)(30)
Trading assets, net of Trading liabilities5:
U.S.43 (399)(356)
Non-U.S.(56)33 (23)
Customer receivables and Other6:
U.S.639 (418)221 
Non-U.S.56 (189)(133)
Change in interest income$2,150 $(2,901)$(751)
Interest bearing liabilities
Deposits1
$332 $(876)$(544)
Borrowings1,7
356 (881)(525)
Securities sold under agreements to repurchase8,10:
U.S.41 (367)(326)
Non-U.S.21 (166)(145)
Securities loaned9,10:
U.S.32 (52)(20)
Non-U.S.(61)63 2 
Customer payables and Other11:
U.S.(65)(584)(649)
Non-U.S.(28)(248)(276)
Change in interest expense$628 $(3,111)$(2,483)
Change in net interest income$1,522 $210 $1,732 

December 2021 Form 10-K
140

 
Financial Data Supplement (Unaudited)
ms-20211231_g1.jpg
Average Balances and Interest Rates and Net Interest Income
 2019
$ in millionsAverage
Daily
Balance
InterestAverage
Rate
Interest earning assets
Investment securities1
$101,696 $2,175 2.1 %
Loans1
121,002 4,783 4.0 
Securities purchased under agreements to resell2,3:
U.S.46,757 2,121 4.5 
Non-U.S.43,328 160 0.4 
Securities borrowed2,4:
U.S.95,332 1,257 1.3 
Non-U.S.33,249 (53)(0.2)
Trading assets, net of Trading liabilities5:
U.S.77,481 2,531 3.3 
Non-U.S.14,654 368 2.5 
Customer receivables and Other6:
U.S.61,501 2,697 4.4 
Non-U.S.58,601 1,059 1.8 
Total$653,601 $17,098 2.6 %
Interest bearing liabilities
Deposits1
$180,116 $1,885 1.0 %
Borrowings1,7
192,770 5,052 2.6 
Securities sold under agreements to repurchase2,8,10:
U.S.29,140 1,784 6.1 
Non-U.S.24,373 183 0.8 
Securities loaned2,9,10:
U.S.3,297 132 4.0 
Non-U.S.7,435 510 6.9 
Customer payables and Other11:
U.S.118,775 1,792 1.5 
Non-U.S.65,196 1,066 1.6 
Total$621,102 $12,404 2.0 %
Net interest income and net interest rate spread$4,694 0.6 %
Effect of Volume and Rate Changes on Net Interest Income
 2020 versus 2019
 Increase (Decrease)
Due to Change in:
 
$ in millionsVolumeRateNet Change
Interest earning assets
Investment securities1
$744 $(637)$107 
Loans1
883 (1,524)(641)
Securities purchased under agreements to resell2,3:
U.S.(81)(1,495)(1,576)
Non-U.S.(5)(242)(247)
Securities borrowed2,4:
U.S.(129)(1,618)(1,747)
Non-U.S.26 (135)(109)
Trading assets, net of Trading liabilities5:
U.S.(39)(492)(531)
Non-U.S.200 (151)49 
Customer receivables and Other6:
U.S.1,152 (2,661)(1,509)
Non-U.S.85 (817)(732)
Change in interest income$2,836 $(9,772)$(6,936)
Interest bearing liabilities
Deposits1
$642 $(1,574)$(932)
Borrowings1,7
255 (2,057)(1,802)
Securities sold under agreements to repurchase2,8,10:
U.S.(127)(1,174)(1,301)
Non-U.S.(20)(82)(102)
Securities loaned2,9,10:
U.S.(16)(67)(83)
Non-U.S.(57)(83)(140)
Customer payables and Other11:
U.S.109 (3,077)(2,968)
Non-U.S.(4)(1,223)(1,227)
Change in interest expense$782 $(9,337)$(8,555)
Change in net interest income$2,054 $(435)$1,619 
1.Amounts include primarily U.S. balances.
2.Certain prior period amounts have been reclassified to conform to the current presentation.
3.Includes interest paid on Securities purchased under agreements to resell.
4.Includes fees paid on Securities borrowed.
5.Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities.
6.Includes Cash and cash equivalents.
7.Includes borrowings carried at fair value, whose interest expense is considered part of fair value, and therefore, is recorded within Trading revenues.
8.Includes interest received on Securities sold under agreements to repurchase.
9.Includes fees received on Securities loaned.
10.The annualized average rate was calculated using (a) interest expense incurred on all securities sold under agreements to repurchase and securities loaned transactions, whether or not such transactions were reported in the balance sheet and (b) net average on-balance sheet balances, which exclude certain securities-for-securities transactions.
11.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements.
Deposits
 Average Daily Deposits
 202120202019
$ in millionsAverage
Amount
Average
Rate
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Deposits1:
Savings$304,664  %$202,035 0.1 %$144,017 0.6 %
Time20,836 1.7 %39,452 1.8 %36,099 2.8 %
Total$325,500 0.1 %$241,487 0.4 %$180,116 1.0 %
1.The Firm’s deposits were primarily held in U.S. offices.
141
December 2021 Form 10-K

 
Glossary of Common Terms and Acronyms
ms-20211231_g1.jpg
ABSAsset-backed securities
ACLAllowance for credit losses
AFSAvailable-for-sale
AMLAnti-money laundering
AOCIAccumulated other comprehensive income (loss)
AUMAssets under management or supervision
Balance sheetConsolidated balance sheet
BHCBank holding company
bpsBasis points; one basis point equals 1/100th of 1%
Cash flow statementConsolidated cash flow statement
CCARComprehensive Capital Analysis and Review
CCyBCountercyclical capital buffer
CDOCollateralized debt obligation(s), including Collateralized loan obligation(s)
CDSCredit default swaps
CECLCurrent Expected Credit Losses, as calculated under the Financial Instruments—Credit Losses accounting update
CFTCU.S. Commodity Futures Trading Commission
CLNCredit-linked note(s)
CLOCollateralized loan obligation(s)
CMBSCommercial mortgage-backed securities
CMOCollateralized mortgage obligation(s)
CRMCredit Risk Management Department
CVACredit valuation adjustment
DVADebt valuation adjustment
EBITDAEarnings before interest, taxes, depreciation and amortization
ELNEquity-linked note(s)
EMEAEurope, Middle East and Africa
EPSEarnings per common share
E.U.European Union
FDICFederal Deposit Insurance Corporation
FFELPFederal Family Education Loan Program
FHCFinancial holding company
FICCFixed Income Clearing Corporation
FICOFair Isaac Corporation
Financial statementsConsolidated financial statements
FVAFunding valuation adjustment
FVOFair value option
G-SIBGlobal systemically important banks
HELOCHome Equity Line of Credit
HFIHeld-for-investment
HFSHeld-for-sale
HQLAHigh-quality liquid assets
HTMHeld-to-maturity
I/EIntersegment eliminations
IHCIntermediate holding company
IMInvestment Management
Income statementConsolidated income statement
IRSInternal Revenue Service
ISInstitutional Securities
LCRLiquidity coverage ratio, as adopted by the U.S. banking agencies
LIBORLondon Interbank Offered Rate
LTVLoan-to-value
M&AMerger, acquisition and restructuring transaction
MSBNAMorgan Stanley Bank, N.A.
MS&Co.Morgan Stanley & Co. LLC
MSCGMorgan Stanley Capital Group Inc.
MSCSMorgan Stanley Capital Services LLC
MSESEMorgan Stanley Europe SE
MSIPMorgan Stanley & Co. International plc
MSMSMorgan Stanley MUFG Securities Co., Ltd.
MSPBNAMorgan Stanley Private Bank, National Association
MSSBMorgan Stanley Smith Barney LLC
MUFGMitsubishi UFJ Financial Group, Inc.
MUMSSMitsubishi UFJ Morgan Stanley Securities Co., Ltd.
MWhMegawatt hour
N/ANot Applicable
N/MNot Meaningful
NAVNet asset value
Non-GAAPNon-generally accepted accounting principles
NSFRNet stable funding ratio, as adopted by the U.S. banking agencies
OCCOffice of the Comptroller of the Currency
OCIOther comprehensive income (loss)
OISOvernight index swap
OTCOver-the-counter
PRAPrudential Regulation Authority
PSUPerformance-based stock unit
RMBSResidential mortgage-backed securities
ROEReturn on average common equity
ROTCEReturn on average tangible common equity
ROURight-of-use
RSURestricted stock unit
RWARisk-weighted assets
SCBStress capital buffer
SECU.S. Securities and Exchange Commission
SLRSupplementary leverage ratio
SOFRSecured Overnight Financing Rate
S&PStandard & Poor’s
SPESpecial purpose entity
SPOESingle point of entry
TDRTroubled debt restructuring
TLACTotal loss-absorbing capacity
U.K.United Kingdom
UPBUnpaid principal balance
U.S.United States of America
U.S. GAAPAccounting principles generally accepted in the United States of America
VaRValue-at-Risk
VIEVariable interest entity
WACCImplied weighted average cost of capital
WMWealth Management
December 2021 Form 10-K
142

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of the Firm’s management, including the Chief Executive Officer and Chief Financial Officer, the Firm conducted an evaluation of disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Firm’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
The Firm’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Firm’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
The internal control over financial reporting includes those policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Firm;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures are being made only in accordance with authorizations of the Firm’s management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Firm assets that could have a material effect on the Firm’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Firm’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). Based on management’s assessment and those criteria, management believes that the Firm maintained effective internal control over financial reporting as of December 31, 2021.
The Firm’s independent registered public accounting firm has audited and issued a report on the Firm’s internal control over financial reporting, which appears below.
 
143
December 2021 Form 10-K

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Morgan Stanley:

Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Morgan Stanley and subsidiaries (the “Firm”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Firm maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements of the Firm as of and for the year ended December 31, 2021 and our report dated February 24, 2022 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Firm’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Firm’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
/s/ Deloitte & Touche LLP
New York, New York
February 24, 2022
 

December 2021 Form 10-K
144

Changes in Internal Control Over Financial Reporting
No change in the Firm’s internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the quarter ended December 31, 2021 that materially affected, or is reasonably likely to materially affect, the Firm’s internal control over financial reporting.
Other Information
None.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Unresolved Staff Comments
The Firm, like other well-known seasoned issuers, from time to time receives written comments from the staff of the SEC regarding its periodic or current reports under the Exchange Act. There are no comments that remain unresolved that the Firm received not less than 180 days before the end of the year to which this report relates that the Firm believes are material.
Properties
We have offices, operations and data centers located around the world. Our global headquarters and principal executive offices are located at 1585 Broadway, New York, New York. Our other principal offices include locations in Manhattan and the greater New York metropolitan area, London, Hong Kong and Tokyo. Our current facilities are adequate for our present and future operations for each of our business segments, although we may add regional offices, depending upon our future operations.
Legal Proceedings
In addition to the matters described below, in the normal course of business, the Firm has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress.
The Firm is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Firm’s business, and involving, among other matters, sales and trading activities, financial products or offerings
sponsored, underwritten or sold by the Firm, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Firm contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and the Firm can reasonably estimate the amount of that loss, the Firm accrues the estimated loss by a charge to income. The Firm’s future legal expenses may fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Firm.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. The Firm cannot predict with certainty if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss or range of loss or additional range of loss can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question. Subject to the foregoing, the Firm believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and investigations will not have a material adverse effect on the financial condition of the Firm, although the outcome of such proceedings or investigations could be material to the Firm’s operating results and cash flows for a particular period depending on, among other things, the level of the Firm’s revenues or income for such period.
While the Firm has identified below certain proceedings that the Firm believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
Residential Mortgage Related Matters
On May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Firm and certain affiliates in the Supreme Court of the State of New York County (“Supreme Court of NY”). The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by
145
December 2021 Form 10-K

securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Firm to plaintiff was approximately $133 million. The complaint alleges causes of action against the Firm for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Firm’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Firm or sold to plaintiff by the Firm was approximately $116 million. On August 11, 2016, the Appellate Division, First Department (“First Department") affirmed the trial court’s order denying in part the Firm’s motion to dismiss the complaint.
On July 2, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 (MSAC 2007-NC1) v. Morgan Stanley ABS Capital I Inc., and filed a complaint in the Supreme Court of NY styled Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. On February 3, 2014, the plaintiff filed an amended complaint, which asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing, and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.25 billion, breached various representations and warranties. The amended complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On April 12, 2016, the court granted in part and denied in part the Firm’s motion to dismiss the amended complaint, dismissing all claims except a single claim alleging failure to notify, regarding which the motion was denied without prejudice. On December 9, 2016, the Firm renewed its motion to dismiss that notification claim. On January 17, 2017, the First Department affirmed the lower court’s April 12, 2016 order. On April 13, 2017, the First Department denied plaintiff’s motion for leave to appeal to the New York Court of Appeals (“Court of Appeals"). On March 8, 2018, the trial court denied the Firm’s renewed motion to dismiss the notification claims.
On November 6, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 (MSAC 2007-NC3) v. Morgan Stanley Mortgage Capital Holdings LLC, and filed a complaint in the Supreme Court of NY styled Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley
Mortgage Capital Inc. The complaint asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing, and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.3 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On April 12, 2016, the court granted the Firm’s motion to dismiss the complaint and granted the plaintiff the ability to seek to replead certain aspects of the complaint. On January 17, 2017, the First Department affirmed the lower court’s order granting the motion to dismiss the complaint. On January 9, 2017, plaintiff filed a motion to amend its complaint. On April 13, 2017, the First Department denied plaintiff’s motion for leave to appeal to the Court of Appeals. On March 8, 2018, the trial court granted plaintiff’s motion to amend its complaint to include failure to notify claims. On March 19, 2018, the Firm filed an answer to plaintiff’s amended complaint.
On September 23, 2014, Financial Guaranty Insurance Company (“FGIC”) filed a complaint against the Firm in the Supreme Court of NY styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. relating to the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and that defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys’ fees, interest and costs. On January 23, 2017, the court denied the Firm’s motion to dismiss the complaint. On September 13, 2018, the First Department affirmed in part and reversed in part the lower court’s order denying the Firm’s motion to dismiss the complaint. On December 20, 2018, the First Department denied plaintiff’s motion for leave to appeal to the Court of Appeals or, in the alternative, for re-argument. On July 30, 2021, the Firm filed a motion for summary judgment. On February 4, 2022, the parties entered into a confidential settlement agreement, which is conditioned on consummation of the Firm’s agreement to settle Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Firm styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage
December 2021 Form 10-K
146

Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys’ fees, costs and other related expenses, and interest. On December 11, 2015, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On October 19, 2018, the court granted the Firm’s motion for leave to amend its answer and to stay the case pending resolution of Deutsche Bank National Trust Company’s appeal to the Court of Appeals in another case, styled Deutsche Bank National Trust Company v. Barclays Bank PLC, regarding the applicable statute of limitations. On January 17, 2019, the First Department reversed the trial court’s order to the extent that it had granted in part the Firm’s motion to dismiss the complaint. On June 4, 2019, the First Department granted the Firm’s motion for leave to appeal its January 17, 2019 decision to the Court of Appeals. On March 19, 2020, the Firm filed a motion for partial summary judgment. On December 22, 2020, the Court of Appeals reversed the First Department and reinstated the trial court’s order to the extent it had granted in part the Firm’s motion to dismiss the complaint. On February 4, 2022, the parties entered into an agreement to settle the litigation, which is conditioned on approval by either certificateholders in a consent solicitation or a court in a trust instructional proceeding.
Antitrust Related Matters
The Firm and other financial institutions are responding to a number of governmental investigations and civil litigation matters related to allegations of anticompetitive conduct in various aspects of the financial services industry, including the matters described below.
Beginning in February of 2016, the Firm was named as a defendant in multiple purported antitrust class actions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”) styled In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that the Firm, together with a number of other financial institution defendants, violated U.S. and New York state antitrust laws from 2008 through December of 2016 in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for interest rate swaps trading. Complaints were filed both on behalf of a purported class of investors who purchased interest rate swaps from defendants, as well as on behalf of two swap execution facilities that allegedly were thwarted by the defendants in their efforts to develop such platforms. The consolidated complaints seek, among other relief, certification of the investor class of plaintiffs and treble
damages. On July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the complaints. A decision on plaintiffs' motion for class certification is pending.
In August of 2017, the Firm was named as a defendant in a purported antitrust class action in the United States District Court for the SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that the Firm, together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. A decision on plaintiffs' motion for class certification is pending.
Qui Tam Matters
The Firm and other financial institutions are defending against qui tam litigations brought under various state false claims statutes, including the matter described below. Such matters may involve the same types of claims pursued in multiple jurisdictions and may include claims for treble damages.
On August 18, 2009, Relators Roger Hayes and C. Talbot Heppenstall, Jr., filed a qui tam action in New Jersey state court styled State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al. The complaint, filed under seal pursuant to the New Jersey False Claims Act, alleged that the Firm and several other underwriters of municipal bonds had defrauded New Jersey issuers by misrepresenting that they would achieve the best price or lowest cost of capital in connection with certain municipal bond issuances. On March 17, 2016, the court entered an order unsealing the complaint. On November 17, 2017, Relators filed an amended complaint to allege the Firm mispriced certain bonds issued in twenty-three bond offerings between 2008 and 2017, having a total par amount of $6.946 billion. The complaint seeks, among other relief, treble damages. On February 22, 2018, the Firm moved to dismiss the amended complaint, and on July 17, 2018, the court denied the Firm’s motion. On October 13, 2021, following a series of voluntary and involuntary dismissals, Relators limited their claims to certain bonds issued in five offerings the Firm underwrote between 2008 and 2011, having a total par amount of $3.856 billion.
Block Trading Matter

Beginning in June of 2019, the Firm has been responding to requests for information from the U.S. Securities and Exchange Commission in connection with an investigation of various aspects of the Firm’s block trading business.
147
December 2021 Form 10-K

Beginning in August of 2021, the Firm has been responding to requests for information from the U.S. Attorney’s Office for the SDNY in connection with its investigation of the same subject matter. The Firm is cooperating with these investigations.
European Matters

In matters styled Case number 15/3637 and Case number 15/4353, the Dutch Tax Authority (“Dutch Authority”) is challenging in the Dutch courts the prior set-off by the Firm of approximately €124 million (approximately $141 million) plus accrued interest of withholding tax credits against the Firm’s corporation tax liabilities for the tax years 2007 to 2012. The Dutch Authority alleges that the Firm was not entitled to receive the withholding tax credits on the basis, inter alia, that a Firm subsidiary did not hold legal title to certain securities subject to withholding tax on the relevant dates. The Dutch Authority has also alleged that the Firm failed to provide certain information to the Dutch Authority and to keep adequate books and records. On April 26, 2018, the District Court in Amsterdam issued a decision dismissing the Dutch Authority’s claims with respect to certain of the tax years in dispute. On May 12, 2020, the Court of Appeal in Amsterdam granted the Dutch Authority's appeal in matters re-styled Case number 18/00318 and Case number 18/00319. On June 22, 2020, the Firm filed an appeal against the decision of the Court of Appeal in Amsterdam before the Dutch High Court. On January 29, 2021, the Advocate General of the Dutch High Court issued an advisory opinion on the Firm’s appeal, which rejected the Firm’s principal grounds of appeal. On February 11, 2021, the Firm and the Dutch Authority each responded to this opinion. On June 22, 2021, Dutch criminal authorities sought various documents in connection with an investigation of the Firm related to the civil claims asserted by the Dutch Authority concerning the accuracy of the Firm subsidiary’s tax returns and the maintenance of its books and records for 2007 to 2012.
On October 5, 2017, various institutional investors filed a claim against the Firm and another bank in a matter now styled Case number B-803-18 (previously BS 99-6998/2017), in the City Court of Copenhagen, Denmark concerning their roles as underwriters of the initial public offering (“IPO”) in March 2014 of the Danish company OW Bunker A/S. The claim seeks damages of approximately DKK 529 million (approximately $87 million) plus interest in respect of alleged losses arising from investing in shares in OW Bunker, which entered into bankruptcy in November 2014. Separately, on November 29, 2017, another group of institutional investors joined the Firm and another bank as defendants to pending proceedings in the High Court of Eastern Denmark against various other parties involved in the IPO in a matter styled Case number B-2073-16. The claim brought against the Firm and the other bank has been given its own Case number B-2564-17. The investors claim damages of approximately DKK 767 million (approximately $126 million) plus interest from the Firm and the other bank on a joint and several basis with the Defendants to these proceedings. Both claims are
based on alleged prospectus liability; the second claim also alleges professional liability of banks acting as financial intermediaries. On June 8, 2018, the City Court of Copenhagen, Denmark ordered that the matters now styled Case number B-803-18, Case number B-2073-16, and Case number B-2564-17 be heard together before the High Court of Eastern Denmark. On June 29, 2018, the Firm filed its defense to the matter now styled Case number B-2564-17. On February 4, 2019, the Firm filed its defense to the matter now styled Case number B-803-18.
Mine Safety Disclosures
Not applicable.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Morgan Stanley’s common stock trades under the symbol “MS” on the New York Stock Exchange. As of January 31, 2022, the Firm had 50,502 holders of record; however, the Firm believes the number of beneficial owners of the Firm’s common stock exceeds this number.
The table below sets forth the information with respect to purchases made by or on behalf of the Firm of its common stock during the fourth quarter of the year ended December 31, 2021.
Issuer Purchases of Equity Securities
$ in millions, except per share data
Total Number of Shares Purchased1
Average Price Paid per Share
Total Shares Purchased as Part of Share Repurchase Program2, 3
Dollar Value of Remaining Authorized Repurchase
October5,429,074 $101.85 5,390,586 $7,894 
November12,082,824 $100.19 12,067,997 $6,685 
December11,013,200 $98.34 10,927,639 $5,610 
Three Months Ended December 31, 202128,525,098 $99.79 28,386,222 
1.Includes 138,876 shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards granted under the Firm’s stock-based compensation plans during the three months ended December 31, 2021.
2.Share purchases under publicly announced programs are made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions (including with employee benefit plans) as market conditions warrant and at prices the Firm deems appropriate and may be suspended at any time.
3.The Firm’s Board of Directors has authorized the repurchase of the Firm’s outstanding common stock under a share repurchase program (the “Share Repurchase Program”) from time to time as conditions warrant and subject to limitations on distributions from the Federal Reserve. The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date.
On June 28, 2021, the Firm announced that its Board of Directors authorized the repurchase of up to $12 billion of outstanding common stock from July 1, 2021 through June 30, 2022, from time to time as conditions warrant, which supersedes the previous common stock repurchase authorization. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer.”
December 2021 Form 10-K
148

Stock Performance Graph
The following graph compares the cumulative total shareholder return (rounded to the nearest whole dollar) of the Firm’s common stock, the S&P 500 Stock Index and the S&P 500 Financials Sector Index for the last five years. The graph assumes a $100 investment at the closing price on December 31, 2016 and reinvestment of dividends on the respective dividend payment dates without commissions. This graph does not forecast future performance of the Firm’s common stock.
Cumulative Total Return
December 31, 2016 – December 31, 2021
ms-20211231_g12.jpg
 At December 31,
201620172018201920202021
Morgan Stanley$100.00 $126.62 $97.79 $129.73 $179.10 $262.57 
S&P 500 Stock Index
100.00 121.82 116.47 152.82 180.93 232.81 
S&P 500 Financials Sector Index
100.00 121.14 105.34 139.15 136.71 184.37 
Directors, Executive Officers and Corporate Governance
Information relating to the Firm’s directors and nominees in the Firm’s definitive proxy statement for its 2022 annual meeting of shareholders (“Morgan Stanley’s proxy statement”) is incorporated by reference herein.
Information relating to the Firm’s executive officers is contained in the “Business” section of this report under “Information about our Executive Officers.”
Morgan Stanley’s Code of Ethics and Business Conduct applies to all directors, officers and employees, including its Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. You can find the Code of Ethics and Business Conduct on the webpage, www.morganstanley.com/about-us-governance/ethics.html. The Firm will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the U.S. Securities and Exchange Commission or the New York Stock Exchange LLC, on the webpage.
Executive Compensation
Information relating to director and executive officer compensation in Morgan Stanley’s proxy statement is incorporated by reference herein.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information about outstanding awards and shares of common stock available for future awards under all of Morgan Stanley’s equity compensation plans. Morgan Stanley has not made any grants of common stock outside of its equity compensation plans.
 At December 31, 2021
 (a)(b)(c)
plan category
Number of securities to be issued upon exercise of outstanding options, warrants and rights1
Weighted-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders
72,542,158 $ 148,865,107 
2
Equity compensation plans not approved by security holders
   
Total72,542,158 $ 148,865,107 
1.Includes outstanding restricted stock unit and performance stock unit awards. The number of outstanding performance stock unit awards is based on the target number of units granted to senior executives.
2.Includes the following:
(a)39,182,870 shares available under the Employee Stock Purchase Plan (“ESPP”). Pursuant to this plan, which is qualified under Section 423 of the Internal Revenue Code, eligible employees are permitted to purchase shares of common stock at a discount to market price through regular payroll deduction. The Compensation, Management Development and Succession Committee of the Board (“CMDS Committee”) approved the discontinuation of the ESPP, effective June 1, 2009, such that no further contributions to the plan would be permitted following such date, until such time as the CMDS Committee determined to recommence contributions under the plan. Effective February 1, 2022, the CMDS Committee approved the recommencement of contributions under the ESPP to begin as soon as administratively practicable thereafter.
(b)93,602,123 shares available under the Equity Incentive Compensation Plan. Awards may consist of stock options, stock appreciation rights, restricted stock, restricted stock units to be settled by the delivery of shares of common stock (or the value thereof), performance-based units, other awards that are valued by reference to or otherwise based on the fair market value of common stock, and other equity-based or equity-related awards approved by the CMDS Committee.
(c)14,869,924 shares available under the Employee Equity Accumulation Plan, which includes 733,757 shares available for awards of restricted stock and restricted stock units. Awards may consist of stock options, stock appreciation rights, restricted stock, restricted stock units to be settled by the delivery of shares of common stock (or the value thereof), other awards that are valued by reference to or otherwise based on the fair market value of common stock, and other equity-based or equity-related awards approved by the CMDS Committee.
(d)355,243 shares available under the Tax Deferred Equity Participation Plan. Awards consist of restricted stock units, which are settled by the delivery of shares of common stock.
(e)854,947 shares available under the Directors’ Equity Capital Accumulation Plan. This plan provides for periodic awards of shares of common stock and stock units to non-employee directors and also allows non-employee directors to defer the cash fees they earn for services as a director in the form of stock units.
Other information relating to security ownership of certain beneficial owners and management is set forth under the caption “Ownership of Our Common Stock” in Morgan Stanley’s proxy statement and such information is incorporated by reference herein.
149
December 2021 Form 10-K

Certain Relationships and Related Transactions and Director Independence
Information regarding certain relationships and related transactions in Morgan Stanley’s proxy statement is incorporated by reference herein.
Information regarding director independence in Morgan Stanley’s proxy statement is incorporated by reference herein.
Principal Accountant Fees and Services
Information regarding principal accountant fees and services in Morgan Stanley’s proxy statement is incorporated by reference herein.
Exhibits and Financial Statement Schedules
Documents filed as part of this report
The financial statements required to be filed in this annual report on Form 10-K are included in the section titled “Financial Statements and Supplementary Data.”
Exhibit Index1
Certain of the following exhibits, as indicated parenthetically, were previously filed as exhibits to registration statements filed by Morgan Stanley or its predecessor companies under the Securities Act or to reports or registration statements filed by Morgan Stanley or its predecessor companies under the Exchange Act and are hereby incorporated by reference to such statements or reports. Morgan Stanley’s Exchange Act file number is 1-11758. The Exchange Act file number of Morgan Stanley Group Inc., a predecessor company (“MSG”), was 1-9085.
Exhibit No.Description
3.1*
3.2
Amended and Restated Bylaws of Morgan Stanley, as amended to date (Exhibit 3.1 to Morgan Stanley’s current report on Form 8-K dated October 29, 2015).
4.1*
4.2
Amended and Restated Senior Indenture dated as of May 1, 1999 between Morgan Stanley and The Bank of New York, as trustee (Exhibit 4e to Morgan Stanley’s Registration Statement on Form S-3/A (No. 333-75289) as amended by Fourth Supplemental Senior Indenture dated as of October 8, 2007 (Exhibit 4.3 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended November 30, 2007).
Exhibit No.Description
4.3
Senior Indenture dated as of November 1, 2004 between Morgan Stanley and The Bank of New York, as trustee (Exhibit 4-f to Morgan Stanley’s Registration Statement on Form S-3/A (No. 333-117752), as amended by First Supplemental Senior Indenture dated as of September 4, 2007 (Exhibit 4.5 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended November 30, 2007), Second Supplemental Senior Indenture dated as of January 4, 2008 (Exhibit 4.1 to Morgan Stanley’s current report on Form 8-K dated January 4, 2008), Third Supplemental Senior Indenture dated as of September 10, 2008 (Exhibit 4 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended August 31, 2008), Fourth Supplemental Senior Indenture dated as of December 1, 2008 (Exhibit 4.1 to Morgan Stanley’s current report on Form 8-K dated December 1, 2008), Fifth Supplemental Senior Indenture dated as of April 1, 2009 (Exhibit 4 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2009), Sixth Supplemental Senior Indenture dated as of September 16, 2011 (Exhibit 4.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended September 30, 2011), Seventh Supplemental Senior Indenture dated as of November 21, 2011 (Exhibit 4.4 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2011), Eighth Supplemental Senior Indenture dated as of May 4, 2012 (Exhibit 4.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended June 30, 2012), Ninth Supplemental Senior Indenture dated as of March 10, 2014 (Exhibit 4.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2014) and Tenth Supplemental Senior Indenture dated as of January 11, 2017 (Exhibit 4.1 to Morgan Stanley’s current report on Form 8-K dated January 11, 2017).
4.4*
4.5
4.6
4.7
December 2021 Form 10-K
150

Exhibit No.Description
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
Exhibit No.Description
4.19
4.20
4.21
4.22
4.23
4.24
10.1
10.2
Amended and Restated Investor Agreement dated as of June 30, 2011 by and between Morgan Stanley and Mitsubishi UFJ Financial Group, Inc. (Exhibit 10.1 to Morgan Stanley’s current report on Form 8-K dated June 30, 2011), as amended by Third Amendment, dated October 3, 2013 (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended September 30, 2013), Fourth Amendment, dated April 6, 2016 (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2016), Fifth Amendment, dated October 4, 2018 (Exhibit 10.3 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2020), and Sixth Amendment, dated April 13, 2021 (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended June 30, 2021).
151
December 2021 Form 10-K

Exhibit No.Description
10.3†
Morgan Stanley 401(k) Plan, amended and restated as of January 1, 2013 (Exhibit 10.6 to Morgan Stanley annual report on Form 10-K for the year ended December 31, 2012), as amended by Amendment (Exhibit 10.5 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2013), Amendment (Exhibit 10.6 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2013), Amendment (Exhibit 10.5 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2014), Amendment (Exhibit 10.5 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2015), Amendment (Exhibit 10.4 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2016), Amendment (Exhibit 10.4 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2017), Amendment (Exhibit 10.5 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2017), Amendment (Exhibit 10.4 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2018), Amendment (Exhibit 10.4 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2019) and Amendment (Exhibit 10.6 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2020).
10.4†*
10.5†
Tax Deferred Equity Participation Plan as amended and restated as of November 26, 2007 (Exhibit 10.9 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended November 30, 2007).
10.6†
Directors’ Equity Capital Accumulation Plan as amended and restated as of November 1, 2018 (Exhibit 10.6 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended December 31, 2018).
10.7†
Employees’ Equity Accumulation Plan as amended and restated as of November 26, 2007 (Exhibit 10.12 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended November 30, 2007).
10.8†
Employee Stock Purchase Plan as amended and restated as of February 1, 2009 (Exhibit 10.20 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended November 30, 2008).
Exhibit No.Description
10.9†
Morgan Stanley Supplemental Executive Retirement and Excess Plan, amended and restated effective December 31, 2008 (Exhibit 10.2 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2009) as amended by Amendment (Exhibit 10.5 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended June 30, 2009), Amendment (Exhibit 10.19 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2010), Amendment (Exhibit 10.3 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended June 30, 2011) and Amendment (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended September 30, 2014).
10.10†
Form of Deferred Compensation Agreement under the Pre-Tax Incentive Program 2 (Exhibit 10.12 to MSG’s annual report for the fiscal year ended November 30, 1996).
10.11†
Morgan Stanley UK Share Ownership Plan (Exhibit 4.1 to Morgan Stanley’s Registration Statement on Form S-8 (No. 333-146954)).
10.12†
Supplementary Deed of Participation for the Morgan Stanley UK Share Ownership Plan, dated as of November 5, 2009 (Exhibit 10.36 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2009).
10.13†
Aircraft Time Sharing Agreement, dated as of January 1, 2010, by and between Corporate Services Support Corp. and James P. Gorman (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2010).
10.14†
Agreement between Morgan Stanley and James P. Gorman, dated August 16, 2005, and amendment dated December 17, 2008 (Exhibit 10.2 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2010), as amended by Amendment (Exhibit 10.25 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2013).
10.15†
Form of Restrictive Covenant Agreement (Exhibit 10 to Morgan Stanley’s current report on Form 8-K dated November 22, 2005).
10.16†
10.17†
10.18†
Morgan Stanley Schedule of Non-Employee Directors Annual Compensation, effective as of November 1, 2018 (Exhibit 10.24 to Morgan Stanley’s annual report on Form 10-K for the fiscal year ended December 31, 2018).
10.19†
Description of Operating Committee Medical Coverage (Exhibit 10.2 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended March 31, 2015).
December 2021 Form 10-K
152

Exhibit No.Description
10.20†
Form of Award Certificate for Discretionary Retention Awards of Stock Units. (Exhibit 10.33 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2017).
10.21†
Form of Award Certificate for Discretionary Retention Awards under the Morgan Stanley Compensation Incentive Plan. (Exhibit 10.34 to Morgan Stanley’s annual report on Form 10-K for the year ended December 31, 2017).
10.22†
10.23†
Form of Aircraft Time-Sharing Agreement (Exhibit 10.1 to Morgan Stanley’s quarterly report on Form 10-Q for the quarter ended September 30, 2020).
21*
22*
23.1*
23.2*
24
31.1*
31.2*
32.1**
32.2**
101Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline eXtensible Business Reporting Language (“Inline XBRL”).
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
1.For purposes of this Exhibit Index, references to “The Bank of New York” mean in some instances the entity successor to JPMorgan Chase Bank, N.A. or J.P. Morgan Trust Company, National Association; references to “JPMorgan Chase Bank, N.A.” mean the entity formerly known as The Chase Manhattan Bank, in some instances as the successor to Chemical Bank; references to “J.P. Morgan Trust Company, N.A.” mean the entity formerly known as Bank One Trust Company, N.A., as successor to The First National Bank of Chicago.
*Filed herewith.
**Furnished herewith.
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b).
Note: Other instruments defining the rights of holders of long-term debt securities of Morgan Stanley and its subsidiaries are omitted pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K. Morgan Stanley hereby agrees to furnish copies of these instruments to the U.S. Securities and Exchange Commission upon request.
Form 10-K Summary
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2022.
MORGAN STANLEY
(REGISTRANT)
By:
/s/ JAMES P. GORMAN
(James P. Gorman)
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute Sharon Yeshaya, Eric F. Grossman and Martin M. Cohen, and each of them singly, our true and lawful attorneys with full power to them and each of them to sign for us, and in our names in the capacities indicated below, any and all amendments to the annual report on Form 10-K filed with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys to any and all amendments to said annual report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 24th day of February, 2022.
SignatureTitle
/s/ JAMES P. GORMAN
Chairman of the Board and Chief Executive Officer
(James P. Gorman)(Principal Executive Officer)
/s/ SHARON YESHAYA
Executive Vice President and Chief Financial Officer
(Sharon Yeshaya)(Principal Financial Officer)
/s/ RAJA J. AKRAM
Deputy Chief Financial Officer
(Raja J. Akram)(Chief Accounting Officer and Controller)
/s/ ELIZABETH CORLEY
Director
(Elizabeth Corley)
/s/ ALISTAIR DARLING
Director
(Alistair Darling)
153
December 2021 Form 10-K

SignatureTitle
/s/ THOMAS H. GLOCER
Director
(Thomas H. Glocer)
/s/ ROBERT H. HERZ
Director
(Robert H. Herz)
/s/ NOBUYUKI HIRANO
Director
(Nobuyuki Hirano)
/s/ ERIKA H. JAMES
Director
(Erika H. James)
/s/ HIRONORI KAMEZAWA
Director
(Hironori Kamezawa)
/s/ SHELLEY B. LEIBOWITZ
Director
(Shelley B. Leibowitz)
/s/ STEPHEN J. LUCZO
Director
(Stephen J. Luczo)
/s/ JAMI MISCIK
Director
(Jami Miscik)
/s/ DENNIS M. NALLY
Director
(Dennis M. Nally)
/s/ MARY L. SCHAPIRO
Director
(Mary L. Schapiro)
/s/ PERRY M. TRAQUINA
Director
(Perry M. Traquina)
/s/ RAYFORD WILKINS, JR.
Director
(Rayford Wilkins, Jr.)

December 2021 Form 10-K
154

EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MORGAN STANLEY
The present name of the corporation is Morgan Stanley. The corporation was incorporated under the name “Sears Acquisition Corporation” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on October 1, 1981. This Amended and Restated Certificate of Incorporation of the corporation, which restates and integrates and also further amends the provisions of the corporation’s Certificate of Incorporation, was duly adopted in accordance with the provisions of the Certificate of Incorporation and Sections 242 and 245 of the General Corporation Law of the State of Delaware by the requisite vote of the holders of the outstanding stock of the corporation entitled to vote thereon at a meeting which was called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware. The Certificate of Incorporation of the corporation is hereby amended, integrated and restated to read in its entirety as follows:
ARTICLE I
Name
The name of the Corporation (which is hereafter referred to as the “Corporation”) is Morgan Stanley.
ARTICLE II
Address
The address of the Corporation’s registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.
ARTICLE III
Purpose
The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware.
ARTICLE IV
Capitalization
The total number of shares of stock which the Corporation shall have the authority to issue is three billion five hundred thirty million (3,530,000,000), consisting of thirty million (30,000,000) shares of Preferred Stock, par value $0.01 per share (hereinafter referred to as “Preferred Stock”), and three billion five hundred million (3,500,000,000) shares of Common Stock, par value $0.01 per share (hereinafter referred to as “Common Stock”).

The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the applicable law of the State of Delaware (hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(1) The designation of the series, which may be by distinguishing number, letter or title.



(2) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(3) The amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative.
(4) Dates at which dividends, if any, shall be payable.
(5) The redemption rights and price or prices, if any, for shares of the series.
(6) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(7) The amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(8) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made.
(9) Restrictions on the issuance of shares of the same series or of any other class or series.
(10) The voting rights, if any, of the holders of shares of the series.
The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation or by applicable law, the holders of shares of Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders, the Common Stock shall have the exclusive right to vote for the election of directors and for all other
purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote. The holders of the shares of Common Stock shall at all times, except as otherwise provided in this Certificate of Incorporation or as required by law, vote as one class, together with the holders of any other class or series of stock of the Corporation accorded such general voting rights.
The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
The voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions, of the Floating Rate Non-Cumulative Preferred Stock, Series A, are set forth in Exhibit A hereto and are incorporated herein by reference.
ARTICLE V
By-Laws
In furtherance of, and not in limitation of, the powers conferred by law, the Board of Directors is expressly authorized and empowered:
(1) to adopt, amend, or repeal the Bylaws of the Corporation; provided, however, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be amended or repealed by the Board of Directors or by the stockholders having voting power with respect thereto; and
(2) from time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to inspection of stockholders; and, except as so determined or as expressly provided in this Certificate of Incorporation or in any Preferred Stock Designation, no stockholder shall have any right to inspect any account, book or document of the Corporation other than such rights as may be conferred by applicable law.



The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law.
ARTICLE VI
Action of Stockholders
Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing in lieu of a meeting of such stockholders.
ARTICLE VII
Board of Directors
Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of stock as set forth in this Certificate of Incorporation, to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed in such manner as prescribed in the Bylaws of the Corporation and may be increased or decreased from time to time in such manner as prescribed by the Bylaws.
Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.
The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, shall be elected annually at each annual meeting of stockholders of the Corporation to hold office for a term expiring at the next annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified.
Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of stock as set forth in this Certificate of Incorporation, to elect additional directors under specified circumstances, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders, and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director.
Any director may be removed from office at any time, with or without cause.
ARTICLE VIII
Indemnification
Each person who is or was a director or officer of the Corporation shall be indemnified by the Corporation to the fullest extent permitted from time to time by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, if permitted by applicable law, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect. The Corporation may, by action of the Board of Directors, provide indemnification to employees and agents (other than a director or officer) of the Corporation, to directors, officers, employees or agents of a subsidiary, and to each person serving as a director, officer, partner, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, at the request of the Corporation, with the same scope and effect as the foregoing indemnification of directors and officers of the Corporation. The Corporation shall be required to indemnify any person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors or is a proceeding to enforce such person’s claim to indemnification pursuant to the rights granted by this Certificate of Incorporation or otherwise by the Corporation. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this



Article VIII. Any amendment or repeal of this Article VIII shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
ARTICLE IX
Directors’ Liability
A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the General Corporation Law of the State of Delaware, or (4) for any transaction from which the director derived an improper personal benefit. Any amendment or repeal of this Article IX shall not adversely affect any right or protection of a director of the Corporation existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
If the General Corporation Law of the State of Delaware shall be amended, to authorize corporate action further eliminating or limiting the liability of directors, then a director of the Corporation, in addition to the circumstances in which he is not liable immediately prior to such amendment, shall be free of liability to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
ARTICLE X
Amendments
Except as may be expressly provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation or a Preferred Stock Designation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article X; provided, however, that any amendment or repeal of Article VIII or Article IX of this Certificate of Incorporation shall not adversely affect any right or protection existing thereunder in respect of any act or omission occurring prior to such amendment or repeal, and provided further that no Preferred Stock Designation shall be amended after the issuance of any shares of the series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law.

IN WITNESS WHEREOF, Morgan Stanley has caused this Amended and Restated Certificate of Incorporation to be executed by its duly authorized officer on this 9th day of April, 2008.
 
MORGAN STANLEY
By:     /s/ Martin M. Cohen
 Name:     Martin M. Cohen
 Office: Vice President and Counsel
and Assistant Secretary













Exhibit A
DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES A
(Liquidation Preference $25,000 per share)
The designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Floating Rate Non-Cumulative Preferred Stock, Series A (“Series A”) are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Floating Rate Non-Cumulative Preferred Stock, Series A.” Each share of Series A shall be identical in all respects to every other share of Series A, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series A shall be 46,000. Shares of Series A that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series A by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series A:
(a) “Allowable Capital” has the meaning set forth in Section 7.
(b) “Board of Directors” means the board of directors of the Corporation.
(c) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(d) “Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York City generally are authorized or obligated by law, regulation or executive order to close.
(e) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure that there is, at all relevant times when the Series A is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.

(f) “Capital Units” means the outstanding Capital Units of the Corporation and of Morgan Stanley Finance plc. Each Capital Unit consists of a subordinated debenture issued by Morgan Stanley Finance plc and guaranteed by the Corporation on a subordinated basis, and a related purchase contract issued by the Corporation that requires the holder to purchase one depositary share representing ownership of multiple shares of the Corporation’s cumulative preferred stock.
(g) “Capital Units Cumulative Preferred Stock” means shares, if any, of the Corporation’s 8.03% Cumulative Preferred Stock, par value $0.01 per share, with a stated value $200 per share, which the Corporation may issue under the terms of the outstanding Capital Units.
(h) “Certificate of Designation” means this Certificate of Designation relating to the Series A, as it may be amended or supplemented from time to time.
(i) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(j) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(k) “Dividend Determination Date” means, for each Dividend Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(l) “Dividend Payment Date” means January 15, April 15, July 15, and October 15 of each year.
(m) “Dividend Period” has the meaning set forth in Section 4(a).
(n) “Dividend Record Date” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series A as to the payment of dividends. Junior Stock includes the Common Stock.



(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 8(b).

(t) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series A in the payment of dividends.
(u) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series A.
(v) “Preferred Stock Directors” has the meaning set forth in Section 8(b).
(w) “Regulations” has the meaning set forth in Section 7.
(x) “Required Unrestricted Capital Provisions” has the meaning set forth in Section 7.
(y) “Tier 1 Capital Equivalent” has the meaning set forth in Section 7.
(z) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series A as to the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Capital Units Cumulative Preferred Stock, if issued, and any class or series of cumulative Preferred Stock that the Corporation may issue in the future, to the extent their like voting rights are exercisable at such time. Whether a plurality, majority or other portion of the shares of Series A and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series A will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the original issue date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on October 15, 2006. These dividends will accrue, with respect to each Dividend Period (as defined below), on the liquidation preference amount of $25,000 per share at a rate per annum equal to the greater of (1) three-month U.S. Dollar LIBOR (as defined below) on the related Dividend Determination Date plus .70% or (2) 4%. In the event that the Corporation issues additional shares of Series A after the original issue date, dividends on such shares may accrue from the original issue date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series A on any Dividend Payment Date will be payable to holders of record of Series A as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series A issued on the original issue date will commence on and include the original issue date of the Series A and will end on and exclude the October 15, 2006 Dividend Payment Date, and (ii) for any share of Series A issued after the original issue date, the initial Dividend Period for such shares may commence on and include such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series A will be computed by the Calculation Agent on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period will be calculated from the original issue date. If any date on which dividends would otherwise be payable is not a Business Day, then the Dividend Payment Date will be the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be the immediately preceding day that is a Business Day.
For any Dividend Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:



(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Page 3750, or any successor page, on Moneyline Telerate Inc., or any successor service, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent after consultation with the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, as selected by the Calculation Agent after consultation with the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no Dividend Period, the dividend payable will be based on the initial dividend rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be maintained on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Holders of Series A shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series A as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series A will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series A payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series A are declared for any future Dividend Period.
(b) Priority of Dividends. The Series A will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series A, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series A (issued with the requisite consent of the holders of the Series A, if required) and (iii) except as described in the following sentence, at least equally with each other class or series of Preferred Stock the Corporation may issue with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. The Series A will rank junior as to payment of dividends, but on a parity as to amounts payable upon liquidation, dissolution or winding up of the Corporation, with any Capital Units Cumulative Preferred Stock, any other class or series of cumulative Preferred Stock that the Corporation may issue in the future and any other class or series of Preferred Stock that the Corporation may issue in the future that is expressly stated to be senior as to payment of dividends, but on a parity as to amounts payable upon our liquidation, dissolution or winding up, to the Series A.
So long as any share of Series A remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series A has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.



In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. Incorporated, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series A and any shares of Parity Stock, all dividends declared on the Series A and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series A and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any other stock ranking, as to dividends, equally with or junior to the Series A, from time to time out of any funds legally available for such payment, and the Series A shall not be entitled to participate in any such dividends.

5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series A shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities, if any, to creditors of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series A as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series A Preferred Stock will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series A and all holders of any stock of the Corporation ranking equally with the Series A as to such distribution, the amounts paid to the holders of Series A and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series A and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series A and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series A and any other shares of the Corporation’s stock ranking equally as to such liquidation distribution, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series A receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Series A may not be redeemed by the Corporation prior to July 15, 2011. On or after July 15, 2011, subject to obtaining any then required regulatory approval, the Corporation, at its option, may redeem, in whole at any time or in part from time to time, the shares of Series A at the time outstanding, upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together (except as otherwise provided herein below), for the purposes of the redemption price only, with an amount equal to dividends accrued but unpaid for the then current Dividend Period at the rate set forth in Section 4(a) to, but excluding, the date fixed for redemption (regardless of whether any dividends are actually declared for that Dividend Period). The redemption price for any shares of Series A shall be payable on the



redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any accrued and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
(b) No Sinking Fund. The Series A will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series A will have no right to require the redemption or repurchase of any shares of Series A.
(c) Notice of Redemption. Notice of every redemption of shares of Series A shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series A designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A. Notwithstanding the foregoing, if the depositary shares representing interests in the Series A are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series A at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series A to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series A at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Corporation may determine to be fair and equitable. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series A shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series A so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after June 26, 2006, the Corporation (by election or otherwise) becomes subject to any law, rule, regulation or guidance (together, “Regulations”) relating to its capital adequacy, which Regulation (x) modifies the existing requirements for treatment as Allowable Capital (as defined under the Securities and Exchange Commission rules relating to consolidated supervised entities as in effect from time to time), (y) provides for a type or level of capital characterized as “Tier 1” or its equivalent pursuant to Regulations of any governmental agency, authority or other body having regulatory jurisdiction over the Corporation (or any of its subsidiaries or consolidated affiliates) and implementing the capital standards published by the Basel Committee on Banking Supervision, the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System or any other United States national governmental agency, authority or other body, or any other applicable regime based on capital standards published by the Basel Committee on Banking Supervision or its successor, or (z) provides for a type or level of capital that in the judgment of the Corporation (after consultation with legal counsel of recognized standing) is substantially equivalent to such “Tier 1” capital (such capital described in either (y) or (z) above is referred to below as “Tier 1 Capital Equivalent”), and
(ii) the Corporation affirmatively elects to qualify the Series A for treatment as Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative restriction on the inclusion of the Series A in Allowable Capital or Tier 1 Capital Equivalent (other than any limitation the Corporation elects to accept and any limitation requiring that common equity or a specified form of common equity constitute the dominant form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,



then, upon such affirmative election, the Series A shall be convertible at the Corporation’s option into a new series of Preferred Stock having terms and provisions substantially identical to those of the Series A, except that such new series may have such additional or modified rights, preferences, privileges and voting powers, and limitations and restrictions thereof, as are necessary in the judgment of the Board of Directors or a duly authorized committee of the Board of Directors (after consultation with legal counsel of recognized standing) to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the Corporation shall not cause any such conversion unless the Board of Directors or a duly authorized committee of the Board of Directors determines that the rights, preferences, privileges and voting powers, and the qualifications, limitations and restrictions thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and the qualifications, limitations and restrictions thereof, of the Series A, taken as a whole.
As used above, the term “Required Unrestricted Capital Provisions” means such terms and provisions as are, in the judgment of the Board of Directors or a duly authorized committee of the Board of Directors (after consultation with counsel of recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1 Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable (other than any limitation the Corporation elects to accept and any limitation requiring that common equity or a specified form of common equity constitute the dominant form of Allowable Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series A of any election to qualify the Series A for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to convert the Series A into a new series of Preferred Stock pursuant to the terms of this Section 7, promptly upon the effectiveness of any such election or determination. A copy of such notice and of the relevant Regulations shall be maintained on file at the principal offices of the Corporation and, upon request, will be made available to any stockholder of the Corporation. Any conversion of the Series A pursuant to this Section 7 shall be effected pursuant to such procedures as the Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series A shares shall have no right to exchange or convert such shares into any other securities.
8. Voting Rights.
(a) General. The holders of Series A shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series A, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series A or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series A or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series A and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four regular dividend periods following the Nonpayment.
If and when dividends for at least four regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series A and any other class or series of Voting Preferred Stock, the holders of the Series A and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a



majority of the outstanding shares of the Series A together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series A and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series A are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series A and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series A with respect to the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series A. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series A, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series A, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series A remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series A, taken as a whole;
provided, however, that for all purposes of this Section 8(c), any increase in the amount of the authorized or issued Series A or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series A with respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation and ranking senior to or equally with the Series A with respect to the payment of dividends will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series A. In addition, any conversion of the Series A pursuant to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and voting powers of the Series A.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 8(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series A for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series A, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series A, the Corporation may amend, alter, supplement or repeal any terms of the Series A:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series A that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series A shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series A shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.



(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series A (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series A is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series A and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series A are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
9. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series A may deem and treat the record holder of any share of Series A as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
10. Notices. All notices or communications in respect of Series A shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
11. No Preemptive Rights. No share of Series A shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
12. Other Rights. The shares of Series A shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.




CERTIFICATE OF DESIGNATIONS OF PREFERENCES AND RIGHTS
OF THE
10% SERIES B NON-CUMULATIVE NON-VOTING PERPETUAL
CONVERTIBLE PREFERRED STOCK
($1,000 LIQUIDATION PREFERENCE PER SHARE)
OF
MORGAN STANLEY
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MORGAN STANLEY, a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee of the Board of Directors of the Corporation adopted on September 28, 2008, the creation of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock, par value $0.01 per share, liquidation preference $1,000 per share (“Series B”) of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series B, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock.” Each share of Series B shall be identical in all respects to every other share of Series B, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 3 below.
2. Number of Shares. The authorized number of shares of Series B shall be 6,045,750. Shares of Series B that are purchased or otherwise acquired by the Corporation, or converted into Common Stock or another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series B by any Subsidiary of the Corporation.
3. Dividends.
(a) Rate. Holders of shares of Series B shall be entitled to receive, only when, as and if declared by the Board of Directors or a duly authorized committee thereof out of funds of the Corporation legally available for payment, non-cumulative cash dividends on the liquidation preference of $1,000 per share at a rate per annum equal to 10%. Declared dividends on the Series B shall be payable from and including the date of initial issuance (in the case of the initial Dividend Period) or the immediately preceding Dividend Payment Date (in the case of Dividend Periods other than the initial Dividend Period), and shall be payable quarterly, in arrears, on each January 15, April 15, July 15 and October 15, commencing on January 15, 2009 (each such date a “Dividend Payment Date”). If any date on which dividends would otherwise
be payable shall not be a Business Day (as defined below), then the date of payment of dividends need not be made on such date, but such payment of dividends may be made on the next succeeding day that is a Business Day with the same force and effect as if made on the Dividend Payment Date, and no additional dividends shall be payable nor shall interest accrue on the amount payable from and after such Dividend Payment Date to the next succeeding Business Day. “Business Day” means any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions generally are authorized or obligated by law or executive order to be closed.
Dividends on the Series B shall not be cumulative; Holders of Series B shall not be entitled to receive any dividends not declared by the Board of Directors or a duly authorized committee thereof and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so declared. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series B payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on that Dividend Payment Date or at any future time, whether or not dividends on the Series B are declared for any future Dividend Period. Declared and unpaid dividends shall not bear interest.
Dividends that are payable on the Series B on any Dividend Payment Date will be payable to holders of record of Series B as they appear on the stock register of the Corporation on the applicable Dividend Record Date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each,



a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
The term “Dividend Period” means the period from and including each Dividend Payment Date to but excluding the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the date of initial issuance of the Series B and shall end on but exclude the next Dividend Payment Date). Dividends payable on the Series B shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) Priority of Dividends. The Series B will rank (i) senior to the Common Stock (as defined below) and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series B, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series B (issued with the requisite consent of the Holders of the Series B, if required) and (iii) at least equally with each other class or series of Preferred Stock (as defined below) that the Corporation may issue with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. So long as any share of Series B remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series B has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to (i) repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan; (ii) an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a Subsidiary of the Corporation, for any class or series of Junior Stock; (iii) the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged; (iv) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock. In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. Incorporated, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series B and any shares of Parity Stock, all dividends declared on the Series B and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series B and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any other stock ranking, as to dividends, equally with or junior to the Series B, from time to time out of any funds legally available for such payment, and the Series B shall not be entitled to participate in any such dividends.
4. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, Holders of Series B shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities, if
any, to creditors of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series B in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series B as to such distribution, a liquidating distribution in an amount equal to $1,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series B will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.



(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all Holders of Series B and all holders of any stock of the Corporation ranking equally with the Series B as to such distribution, the amounts paid to the Holders of Series B and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the Holders of Series B and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series B and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series B will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 4 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference on the Series B and any other shares of the Corporation’s stock ranking equally as to such liquidation distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the Holders of Series B receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
5. Voting Rights.
(a) General. The Holders of Series B shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right to Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series B, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more Dividend Periods, whether or not for consecutive Dividend Periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”); provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors; and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series B or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series B or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 16 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series B and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four regular dividend periods following the Nonpayment.
If and when dividends for at least four regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series B and any other class or series of Voting Preferred Stock, the holders of the Series B and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed.
Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series B together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any



vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series B and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series B or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
The term “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series B as to payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series A (the “Series A”), if outstanding, and any class or series of Preferred Stock, whether or not cumulative, that the Corporation may issue in the future, to the extent their like voting rights are exercisable at such time. Whether a plurality, majority or other portion of the shares of Series B and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the relative liquidation preferences of the shares voted.
(c) Other Voting Rights. So long as any shares of Series B are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series B and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designations to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series B with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series B. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designations, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series B, taken as a whole; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series B, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series B remain outstanding or are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding as securities of the Corporation or such other entity as permitted by clause (x) or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series B, taken as a whole;
provided, however, that for all purposes of this Section 5(c), neither the issuance of any Series B in accordance with the terms of the Securities Purchase Agreement (as defined below) as in effect on the date hereof nor the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series B with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will be deemed to adversely affect the rights, preferences, privileges or voting powers of, and neither will require the affirmative vote or consent of, the holders of outstanding shares of Series B. In addition, any conversion of the Series B pursuant hereto shall not be deemed to adversely affect the rights, preferences, privileges and voting powers of the Series B. For purposes of clarification, no Holder of Series B shall have any voting rights with respect to any binding share exchange, reclassification, merger or consolidation which complies with the provisions of clause (iii)(x) and (y) hereof.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 5(c) for which a vote is otherwise required would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series B for this purpose), then only such series of Preferred Stock as are adversely affected by and otherwise entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred



Stock. If all series of a class of Preferred Stock that are otherwise entitled to vote on the matter are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status and that is otherwise entitled to vote thereon.
(d) Changes for Clarification. Without the consent of the holders of the Series B, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series B, the Corporation may amend, alter, supplement or repeal any terms of the Series B:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series B that is not inconsistent with the provisions of this Certificate of Designations.
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series B (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series B is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series B and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series B are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
6. Redemption. The shares of Series B shall not be redeemable.
7. Rank. Any stock of any class or classes or series of the Corporation shall be deemed to rank:
(a) prior to shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, if the holders of stock of such class or classes or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the Holders of shares of the Series B;
(b) on a parity with shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series B, if the holders of stock of such class or classes or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributed upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority of one over the other as between the holders of such stock and the Holders of shares of Series B (the term “Parity Preferred Stock” being used to refer to any stock on a parity with the shares of Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, as the content may require); and
(c) junior to shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, if such class or classes or series shall be common stock or if the Holders of the Series B shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of stock of such class or classes or series.
The Series B shall rank, as to dividends and upon liquidation, dissolution or winding up, on a parity with the Series A and any Parity Preferred Stock issued hereafter.
8. Additional Definitions. As used herein with respect to Series B:
Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, excluding any debt securities convertible into such equity.
Cash” means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.
Close of Business” means 5:00 p.m., New York City time.



Closing Price” of the Common Stock or any securities distributed in a Spin-Off, as the case may be, means, as of any date of determination:
(a) the closing price on that date or, if no closing price is reported, the last reported sale price, of shares of the Common Stock or such other securities on the New York Stock Exchange on that date; or
(b) if the Common Stock or such other securities are not traded on the New York Stock Exchange, the closing price on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded or, if no closing price is reported, the last reported sale price of shares of the Common Stock or such other securities on the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded on that date; or
(c) if the Common Stock or such other securities are not traded on a U.S. national or regional securities exchange, the last quoted bid price on that date for the Common Stock or such other securities in the over-the-counter market as reported by Pink Sheets LLC or a similar organization; or
(d) if the Common Stock or such other securities are not so quoted by Pink Sheets LLC or a similar organization, the market price of the Common Stock or such other securities on that date as determined by a nationally recognized independent investment banking not affiliated with the Corporation retained by the Corporation for this purpose.
For the purposes of this Certificate of Designations, all references herein to the closing price and the last reported sale price of the Common Stock on the New York Stock Exchange shall be such closing price and last reported sale price as reflected on the website of the New York Stock Exchange (www.nyse.com) and as reported by Bloomberg Professional Service; provided that in the event that there is a discrepancy between the closing price and the last reported sale price as reflected on the website of the New York Stock Exchange and as reported by Bloomberg Professional Service, the closing price and the last reported sale price on the website of the New York Stock Exchange shall govern.
Common Stock” means the common stock, $0.01 par value, of the Corporation.
Conversion Agent” shall mean BNY Mellon Shareowner Services, acting in its capacity as conversion agent for the Series B, and its successors and assigns or any other conversion agent appointed by the Corporation.
Conversion Date” means each of a Mandatory Conversion Date and a Non-Mandatory Conversion Date.
Conversion Price” at any time means for each share of Series B the price equal to $1,000 divided by the Conversion Rate in effect at such time (initially $31.25).
Conversion Rate” means initially 32 shares of Common Stock per share of Series B, subject to adjustment in accordance with the provisions of this Certificate of Designations.
Depositary” means DTC or its nominee or any successor depositary appointed by the Corporation.
DTC” means The Depository Trust Company, together with its successors and assigns.
Exchange Act” means the Securities Exchange Act of 1934, as amended.
Ex-Dividend Date” means the first date on which the Common Stock trades, regular way, on the relevant exchange, or in the relevant market from which the Closing Price was obtained, without the right to receive such dividend or distribution.
Fair Market Value” means the amount which a willing buyer would pay a willing seller in an arm’s-length transaction as determined by the Board of Directors.
Full Mandatory Conversion Date” means the 3rd Trading Day immediately following the first date after the second anniversary of the Issue Date as of which, for 20 Trading Days within any period of 30 consecutive Trading Days beginning after such second anniversary and preceding such date, the Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price.

Fundamental Change” means the occurrence, prior to the Full Mandatory Conversion Date, of one of the following:



(i) a “person” or “group” within the meaning of Section 13( d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Corporation representing more than 50% of the voting power of the outstanding Common Stock;
(ii) consummation of any consolidation or merger of the Corporation or similar transaction or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries, taken as a whole, to any Person other than one of the Corporation’s subsidiaries, in each case pursuant to which the Common Stock will be converted into, or receive a distribution of the proceeds in, cash, securities or other property, other than pursuant to a transaction in which the Persons that “beneficially owned” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, voting shares of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, voting shares representing a majority of the total voting power of all outstanding classes of voting shares of the continuing or surviving Person or the ultimate parent entity thereof immediately after the transaction; or
(iii) shares of the Common Stock or shares of any other stock into which the Series B is convertible are not listed for trading on any United States national securities exchange or cease to be traded in contemplation of a delisting (other than as a result of a transaction described in clause (ii) above);
provided, however, that a Fundamental Change with respect to clauses (i) and (ii) above will not be deemed to have occurred if at least 90% of the consideration received by holders of the Common Stock in the transaction or transactions consists of shares of common stock or American Depositary Receipts in respect of common stock that are traded on a U.S. national securities exchange or that will be so traded when issued or exchanged in connection with a Fundamental Change; and provided, further, that with respect to any shares of Series B that are beneficially owned by the Initial Holder or its affiliates, a Fundamental Change with respect to clauses (i) or (ii) above will not be deemed to have occurred if the Initial Holder or any of its affiliates is part of the person or group referred to in clause (i) above or is a counterparty to the Corporation in any of the transactions referred to in clause (ii) above.
Holder” means the Person in whose name the shares of Series B are registered, which may be treated by the Corporation, Transfer Agent, Registrar, dividend disbursing agent and Conversion Agent as the absolute owner of the shares of Series B for the purpose of disbursing dividends and settling conversions and for all other purposes.
Initial Holder” means Mitsubishi UFJ Financial Group, Inc.
Issue Date” means the date of original issuance of any share of Series B.
Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series B as to the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation. Junior Stock includes the Common Stock.
Make-Whole Acquisition” means the occurrence, prior to the Full Mandatory Conversion Date, of one of the following:
(i) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Corporation representing more than 50% of the voting power of the outstanding Common Stock; or
(ii) consummation of any consolidation or merger of the Corporation or similar transaction or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries, taken as a whole, to any Person other than one of the Corporation’s subsidiaries, in each case pursuant to which the Common Stock will be converted into, or receive distributions of the proceeds in, cash, securities or other property, other than pursuant to a transaction in which the Persons that “beneficially owned” (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, voting shares of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, voting shares representing a majority of the total voting power of all outstanding classes of voting shares of the continuing or surviving Person or the ultimate parent entity thereof immediately after the transaction;
provided, however, that a Make-Whole Acquisition will not be deemed to have occurred if at least 90% of the consideration received by holders of the Common Stock in the transaction or transactions consists of shares of common stock or American Depositary Receipts in respect of common stock that are traded on a U.S. national securities exchange or that will be so traded when issued or exchanged in connection with a Make-Whole Acquisition; and provided, further, that with respect to any shares



of Series B that are beneficially owned by the Initial Holder or its affiliates, a Make-Whole Acquisition will not be deemed to have occurred if the Initial Holder or any of its affiliates is part of the person or group referred to in clause (i) above or is a counterparty to the Corporation in any of the transactions referred to in clause (ii) above.
Make-Whole Acquisition Stock Price” means the consideration paid per share of Common Stock in a Make-Whole Acquisition. If such consideration consists only of cash, the Make-Whole Acquisition Stock Price shall equal the amount of cash paid per share of Common Stock. If such consideration consists of any property other than cash, the Make-Whole Acquisition Stock Price shall be the average of the Closing Price per share of Common Stock on each of the 10 consecutive Trading Days up to, but not including, the Make-Whole Acquisition Effective Date.
Mandatory Conversion Date” means a Partial Mandatory Conversion Date or a Full Mandatory Conversion Date.
Non-Mandatory Conversion Date” means an Early Conversion Date, a Make-Whole Acquisition Conversion Date or a Fundamental Change Conversion Date.
Open of Business” means 9:00 a.m., New York City time.
Ownership Limit” means a number of shares of Common Stock equal to 0.149 times the sum, without duplication, of (1) the total number of outstanding shares of Common Stock on such date of measurement and (2) the total number of shares of Common Stock to be converted on the Partial Mandatory Conversion Date.
Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series B in the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation.
Partial Mandatory Conversion Date” means the 3rd Trading Day immediately following the first date after the first anniversary of the Issue Date as of which, for 20 Trading Days within any period of 30 consecutive Trading Days beginning after such first anniversary and preceding such date, the Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price.
Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series B.
Reference Price” means the price per share of Common Stock in connection with a Fundamental Change. If the holders of shares of Common Stock receive only cash in connection with the Fundamental Change, the Reference Price shall be the cash amount paid per share. Otherwise the Reference Price shall be the average of the Closing Price per share of Common Stock on each of the 10 Trading Days up to, but not including, the effective date of the Fundamental Change.
Registrar” shall mean BNY Mellon Shareowner Services, acting in its capacity as registrar for the Series B, and its successors and assigns or any other registrar appointed by the Corporation.
Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of December 19, 2007, between the Corporation and the Investor listed on the signature page thereto.
Subsidiary” means with respect to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries.
Trading Day” means a day on which the Common Stock (i) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the Close of Business and (ii) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.
Transfer Agent” shall mean BNY Mellon Shareowner Services, acting in its capacity as transfer agent for the Series B, and its respective successors and assigns or any other transfer agent appointed by the Corporation.



9. Early Conversion at the Option of the Holder. Other than during a Make-Whole Acquisition Conversion Period, any Holder shall have the right to convert such Holder’s shares of Series B, in whole or in part (but in no event less than one share of Series B), at any time prior to the Full Mandatory Conversion Date (“Early Conversion”), into shares of Common Stock at the then applicable Conversion Rate, subject to satisfaction of the conversion procedures set forth in Section 10(b). The date of such Early Conversion is referred to herein as the “Early Conversion Date.”
10. Conversion.
(a) Mandatory Conversion on Mandatory Conversion Date.
(i) On the Partial Mandatory Conversion Date, one half of the outstanding shares of Series B held by each Holder thereof will mandatorily convert into shares of Common Stock at the then applicable Conversion Rate; provided that to the extent such conversion would result in the number of shares of Common Stock beneficially owned by the Initial Holder and its affiliates exceeding the Ownership Limit (such shares of Common Stock that would exceed the Ownership Limit, the “Excess Shares”) the number of shares of Series B of the Initial Holder so converted on the Partial Mandatory Conversion Date shall be limited to the number of shares of Series B such that after giving effect to such conversion, the shares of Common Stock beneficially owned by the Initial Holder and its affiliates equal the Ownership Limit; and provided further, that to the extent that there are Excess Shares and shares of Common Stock are issued upon settlement of the equity units sold pursuant to the Securities Purchase Agreement after the Partial Mandatory Conversion Date and prior to the Full Mandatory Conversion Date, outstanding shares of Series B held by the Initial Holder will mandatorily convert into shares of Common Stock (but not greater than the number of Excess Shares) at the then applicable Conversion Rate provided that the number of shares of Series B of the Initial Holder so converted shall be limited to the number of shares of Series B such that after giving effect to such conversion, the shares of Common Stock beneficially owned by the Initial Holder and its affiliates do not exceed the Ownership Limit. No action shall be required by the Holder thereof. The person or persons entitled to receive the shares of Common Stock issuable upon mandatory conversion of Series B will be treated as the record Holder(s) of such shares of Common Stock as of the Close of Business on the Partial Mandatory Conversion Date. Except as provided under Section 11(a)(xv), prior to the Close of Business on the Partial Mandatory Conversion Date, the shares of Common Stock issuable upon conversion of the Series B will not be deemed to be outstanding for any purpose and Holders shall have no rights with respect to such shares of Common Stock, including voting rights, rights to respond to tender offers and rights to receive any dividends or other distributions on the Common Stock, by virtue of holding the Series B.
(ii) On the Full Mandatory Conversion Date, all of the outstanding shares of Series B will mandatorily convert into shares of Common Stock at the then applicable Conversion Rate. No action shall be required by the Holder thereof. The person or persons entitled to receive the shares of Common Stock issuable upon mandatory conversion of Series B will be treated as the record holder(s) of such shares of Common Stock as of the Close of Business on the Full Mandatory Conversion Date. Except as provided under Section 11(a)(xv), prior to the Close of Business on the Full Mandatory Conversion Date, the shares of Common Stock issuable upon conversion of the Series B will not be deemed to be outstanding for any purpose and Holders shall have no rights with respect to such shares of Common Stock, including voting rights, rights to respond to tender offers and rights to receive any dividends or other distributions on the Common Stock, by virtue of holding the Series B.
(iii) In addition to the number of shares of Common Stock issuable pursuant to this Section 10(a), if applicable, the Holders on a Mandatory Conversion Date shall have the right to receive an amount equal to any declared and unpaid dividends on the Series B for the most recent Dividend Period ending on a Mandatory Conversion Date to the extent such Holders were the Holders of record as of the Dividend Record Date for such dividend.
(b) Conversion Procedures for a Non-Mandatory Conversion Date. To effect conversion on a Non-Mandatory Conversion Date, a Holder who:
(i) holds a beneficial interest in a global certificate representing the Series B must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program and, if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled by virtue of Section 10(e) and, if required, pay all transfer or similar taxes or duties, if any; or
(ii) holds shares of Series B in certificated form must:
(A) complete and manually sign the conversion notice on the back of the Series B certificate or a facsimile of the conversion notice;
(B) deliver the completed conversion notice and the certificated shares of Series B to be converted to the Conversion Agent;



(C) if required, furnish appropriate endorsements and transfer documents;
(D) if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled by virtue of Section 10(e); and
(E) if required, pay all transfer or similar taxes or duties, if any.

The conversion will be effective on the date on which a Holder has satisfied all of the foregoing requirements, to the extent applicable, which shall be the applicable Non-Mandatory Conversion Date. A Holder will not be required to pay any transfer or similar taxes or duties relating to the issuance or delivery of Common Stock if such Holder exercises its conversion rights, but such Holder will be required to pay any transfer or similar tax or duty that may be payable relating to any transfer involved in the issuance or delivery of Common Stock in a name other than the name of such Holder. A certificate representing Common Stock will be issued and delivered only after all applicable taxes and duties, if any, payable by the Holder have been paid in full.
The person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record Holder(s) of such shares of Common Stock as of the Close of Business on the applicable Non-Mandatory Conversion Date. No allowance or adjustment, except as set forth in Section 11(a), shall be made in respect of dividends payable to Holders of Common Stock of record as of any date prior to such applicable Non-Mandatory Conversion Date. Prior to such applicable Non-Mandatory Conversion Date, shares of Common Stock issuable upon conversion of any shares of Series B shall not be deemed outstanding for any purpose, and Holders shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Series B.
In the event that a conversion is effected with respect to shares of Series B representing fewer than all the shares of Series B held by a Holder, upon such conversion the Corporation shall execute and the Registrar shall countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Series B as to which conversion was not effected.
The Corporation shall deliver the shares of Common Stock to which the Holder converting pursuant to Section 9(a) is entitled on or prior to the third Trading Day immediately following the applicable Non-Mandatory Conversion Date.
(c) Conversion Upon Make-Whole Acquisition.
(i) In the event of a Make-Whole Acquisition, each Holder shall have the option to convert its shares of Series B (a “Make-Whole Acquisition Conversion”) at the then applicable Conversion Rate during the period (the “Make-Whole Acquisition Conversion Period”) beginning on the effective date of the Make-Whole Acquisition (the “Make-Whole Acquisition Effective Date”) and ending on the date that is 30 days after the Make-Whole Acquisition Effective Date and receive an additional number of shares of Common Stock in the form of Make-Whole Shares as set forth in this Section 10(c). The date of such Make-Whole Acquisition Conversion is referred to herein as the “Make-Whole Acquisition Conversion Date.”
(ii) The number of “Make-Whole Shares” shall be determined for the Series B by reference to the table below for the applicable Make-Whole Acquisition Effective Date and the applicable Make-Whole Acquisition Stock Price:
Effective Date$25.25$26.00$27.50$30.00$32.50$35.00$37.50$40.00
October 14, 20087.6040 7.1523 6.3231 5.1706 4.2577 3.5420 2.9855 2.5588 
October 14, 20097.6040 7.0734 6.2025 4.9612 3.9362 3.0896 2.3903 1.8122 
October 14, 2010 and thereafter7.6040 7.0758 6.1992 4.9399 3.8789 2.9723 2.1872 1.4965 
Effective Date$45.00$50.00$55.00$60.00$70.00$80.00$90.00$100.00
October 14, 20081.9853 1.6463 1.4313 1.2805 1.0698 0.9198 0.8044 0.7122 
October 14, 20090.9388 0.6034 0.5113 0.4532 0.3777 0.3252 0.2847 0.2523 
October 14, 2010 and thereafter0.3474 — — — — — — — 
(A) The exact Make-Whole Acquisition Stock Prices and Effective Dates may not be set forth in the table above, in which case:
(1) if the Make-Whole Acquisition Stock Price is between two Make-Whole Acquisition Stock Price amounts in the table or the Make-Whole Acquisition Effective Date is between two dates in the table, the number of Make-Whole Shares will be determined by straight-line interpolation between the number of Make-Whole Shares set forth for the



higher and lower Make-Whole Acquisition Stock Price amounts and the two Make-Whole Acquisition Effective Dates, as applicable, based on a 365-day year;
(2) if the Make-Whole Acquisition Stock Price is in excess of $100.00 per share (subject to adjustment pursuant hereto), no Make-Whole Shares will be issued upon conversion of the Series B; and
(3) if the Make-Whole Acquisition Stock Price is less than $25.25 per share (subject to adjustment pursuant hereto), no Make-Whole Shares will be issued upon conversion of the Series B.
(B) The Make-Whole Acquisition Stock Prices set forth in the table above (and the corresponding prices set forth in clauses (2) and (3) above) are subject to adjustment pursuant hereto and shall be adjusted as of any date the Conversion Rate is adjusted. The adjusted Make-Whole Acquisition Stock Prices (and corresponding prices set forth in clauses (2) and (3) above) shall equal the Make-Whole Acquisition Stock Prices (and corresponding prices set forth in clauses (2) and (3) above), respectively, applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Make-Whole Acquisition Stock Price adjustments and the denominator of which is the Conversion Rate as so adjusted. The number of Make-Whole Shares in the table above shall also be subject to adjustment in the same manner as the Conversion Rate pursuant to Section II.
(iii) On or before the twentieth day prior to the date on which the Corporation anticipates consummating the Make-Whole Acquisition (or, if later, within two Business Days after the Corporation becomes aware of a Make-Whole Acquisition described in clause (i) of the definition of such term), a written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date on which the Make-Whole Acquisition is anticipated to be effected;
(B) the date, which shall be 30 days after the Make-Whole Acquisition Effective Date, by which the Make-Whole Acquisition conversion option must be exercised;
(C) the amount of cash, securities and other consideration payable per share of Common Stock or Series B, respectively; and
(D) the instructions a Holder must follow to exercise its conversion option in connection with such Make-Whole Acquisition.
(iv) To exercise a Make-Whole Acquisition Conversion option, a Holder must, no later than the Close of Business on the date by which the Make-Whole Acquisition Conversion option must be exercised as specified in the notice delivered under Section 10(c)(iii), comply with the procedures set forth in Section 10(b).
(v) If a Holder does not elect to exercise the Make-Whole Acquisition Conversion option pursuant to this Section 10(c), the shares of Series B or successor securities held by it shall remain outstanding but shall not be eligible to receive Make-Whole Shares.
(vi) Upon a Make-Whole Acquisition Conversion, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder thereof in the written notice provided to the Corporation or its successor as set forth in Section 10(b), deliver to the Holder such cash, securities or other property as are issuable with respect to Make-Whole Shares in the Make-Whole Acquisition.
(vii) In the event that a Make-Whole Acquisition Conversion is effected with respect to shares of Series B or successor securities representing fewer than all the shares of Series B or successor securities held by a Holder, upon such Make-Whole Acquisition Conversion, the Corporation or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to the Holder thereof, at the expense of the Corporation or its successors, a certificate evidencing the shares of Series B or such successor securities held by the Holder as to which a Make-Whole Acquisition Conversion was not effected.
(viii) If a Holder elects to convert its shares of Series B in connection with a Make-Whole Acquisition, such Holder shall not be entitled to an adjusted conversion price pursuant to Section 10(g) to the extent such Make-Whole Acquisition also constitutes a Fundamental Change.
(d) Registration of Common Stock. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock to be issued upon conversion of such Series B should be registered or the address to which the certificate or certificates representing such shares of Common Stock should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the Holder as shown on the records of the Corporation and to send the certificate or certificates representing such shares of Common Stock to the address of such Holder shown on the records of the Corporation.



(e) Dividends. If a Non-Mandatory Conversion Date on which a Holder elects to convert Series B is prior to the Close of Business on the Dividend Record Date relating to any declared dividend for the Dividend Period in which such Holder is electing to convert, such Holder will not have the right to receive any declared dividends for that Dividend Period. If a Non-Mandatory Conversion Date on which a Holder elects to convert Series B is after the Close of Business on the Dividend Record Date for any declared dividend and prior to the Dividend Payment Date, such Holder shall receive that dividend on the relevant Dividend Payment Date if such Holder was the Holder of record at the Close of Business on the Dividend Record Date for that dividend. Notwithstanding the preceding sentence, if the Non-Mandatory Conversion Date is after the Close of Business on the Dividend Record Date and prior to the Open of Business on the Dividend Payment Date, whether or not such Holder was the Holder of record at the Close of Business on the Dividend Record Date, the Holder must pay to the Conversion Agent upon conversion of the shares of Series B an amount in cash equal to the dividend payable on the Dividend Payment Date for the then-current Dividend Period on the shares of Series B being converted.
(f) Outstanding Shares of Series B. Shares of Series B shall cease to be outstanding on the applicable Conversion Date, subject to the right of Holders of such shares to receive shares of common Stock issuable upon conversion of such shares of Series B.
(g) Conversion Upon Fundamental Change.
(i) If the Reference Price in connection with a Fundamental Change is less than the then applicable Conversion Price, a Holder may convert each share of Series B during the period beginning on the effective date of the Fundamental Change and ending on the date that is 30 days after the effective date of such Fundamental Change at an adjusted conversion price equal to the greater of (1) the Reference Price and (2) $12.625, subject to adjustment as described herein (the “Base Price”). The date of such conversion upon a Fundamental Change is referred to herein as the “Fundamental Change Conversion Date.”
(ii) The Base Price shall be adjusted as of any date the Conversion Rate of the Series B is adjusted pursuant hereto. The adjusted Base Price shall equal the Base Price applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Base Price adjustment and the denominator of which is the Conversion Rate as so adjusted. If the Reference Price is less than the Base Price, Holders shall receive a maximum of 79.2079 shares of Common Stock per share of Series B (subject to adjustment in a manner inverse to the adjustments to the Base Price).
(iii) On or before the 20th day prior to the date on which the Corporation anticipates consummating the Fundamental Change (or, if later, within two Business Days after the Corporation becomes aware of a Fundamental Change described in clause (i) of the definition of such term), a written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date on which the Fundamental Change is anticipated to be effected; and
(B) the date, which shall be 30 days after the effective date of a Fundamental Change, by which the Fundamental Change conversion option must be exercised.
(iv) On the effective date of a Fundamental Change, another written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date that shall be 30 days after the effective date of the Fundamental Change;
(B) the adjusted conversion price following the Fundamental Change;
(C) the amount of cash, securities and other consideration payable per share of Common Stock or Series B, respectively; and
(D) the instructions a Holder must follow to exercise its conversion option in connection with such Fundamental Change.
(v) To exercise its conversion option upon a Fundamental Change, a Holder must, no later than the Close of Business on the date by which the conversion option upon the Fundamental Change must be exercised as specified in the notice delivered under Section 10(g)(iv), comply with the procedures set forth in Section 10(b).
(vi) If a Holder does not elect to exercise its conversion option upon a Fundamental Change pursuant to this Section 10(g), the shares of Series B or successor securities held by it will remain outstanding but shall not thereafter be entitled to convert in accordance with Section 10(g).



(vii) Upon a conversion upon a Fundamental Change, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder thereof in the written notice provided to the Corporation or its successor as set forth in Section 10(b), deliver to the Holder such cash, securities or other property as are issuable with respect to the adjusted conversion price following the Fundamental Change.
(viii) In the event that a conversion upon a Fundamental Change is effected with respect to shares of Series B or successor securities representing fewer than all the shares of Series B or successor securities held by a Holder, upon such conversion the Corporation or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Series B or such successor securities held by the Holder as to which a conversion upon a Fundamental Change was not effected.
(ix) If a Holder elects to convert its shares of Series B in connection with a Fundamental Change, such Holder shall not be entitled to Make-Whole Shares pursuant to Section 10(c) to the extent such Fundamental Change also constitutes a Make-Whole Acquisition.
(h) A Holder cannot effect both a Make-Whole Acquisition Conversion and a Fundamental Change Conversion with respect to a share of Series B.
(i) Notwithstanding anything to the contrary in this Certificate of Designations, a Holder of shares of Series B shall not, for a period of 35 calendar days after any Conversion Date, sell any shares of Common Stock or other equity securities it receives upon conversion of the shares it converted on such Conversion Date.
11. Anti-Dilution Adjustments.
(a) The Conversion Rate shall be adjusted from time to time by the Corporation as follows:
(i) If the Corporation, at any time or from time to time while any of the Series B is outstanding, issues shares of Common Stock as a dividend or distribution on shares of Common Stock, or if the Corporation effects a share split or share combination in respect of the Common Stock, then the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
OS1
    
OS0
where
 
CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or combination, as applicable;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable;
OS0
  =  the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable; and
OS1
  =  the number of shares of Common Stock outstanding immediately after such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable.
The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in treasury by the Corporation.
(ii) Except as otherwise provided for by Section 11(a)(iv) below, if the Corporation, at any time or from time to time while any of the Series B is outstanding, distributes to all or substantially all holders of its outstanding shares of Common



Stock any rights or warrants entitling them for a period of not more than 45 calendar days from the Record Date of such distribution to subscribe for or purchase shares of Common Stock at a price per share less than the Closing Price of the Common Stock on the Trading Day immediately preceding the Record Date of such distribution, the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
OS0 + X
    
OS0 + Y

where
 
CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such distribution;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such distribution;
OS0
  =  the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such distribution;
X  =  the total number of shares of Common Stock issuable pursuant to such rights or warrants; and
Y  =  the number of shares of common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Closing Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution.
To the extent that shares of common Stock are not delivered pursuant to such rights or warrants upon the expiration or termination of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered.
In determining the aggregate price payable to exercise such rights or warrants, there shall be taken into account any amount payable on exercise thereof, with the value of such consideration, if other than Cash, to be determined in good faith by the Corporation’s Board of Directors.
(iii) If the Corporation, at any time or from time to time while any of the Series B is outstanding, shall, by dividend or otherwise, distribute to all or substantially all holders of its Common Stock shares of any class of Capital Stock of the Corporation (other than Common Stock as covered by Section 11(a)(i) above), evidences of its indebtedness, assets, property or rights or warrants to acquire the Corporation’s Capital Stock or other securities, but excluding (i) dividends or distributions as to which an adjustment under Section 11(a)(i), Section 11(a)(ii) or Section 11(a)(iv) hereof shall apply, (ii) dividends or distributions paid exclusively in Cash and (iii) Spin-Offs to which the provision set forth below in this Section 11(a)(iii) shall apply (any of such shares of Capital Stock, indebtedness, assets, property or rights or warrants to acquire the Corporation’s Common Stock or other securities, hereinafter in this Section 11(a)(iii) called the “Distributed Property”), then, in each such case the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
SP0
    
SP0 – FMV
Where
 



CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such distribution;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such distribution;
SP0
  =  the average of the Closing Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV  =  the fair market value (as determined in good faith by the Corporation’s Board of Directors) of the portion of Distributed Property with respect to each outstanding share of Common Stock on the Record Date for such distribution.
Notwithstanding the foregoing, if the then fair market value (as so determined) of the portion of the Distributed Property so distributed applicable to one share of Common Stock is equal to or greater than SP0 as set forth above, in lieu of the foregoing adjustment, the Corporation shall distribute to each Holder on the date the Distributed Property is distributed to holders of Common Stock, but without requiring such Holder to convert its shares of Series B, the amount of Distributed Property such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate on the record date fixed for determination for stockholders entitled to receive such distribution. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 11(a)(iii) by reference to the actual or when issued trading market for any securities, it shall in doing so consider the prices in such market over the same period used in computing the average of the Closing Prices of the Common Stock for purposes of calculating SP0 in the formula in this Section 11(a)(iii).
With respect to an adjustment pursuant to this Section 11(a)(iii) where there has been a payment of a dividend or other distribution on the Common Stock consisting of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Corporation (a “Spin-Off”), the Conversion Rate in effect immediately before the Close of Business on the tenth Trading Day immediately following, and including, the effective date of the Spin-Off shall be increased based on the following formula:
 
CR1
 = 
CR0
 ×   
FMV + MP0
    
MP0
where
 
CR0
  =  
the Conversion Rate in effect immediately prior to the Close of Business on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off;
CR1
  =  
the new Conversion Rate in effect from and after the Close of Business on the 10th Trading Day immediately following, and including, the effective date of the Spin Off;
FMV  =  the average of the Closing Prices of the Capital Stock or similar equity interest distributed to holders of common Stock applicable to one share of Common Stock over the 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off; and
MP0
  =  the average of the Closing Prices of Common Stock over the 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off.



Such adjustment shall occur on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off (it being agreed that notwithstanding Section 9(a), the Holder of the Series B shall not be entitled to convert the Series B pursuant to an Early Conversion prior to such 10th Trading Day).
For purposes of this Section 11(a)(iii), Section 11(a)(i) and Section 11(a)(ii) hereof, any dividend or distribution to which this Section 11(a)(iii) is applicable that also includes shares of common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 11(a)(i) or 11(a)(ii) hereof applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets or shares of Capital Stock other than such shares of Common Stock or rights or warrants to which Section 11(a)(i) or 11(a)(ii) hereof applies (and any Conversion Rate adjustment required by this Section 11(a)(iii) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants to which Section 11(a)(i) or 11(a)(ii) hereof applies (and any further Conversion Rate adjustment required by Section 11(a)(i) and 11(a)(ii) hereof with respect to such dividend or distribution shall then be made), except (A) the Close of Business on the Record Date of such dividend or distribution shall be substituted for “the Close of Business on the Record Date,” “the Close of Business on the Record Date or the Close of Business on the effective date,” “after the Close of Business on the Record Date for such dividend or distribution or the Close of Business on the effective date of such share split or share combination” and “the Close of Business on the Record Date for such distribution” within the meaning of Section 11(a)(i) and Section 11(a)(ii) hereof and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding immediately prior to the Close of Business on the Record Date or the Close of Business on the effective date” within the meaning of Section 11(a)(i) hereof.
(iv) If the Corporation, at any time or from time to time while any of the Series B is outstanding, distributes rights or warrants to all holders of Common Stock entitling the holders thereof to subscribe for, purchase or convert into shares of the Corporation’s Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (x) are deemed to be transferred with such shares of Common Stock; (y) are not exercisable; and (z) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of Section 11(a)(iii) above, (and no adjustment to the Conversion Rate under Section 11(a)(iii) above will be required) until the occurrence of the earliest Trigger Event and a distribution or deemed distribution under the terms of such rights or warrants at which time an appropriate adjustment (if any is required) to the Conversion Rate shall be made in the same manner as provided for under Section 11(a)(iii) above. If any such rights or warrants are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 11(a)(iv) was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a Cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights or warrants had not been issued.
(v) (1) If the Corporation, at any time or from time to time while any of the Series B is outstanding, makes a regular, quarterly Cash dividend or distribution to all or substantially all holders of Common Stock during any quarterly fiscal period that exceeds $0.27 (the “Initial Dividend Threshold”), the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
SP0
    
SP0 – C
where
 



CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution;
SP0
  =  the average Closing Price of the Common Stock over the ten consecutive Trading Days ending on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution;
C  =  the amount in Cash per share the Corporation distributes or dividends to holders of Common Stock in excess of the Initial Dividend Threshold.
The Initial Dividend Threshold shall be adjusted in a manner inversely proportional to adjustments to the Conversion Rate; provided that no adjustment shall be made to the Initial Dividend Threshold for any adjustment made to the Conversion Rate pursuant to clauses (1) or (2) of this Section 11(a)(v).
(2) If the Corporation pays any cash dividend or distribution that is not a regular, quarterly cash dividend or distribution to all or substantially all holders of Common Stock, the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
SP0
    
SP0 – C
where
 
CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution;
SP0
  =  the average Closing Price of the Common Stock over the ten consecutive Trading Days ending on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution;
C  =  the amount in Cash per share the Corporation distributes or dividends to holders of common Stock
(3) Notwithstanding the foregoing, if the portion of the Cash so distributed applicable to one share of Common Stock is equal to or greater than SP0 as set forth above, in lieu of the foregoing adjustment, the Corporation shall distribute to each Holder on the date the Cash dividend or distribution is paid to holders of Common Stock, but without requiring such Holder to convert its shares of Series B, the amount of Cash such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate on the Record Date for such dividend or distribution. If such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
(4) For the avoidance of doubt, for purposes of this Section 11(a)(v), in the event of any reclassification of the Common Stock, as a result of which the Series B becomes convertible into more than one class of Common Stock, if an adjustment to the Conversion Rate is required pursuant to this Section 11(a)(v), references in this Section to one share of Common Stock or Closing Price of one share of Common Stock shall be deemed to refer to a unit or to the price of a unit consisting of the number of shares of each class of Common Stock into which the Series B is then convertible equal to the numbers of shares of such



class issued in respect of one share of Common Stock in such reclassification. The above provisions of this paragraph shall similarly apply to successive reclassifications.
(vi) If the Corporation or any of its Subsidiaries makes a payment of Cash or other consideration in respect of a tender offer or exchange offer for all or any portion of the Common Stock, where such Cash and the value of any such other consideration included in the payment per share of Common Stock validly tendered or exchanged exceeds the Closing Price of the Common Stock on the Trading Day next succeeding the last date (the “expiration date”) on which tenders or exchanges may be made pursuant to such tender or exchange offer (as it may be amended), the Conversion Rate shall be increased based on the following formula:
 
CR1
 = 
CR0
 ×   
AC + (SP1 × OS1)
    
OS0 × SP1
Where
 
CR0
=  the Conversion Rate in effect immediately prior to the Close of Business on the expiration date;
CR1
=  the new Conversion Rate in effect immediately after the Close of Business on the expiration date;
AC=  the aggregate value of all Cash and any other consideration (as determined in good faith by the Corporation’s Board of Directors) paid or payable for shares purchased in such tender or exchange offer;
OS0
=  the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires;
OS1
=  the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to such tender offer or exchange offer); and
SP1
=  the average Closing Price of Common Stock over the ten consecutive Trading Days ending on the Trading Day next succeeding the expiration date.
If the Corporation or a Subsidiary is obligated to purchase shares of Common Stock pursuant to any such tender or exchange offer, but the Corporation or such Subsidiary is permanently prevented by applicable law from effecting any such purchases or all or any portion of such purchases are rescinded, then the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made or had only been made in respect of the purchases that had been effected. Except as set forth in the preceding sentence, if an adjustment to the Conversion Rate pursuant to this Section 11(a)(vi) with respect to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this Section 11(a)(vi).
(vii) For purposes of this Section 11(a) the term “Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any Cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of Cash, securities or other property, the date fixed for determination of shareholders entitled to receive such Cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).
(viii) If application of the formulas provided in Sections 11(a)(i), 11(a)(ii), 11(a)(iii), 11(a)(iv), 11(a)(v) or 11(a)(vi) above would result in a decrease in the Conversion Rate, no adjustment (other than a readjustment as described in such sections) to the Conversion Rate shall be made except in the case of a share split or combination of the Common Stock.
(ix) If one or more events occur requiring an adjustment be made to the Conversion Rate for a particular period, adjustments to the Conversion Rate shall be determined by the Corporation’s Board of Directors to reflect the combined impact of such Conversion Rate adjustments, as set out in this Section 11(a), during such period.



(x) Notwithstanding any of the foregoing clauses in this Section II, no adjustment in the Conversion Rate shall be required unless the adjustment would result in a change in the Conversion Rate of at least 1.00%; provided, however, that any adjustment which by reason of this Section 11(a)(x) is not required to be made shall be carried forward and the Corporation shall make such adjustment, regardless of whether the aggregate adjustment is less than 1.00%, within one year of the first such adjustment carried forward or in connection with any conversion of Series B. All calculations under this Section 11 shall be made to the nearest one-ten thousandth (1/10,000) of a cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be.
No adjustment in the Conversion Rate need be made (i) for issuances of Common Stock pursuant to any present or future plan for reinvestment of dividends or interest payable on the Corporation’s securities or the investment of additional optional amounts in shares of Common Stock under any plan, (ii) upon the issuance of any shares of Common Stock or options or rights to purchase shares pursuant to any present or future employee, director or consultant benefit plan or program of, or assumed by, the Corporation or any of its Subsidiaries, (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Series B was first issued, (iv) for a change in the par value of the Common Stock, (v) for repurchases of shares of common Stock in open market transactions or privately negotiated transactions, or (vi) for accumulated and unpaid dividends, other than as expressly contemplated by Section 11(a)(i).
No adjustment to the Conversion Rate need be made pursuant to Section 11(a)(i) through (ix) above for a transaction if Holders are permitted to participate in the transaction without conversion, concurrently with the holders of Common Stock, on a basis and with notice that the Board of Directors of the Corporation determines in good faith to be fair and appropriate in light of the basis and notice to holders of Common Stock participating in the transaction.
Whenever a provision of this Certificate of Designations requires the calculation of an average of the Closing Price over a span of multiple days, the Corporation will make appropriate adjustments to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Ex-Dividend Date of the event occurs, at any time during the period from which the average is to be calculated.

(xi) Upon conversion of the Series B, the Holders shall receive, in addition to any shares of Common Stock issuable upon such conversion, any associated rights issued under any shareholder rights agreement of the Corporation that provides that each share of Common Stock issued upon conversion of the Series B at any time prior to the distribution of separate certificates representing such rights will be entitled to receive such rights unless, prior to conversion, the rights have separated from the Common Stock, expired, terminated or been redeemed or exchanged in accordance with such rights plan, and no adjustment shall be made to the Conversion Rate pursuant to Section 11(a)(iv) hereof. If, prior to any conversion, the rights have separated from the Common Stock, the Conversion Rate shall be adjusted at the time of separation as if the Corporation distributed to all holders of Common Stock, shares of Capital Stock, evidences of indebtedness, assets, property or rights or warrants as described in Section 11(a)(iv) hereof, subject to readjustment in the event of the expiration, termination or redemption of such rights.
(xii) Subject to applicable stock exchange rules and listing standards, the Corporation shall be entitled to increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the best interests in the Corporation; provided the Corporation has given to the Conversion Agent and DTC at least 15 days’ prior notice of any such increase in the Conversion Rate and the period during which it will be in effect. Subject to applicable stock exchange rules and listing standards, the Corporation shall be entitled to increase the Conversion Rate, in addition to the events requiring an increase in the Conversion Rate pursuant to Section 11 hereof, as it in its discretion shall determine to be advisable in order to avoid or diminish any tax to shareholders in connection with any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Corporation to its shareholders or other events.
(xiii) Whenever the Conversion Rate is adjusted as herein provided, the Corporation will issue a notice to the Conversion Agent and DTC containing the relevant information and make this information available on the Corporation’s website. In addition, the Corporation shall provide upon the request of a Holder of Series B, to the extent not posted on the Corporation website, a brief statement setting forth in reasonable detail how the adjustment to the Conversion Rate was determined and setting forth the adjusted Conversion Rate.
(xiv) For purposes of this Section 11, the number of shares of common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.



(xv) If the record date for a dividend or distribution on Common Stock occurs prior to a Mandatory Conversion Date and the payment date for a dividend or distribution on Common Stock occurs after a Mandatory Conversion Date, and such dividend or distribution would have resulted in an adjustment to the Conversion Rate if such dividend or distribution does not result in an adjustment to the Conversion Rate but were paid prior to such Mandatory Conversion Date, then without duplication the Corporation shall deem the Holders to be holders of record of Common Stock for purposes of that dividend or distribution. In that case, the Holders will receive the number of shares of Common Stock issuable upon the applicable Mandatory Conversion Date together with the dividend or distribution on such shares of Common Stock so converted.
12. Reorganization Events.
(a) In the event of:
(i) any consolidation or merger of the Corporation with or into another Person or of another Person with or into the Corporation;
(ii) any sale, transfer, lease or conveyance to another Person of the property of the Company as an entirety or substantially as an entirety;
(iii) any statutory share exchange of the Corporation with another Person (other than in connection with a merger or acquisition); or
(iv) any liquidation, dissolution or termination of the Corporation;
in each case in which holders of Common Stock would be entitled to receive cash, securities or other property for their shares of Common Stock (any such event specified in this Section 12(a), a “Reorganization Event”), each share of Series B outstanding immediately prior to such Reorganization Event shall, without the consent of Holders, become convertible into the kind of cash, securities and other property receivable in such Reorganization Event by a holder of one share of common Stock that was not the counterparty to the Reorganization Event or an affiliate of such other party (such cash, securities and other property, the “Exchange Property”).
(b) In the event that holders of the shares of the Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the “Exchange Property” that Holders of the Series B will be entitled to receive shall be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make an election (or of all such holders if none make an election). The number of units of Exchange Property for each share of Series B converted following the effective date of such Reorganization Event shall be determined based on the Conversion Rate then in effect on the applicable Conversion Date, determined as if the references to a “share of Common Stock” in this Certificate of Designations were to “unit of Exchange Property.”
(c) After a Reorganization Event, for purposes of determining whether a Mandatory Conversion Date has occurred, the term “Closing Price” shall be deemed to refer to the closing sale price, last quoted bid price or mid-point of the last bid and ask prices, as the case may be, of any publicly traded securities that comprise all or part of the Exchange Property. For purposes of this Section 12, references to Common Stock in the definition of “Trading Day” shall be replaced by references to any publicly traded securities that comprise all or part of the Exchange Property.
(d) The above provisions of this Section 12 shall similarly apply to successive Reorganization Events and the provisions of Section 11 shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.
(e) The Corporation (or any successor) shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 12 or the validity of any Reorganization Event.
13. Fractional Shares.
(a) No fractional shares of Common Stock shall be issued as a result of any conversion of shares of Series B.



(b) In lieu of any fractional share of Common Stock otherwise issuable in respect of any mandatory conversion pursuant to Section 10(a) or a conversion at the option of the Holder pursuant to Section 9(a), Section 10(c) or Section 10(g), the Corporation shall pay an amount in cash (computed to the nearest cent) equal to the same fraction of:
(i) in the case of a mandatory conversion pursuant to Section 10(a), a Make Whole Acquisition conversion pursuant to Section 10(c) or a Conversion Upon Fundamental Change pursuant to Section 10(g), the average of the Closing Prices over the five consecutive Trading Day period preceding the Trading Day immediately preceding the applicable Conversion Date; or
(ii) in the case of an Early Conversion pursuant to Section 9(a), the Closing Price of the Common Stock on the second Trading Day immediately preceding the Early Conversion Date.
(c) If more than one share of the Series B is surrendered for conversion at one time by or for the same Holder, the number of full shares of common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Series B so surrendered.
14. Reservation of common Stock.
(a) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares held in the treasury by the Corporation, solely for issuance upon the conversion of shares of Series B as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series B then outstanding. For purposes of this Section 14(a), the number of shares of common Stock that shall be deliverable upon the conversion of all outstanding shares of Series B shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b) Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon conversion of shares of Series B, as herein provided, shares of Common Stock acquired by the Corporation (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(c) All shares of Common Stock delivered upon conversion of the Series B shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(d) Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Series B, the Corporation shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.
(e) The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be listed on the New York Stock Exchange or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Series B; provided, however, that if the rules of such exchange or automated quotation system permit the Corporation to defer the listing of such Common Stock until the first conversion of Series B into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the Series B in accordance with the requirements of such exchange or automated quotation system at such time.
15. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series B may deem and treat the record holder of any share of Series B as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
16. Notices. All notices or communications in respect of Series B shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Certificate of Incorporation or Bylaws or by applicable law.
17. Preemptive or Subscription Rights. Except as expressly provided in any agreement between a Holder and the Corporation, no share of Series B shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.



18. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series B from time to time to such extent, in such manner, and upon such terms as the Board or any duly authorized committee of the Board may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
19. Other Rights. The shares of Series B shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Corporation or as provided by applicable law.
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IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, does hereby affirm that this certificate is the act and deed of the Corporation and that the facts herein stated are true, and accordingly has hereunto set his hand this 10th day of October, 2008.
 
MORGAN STANLEY
By: /s/ Daniel B. Park
 
Name: Daniel B. Park
 
Title: Assistant Treasurer



AMENDED
CERTIFICATE OF DESIGNATIONS OF PREFERENCES AND RIGHTS
OF THE
10% SERIES B NON-CUMULATIVE NON-VOTING PERPETUAL
CONVERTIBLE PREFERRED STOCK
($1,000 LIQUIDATION PREFERENCE PER SHARE)
OF
MORGAN STANLEY
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MORGAN STANLEY, a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY:
A. That, pursuant to resolutions of the Preferred Stock Financing Committee of the Board of Directors of the Corporation adopted on September 28, 2008, and by a Certificate of Designations filed in the office of the Secretary of State of the State of Delaware on October 10, 2008, the Corporation authorized the issuance of 6,045,750 shares of 10% Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock, par value $0.01 per share, liquidation preference $1,000 per share (“Series B”), of the Corporation and established the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series B;
B. That no shares of Series B have been issued;
C. That, pursuant to resolutions of the Preferred Stock Financing Committee of the Board of Directors of the Corporation adopted on October 12, 2008, the Corporation adopted the following resolution amending the Certificate of Designations of the Series B and increasing the number of shares designated as Series B:
“RESOLVED, that, pursuant to Section 151(g) of the Delaware General Corporation Law, the Certificate of Designations of Rights and Preferences of the 10% Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock of the Corporation be and hereby is amended to read in its entirety as follows, and the number of shares designated as Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock of the Corporation be increased from 6,045,750 to 7,839,209:”
1. Designation. The distinctive serial designation of such series of preferred stock is “Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock.” Each share of Series B shall be identical in all respects to every other share of Series B, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 3 below.

2. Number of Shares. The authorized number of shares of Series B shall be 7,839,209. Shares of Series B that are purchased or otherwise acquired by the Corporation, or converted into Common Stock or another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series B by any Subsidiary of the Corporation.
3. Dividends.
(a) Rate. Holders of shares of Series B shall be entitled to receive, only when, as and if declared by the Board of Directors or a duly authorized committee thereof out of funds of the Corporation legally available for payment, non-cumulative cash dividends on the liquidation preference of $1,000 per share at a rate per annum equal to 10%; provided, that, if Stockholder Approval has not been received by February 17, 2009, if such Stockholder Approval is then required for the conversion of all of the Series B without a Violation, the per annum rate shall be increased to 13% per annum on and including February 17, 2009 and shall remain in effect until the date upon which Stockholder Approval is received or no longer required. Declared dividends on the Series B shall be payable from and including the date of initial issuance (in the case of the initial Dividend Period) or the immediately preceding Dividend Payment Date (in the case of Dividend Periods other than the initial Dividend Period), and shall be payable quarterly, in arrears, on each January 15, April 15, July 15 and October 15, commencing on January 15, 2009 (each such date a “Dividend Payment Date”). If any date on which dividends would otherwise be payable shall not be a Business Day (as defined below), then the date of payment of dividends need not be made on such date, but such payment of dividends may be made on the next succeeding day that is a Business Day with the same force and effect as if made on the Dividend Payment Date, and no additional dividends shall be payable nor shall interest accrue on the amount payable from and after such Dividend Payment Date to the next succeeding Business Day. “Business Day” means any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions generally are authorized or obligated by law or executive order to be closed.



Dividends on the Series B shall not be cumulative; Holders of Series B shall not be entitled to receive any dividends not declared by the Board of Directors or a duly authorized committee thereof and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so declared. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series B payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on that Dividend Payment Date or at any future time, whether or not dividends on the Series B are declared for any future Dividend Period. Declared and unpaid dividends shall not bear interest.
Dividends that are payable on the Series B on any Dividend Payment Date will be payable to holders of record of Series B as they appear on the stock register of the Corporation on the applicable Dividend Record Date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly
authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
The term “Dividend Period” means the period from and including each Dividend Payment Date to but excluding the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the date of initial issuance of the Series B and shall end on but exclude the next Dividend Payment Date). Dividends payable on the Series B shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) Priority of Dividends. The Series B will rank (i) senior to the Common Stock (as defined below) and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series B, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series B (issued with the requisite consent of the Holders of the Series B, if required) and (iii) at least equally with each other class or series of Preferred Stock (as defined below) that the Corporation may issue with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. So long as any share of Series B remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series B has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to (i) repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan; (ii) an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a Subsidiary of the Corporation, for any class or series of Junior Stock; (iii) the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged; (iv) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock. In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. Incorporated, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series B and any shares of Parity Stock, all
dividends declared on the Series B and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series B and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any other stock ranking, as to dividends, equally with or junior to the Series B, from time to time out of any funds legally available for such payment, and the Series B shall not be entitled to participate in any such dividends.
4. Liquidation Rights.



(a) Voluntary or Involuntary Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, Holders of Series B shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities, if any, to creditors of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series B in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series B as to such distribution, a liquidating distribution in an amount equal to $1,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series B will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all Holders of Series B and all holders of any stock of the Corporation ranking equally with the Series B as to such distribution, the amounts paid to the Holders of Series B and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the Holders of Series B and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series B and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series B will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 4 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference on the Series B and any other shares of the Corporation’s stock ranking equally as to such liquidation distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the Holders of Series B receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
5. Voting Rights.
(a) General. The Holders of Series B shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right to Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series B, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more Dividend Periods, whether or not for consecutive Dividend Periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”); provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors; and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series B or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series B or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 16 below, or as may otherwise be required by law. The voting rights will continue until
dividends on the shares of the Series B and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four regular dividend periods following the Nonpayment.



If and when dividends for at least four regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series B and any other class or series of Voting Preferred Stock, the holders of the Series B and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed.
Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series B together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series B and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series B or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
The term “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series B as to payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series A (the “Series A”), and the Corporation’s 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock (the “Series C”), in each case, if outstanding, and any class or series of Preferred Stock, whether or not cumulative, that the Corporation may issue in the future, to the extent their like voting rights are exercisable at such time. Whether a plurality, majority or other portion of the shares of Series B and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the relative liquidation preferences of the shares voted.
(c) Other Voting Rights. So long as any shares of Series B are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series B and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designations to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series B with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series B. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designations, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series B, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series B, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series B remain outstanding or are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding as securities of the Corporation or such other entity as permitted by clause (x) or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series B, taken as a whole;
provided, however, that for all purposes of this Section 5(c), neither the issuance of any Series B in accordance with the terms of the Securities Purchase Agreement (as defined below) as in effect on the date hereof nor the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series B



with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will be deemed to adversely affect
the rights, preferences, privileges or voting powers of, and neither will require the affirmative vote or consent of, the holders of outstanding shares of Series B. In addition, any conversion of the Series B pursuant hereto shall not be deemed to adversely affect the rights, preferences, privileges and voting powers of the Series B. For purposes of clarification, no Holder of Series B shall have any voting rights with respect to any binding share exchange, reclassification, merger or consolidation which complies with the provisions of clause (iii)(x) and (y) hereof.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 5(c) for which a vote is otherwise required would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series B for this purpose), then only such series of Preferred Stock as are adversely affected by and otherwise entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock that are otherwise entitled to vote on the matter are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status and that is otherwise entitled to vote thereon.
(d) Changes for Clarification. Without the consent of the holders of the Series B, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series B, the Corporation may amend, alter, supplement or repeal any terms of the Series B:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series B that is not inconsistent with the provisions of this Certificate of Designations.
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series B (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series B is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series B and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series B are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
(f) Authorization of Certain Parity Stock. Until October 13, 2013, if the Initial Holder or an Affiliate thereof beneficially owns shares of Series B representing at least 15% of the shares of Series B initially issued to the Initial Holder, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the consent of the Initial Holder shall be necessary for effecting or validating any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designations to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking pari passu with the Series B with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation if such class or series of stock:
(i) is issued for consideration with a fair market value that is less than the liquidation preference thereof;
(ii) has a dividend rate that is (x) higher than the dividend rate applicable to the Series B and (y) substantially higher than the dividend rate that would then be carried by a substantially equivalent publicly traded security then issued by a similar issuer with a long-term unsecured debt credit rating substantially equivalent to that of the Corporation; or
(iii) is convertible or exchangeable into Common Stock at a per share conversion or exchange price that is less than the closing price of the Common Stock on the day prior to the date of issuance thereof or the date that a binding agreement for the purchase and sale of such shares is entered into, if different from the date of issuance;
provided, however, that this paragraph (f) shall not apply (and no vote or consent of the Initial Holder or any other Holder of any Series B shall be required) in connection with any of the following: (A) any authorization, creation or issuance of any preferred stock in connection with any merger, business combination or share exchange involving an unaffiliated third party for the purpose of replacing or substituting the outstanding series or class of preferred stock of such third party; (B) any broadly



distributed underwritten offering of securities registered under the Securities Act of 1933, as amended; or (C) any broadly distributed placement of securities in a transaction exempt from registration under Rule 144A promulgated under the Securities Act of 1933.
6. Redemption. The shares of Series B shall not be redeemable.
7. Rank. Any stock of any class or classes or series of the Corporation shall be deemed to rank:
(a) prior to shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, if the holders of stock of such class or classes or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the Holders of shares of the Series B;
(b) on a parity with shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series B, if the holders of stock of such class or classes or series shall be entitled by the terms
thereof to the receipt of dividends or of amounts distributed upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority of one over the other as between the holders of such stock and the Holders of shares of Series B (the term “Parity Preferred Stock” being used to refer to any stock on a parity with the shares of Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, as the content may require); and
(c) junior to shares of the Series B, either as to dividends or upon liquidation, dissolution or winding up, or both, if such class or classes or series shall be common stock or if the Holders of the Series B shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of stock of such class or classes or series.
The Series B shall rank, as to dividends and upon liquidation, dissolution or winding up, on a parity with the Series A, the Series C and any Parity Preferred Stock issued hereafter.
8. Additional Definitions. As used herein with respect to Series B:
Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, excluding any debt securities convertible into such equity.
Cash” means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.
Close of Business” means 5:00 p.m., New York City time.
Closing Price” of the Common Stock or any securities distributed in a Spin-Off, as the case may be, means, as of any date of determination:
(a) the closing price on that date or, if no closing price is reported, the last reported sale price, of shares of the Common Stock or such other securities on the New York Stock Exchange on that date; or
(b) if the Common Stock or such other securities are not traded on the New York Stock Exchange, the closing price on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded or, if no closing price is reported, the last reported sale price of shares of the Common Stock or such other securities on the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded on that date; or
(c) if the Common Stock or such other securities are not traded on a U.S. national or regional securities exchange, the last quoted bid price on that date for the Common Stock or such other securities in the over-the-counter market as reported by Pink Sheets LLC or a similar organization; or

(d) if the Common Stock or such other securities are not so quoted by Pink Sheets LLC or a similar organization, the market price of the Common Stock or such other securities on that date as determined by a nationally recognized independent investment banking not affiliated with the Corporation retained by the Corporation for this purpose.



For the purposes of this Certificate of Designations, all references herein to the closing price and the last reported sale price of the Common Stock on the New York Stock Exchange shall be such closing price and last reported sale price as reflected on the website of the New York Stock Exchange (www.nyse.com) and as reported by Bloomberg Professional Service; provided that in the event that there is a discrepancy between the closing price and the last reported sale price as reflected on the website of the New York Stock Exchange and as reported by Bloomberg Professional Service, the closing price and the last reported sale price on the website of the New York Stock Exchange shall govern.
Common Stock” means the common stock, $0.01 par value, of the Corporation.
Conversion Agent” shall mean BNY Mellon Shareowner Services, acting in its capacity as conversion agent for the Series B, and its successors and assigns or any other conversion agent appointed by the Corporation.
Conversion Date” means each of a Mandatory Conversion Date and a Non-Mandatory Conversion Date.
Conversion Price” at any time means for each share of Series B the price equal to $1,000 divided by the Conversion Rate in effect at such time (initially $25.25).
Conversion Rate” means initially 39.604 shares of Common Stock per share of Series B, subject to adjustment in accordance with the provisions of this Certificate of Designations.
Depositary” means DTC or its nominee or any successor depositary appointed by the Corporation.
DTC” means The Depository Trust Company, together with its successors and assigns.
Exchange Act” means the Securities Exchange Act of 1934, as amended.
Ex-Dividend Date” means the first date on which the Common Stock trades, regular way, on the relevant exchange, or in the relevant market from which the Closing Price was obtained, without the right to receive such dividend or distribution.

Fair Market Value” means the amount which a willing buyer would pay a willing seller in an arm’s-length transaction as determined by the Board of Directors.
Full Mandatory Conversion Date” means the 3rd Trading Day immediately following the later of (i) the first date after the second anniversary of the Issue Date as of which, for 20 Trading Days within any period of 30 consecutive Trading Days beginning after such second anniversary and preceding such date, the Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price and (ii) the date Stockholder Approval shall have been received or is no longer required to permit conversion of all shares of Series B.
Fundamental Change” means the occurrence, prior to the Full Mandatory Conversion Date, of one of the following:
(i) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Corporation representing more than 50% of the voting power of the outstanding Common Stock;
(ii) consummation of any consolidation or merger of the Corporation or similar transaction or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries, taken as a whole, to any Person other than one of the Corporation’s subsidiaries, in each case pursuant to which the Common Stock will be converted into, or receive a distribution of the proceeds in, cash, securities or other property, other than pursuant to a transaction in which the Persons that “beneficially owned” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, voting shares of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, voting shares representing a majority of the total voting power of all outstanding classes of voting shares of the continuing or surviving Person or the ultimate parent entity thereof immediately after the transaction; or
(iii) shares of the Common Stock or shares of any other stock into which the Series B is convertible are not listed for trading on any United States national securities exchange or cease to be traded in contemplation of a delisting (other than as a result of a transaction described in clause (ii) above);
provided, however, that a Fundamental Change with respect to clauses (i) and (ii) above will not be deemed to have occurred if at least 90% of the consideration received by holders of the Common Stock in the transaction or transactions consists of shares



of common stock or American Depositary Receipts in respect of common stock that are traded on a U.S. national securities exchange or that will be so traded when issued or exchanged in connection with a Fundamental Change; and provided, further, that with respect to any shares of Series B that are beneficially owned by the Initial Holder or its affiliates, a Fundamental Change with respect to clauses (i) or (ii) above will not be deemed to have occurred if the Initial Holder or any of its affiliates is part of the person or group referred to in clause (i) above or is a counterparty to the Corporation in any of the transactions referred to in clause (ii) above.
    “Holder” means the Person in whose name the shares of Series B are registered, which may be treated by the Corporation, Transfer Agent, Registrar, dividend disbursing agent and Conversion Agent as the absolute owner of the shares of Series B for the purpose of disbursing dividends and settling conversions and for all other purposes.
Initial Holder” means Mitsubishi UFJ Financial Group, Inc.
Issue Date” means October 13, 2008.
Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series B as to the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation. Junior Stock includes the Common Stock.
Make-Whole Acquisition” means the occurrence, prior to the Full Mandatory Conversion Date, of one of the following:
(i) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Corporation representing more than 50% of the voting power of the outstanding Common Stock; or
(ii) consummation of any consolidation or merger of the Corporation or similar transaction or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries, taken as a whole, to any Person other than one of the Corporation’s subsidiaries, in each case pursuant to which the Common Stock will be converted into, or receive distributions of the proceeds in, cash, securities or other property, other than pursuant to a transaction in which the Persons that “beneficially owned” (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, voting shares of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, voting shares representing a majority of the total voting power of all outstanding classes of voting shares of the continuing or surviving Person or the ultimate parent entity thereof immediately after the transaction;
provided, however, that a Make-Whole Acquisition will not be deemed to have occurred if at least 90% of the consideration received by holders of the Common Stock in the transaction or transactions consists of shares of common stock or American Depositary Receipts in respect of common stock that are traded on a U.S. national securities exchange or that will be so traded when issued or exchanged in connection with a Make-Whole Acquisition; and provided, further, that with respect to any shares of Series B that are beneficially owned by the Initial Holder or its affiliates, a Make-Whole Acquisition will not be deemed to have occurred if the Initial Holder or any of its affiliates is part of the person or group referred to in clause (i) above or is a counterparty to the Corporation in any of the transactions referred to in clause (ii) above.
Make-Whole Acquisition Stock Price” means the consideration paid per share of Common Stock in a Make-Whole Acquisition. If such consideration consists only of cash, the Make-Whole Acquisition Stock Price shall equal the amount of cash paid per share of Common Stock. If such consideration consists of any property other than cash, the Make-Whole Acquisition Stock Price shall be the average of the Closing Price per share of Common Stock on each of the 10 consecutive Trading Days up to, but not including, the Make-Whole Acquisition Effective Date.
Mandatory Conversion Date” means a Partial Mandatory Conversion Date or a Full Mandatory Conversion Date.
Non-Mandatory Conversion Date” means an Early Conversion Date, a Make-Whole Acquisition Conversion Date or a Fundamental Change Conversion Date.
Open of Business” means 9:00 a.m., New York City time.
Ownership Limit” means a number of shares of Common Stock equal to 0.149 times the sum, without duplication, of (1) the total number of outstanding shares of Common Stock on such date of measurement and (2) the total number of shares of Common Stock to be converted on the Partial Mandatory Conversion Date.



Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series B in the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation.
Partial Mandatory Conversion Date” means the 3rd Trading Day immediately following the later of (i) the first date after the first anniversary of the Issue Date as of which, for 20 Trading Days within any period of 30 consecutive Trading Days beginning after such first anniversary and preceding such date, the Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price and (ii) the date Stockholder Approval shall have been received or is no longer required to permit conversion of all shares of Series B.
Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series B.
Reference Price” means the price per share of Common Stock in connection with a Fundamental Change. If the holders of shares of Common Stock receive only cash in connection with the Fundamental Change, the Reference Price shall be the cash amount paid per share. Otherwise the Reference Price shall be the average of the Closing Price per share of Common Stock on each of the 10 Trading Days up to, but not including, the effective date of the Fundamental Change.
Registrar” shall mean BNY Mellon Shareowner Services, acting in its capacity as registrar for the Series B, and its successors and assigns or any other registrar appointed by the Corporation.
Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of December 19, 2007, between the Corporation and the Investor listed on the signature page thereto.
Stockholder Approval” means approval of stockholders of the Corporation necessary to approve the conversion of all of the Series B into Common Stock for purposes of Section 312.03 of the NYSE Listed Company Manual or the time at which such provisions shall for any reason become inapplicable or not required so as to permit the conversion of all shares of Series B.
Subsidiary” means with respect to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries.
Trading Day” means a day on which the Common Stock (i) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the Close of Business and (ii) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.
Transfer Agent” shall mean BNY Mellon Shareowner Services, acting in its capacity as transfer agent for the Series B, and its respective successors and assigns or any other transfer agent appointed by the Corporation.
Violation” means a violation of the stockholder approval requirements of Section 312.03 of the NYSE Listed Company Manual to the extent then applicable.
9. Early Conversion at the Option of the Holder. Other than during a Make-Whole Acquisition Conversion Period, any Holder shall have the right to convert such Holder’s shares of Series B, in whole or in part (but in no event less than one share of Series B), at any time prior to the Mandatory Conversion Date (“Early Conversion”), into shares of Common Stock at the then applicable Conversion Rate, subject to satisfaction of the conversion procedures set forth in Section 10(b); provided that, prior to the receipt of Stockholder Approval, Early Conversion shall be limited to conversion into such number of shares of Common Stock the conversion into which would not result in a Violation. The date of such Early Conversion is referred to herein as the “Early Conversion Date.”
10. Conversion.
(a) Mandatory Conversion on Mandatory Conversion Date.
(i) On the Partial Mandatory Conversion Date, one half of the outstanding shares of Series B held by each Holder thereof will mandatorily convert into shares of Common Stock at the then applicable Conversion Rate; provided that to the



extent such conversion would result in the number of shares of Common Stock beneficially owned by the Initial Holder and its affiliates exceeding the Ownership Limit (such shares of Common Stock that would exceed the Ownership Limit, the “Excess Shares”) the number of shares of Series B of the Initial Holder so converted on the Partial Mandatory Conversion Date shall be limited to the number of shares of Series B such that after giving effect to such conversion, the shares of Common Stock beneficially owned by the Initial Holder and its affiliates equal the Ownership Limit; and provided further, that to the extent that there are Excess Shares and shares of Common Stock are issued upon settlement of the equity units sold pursuant to the Securities Purchase Agreement after the Partial Mandatory Conversion Date and prior to the Full Mandatory Conversion Date, outstanding shares of Series B held by the Initial Holder will mandatorily convert into shares of Common Stock (but not greater than the number of Excess Shares) at the then applicable Conversion Rate provided that the number of shares of Series B of the Initial Holder so converted shall be limited to the number of shares of Series B such that after giving effect to such conversion, the shares of Common Stock beneficially owned by the Initial Holder and its affiliates do not exceed the Ownership Limit. No action shall be required by the Holder thereof. The person or persons entitled to receive the shares of Common Stock issuable upon mandatory conversion of Series B will be treated as the record Holder(s) of such shares of Common Stock as of the Close of Business on the Partial Mandatory Conversion Date. Except as provided under Section 11(a)(xv), prior to the Close of Business on the Partial Mandatory Conversion Date, the shares of Common Stock issuable upon conversion of the Series B will not be deemed to be outstanding for any purpose and Holders shall have no rights with respect to such shares of Common Stock, including voting rights, rights to respond to tender offers and rights to receive any dividends or other distributions on the Common Stock, by virtue of holding the Series B.
(ii) On the Full Mandatory Conversion Date, all of the outstanding shares of Series B will mandatorily convert into shares of Common Stock at the then applicable Conversion Rate. No action shall be required by the Holder thereof. The person or persons entitled to receive the shares of Common Stock issuable upon mandatory conversion of Series B will be treated as the record holder(s) of such shares of Common Stock as of the Close of Business on the Full Mandatory Conversion Date. Except as provided under Section 11(a)(xv), prior to the Close of Business on the Full Mandatory Conversion Date, the shares of Common Stock issuable upon conversion of the Series B will not be deemed to be outstanding for any purpose and Holders shall have no rights with respect to such shares of Common Stock, including voting rights, rights to respond to tender offers and rights to receive any dividends or other distributions on the Common Stock, by virtue of holding the Series B.
(iii) In addition to the number of shares of Common Stock issuable pursuant to this Section 10(a), if applicable, the Holders on a Mandatory Conversion Date shall have the right to receive an amount equal to any declared and unpaid dividends on the Series B for the most recent Dividend Period ending on a Mandatory Conversion Date to the extent such Holders were the Holders of record as of the Dividend Record Date for such dividend.
(b) Conversion Procedures for a Non-Mandatory Conversion Date. To effect conversion on a Non-Mandatory Conversion Date, a Holder who:
(i) holds a beneficial interest in a global certificate representing the Series B must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program and, if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled by virtue of Section 10(e) and, if required, pay all transfer or similar taxes or duties, if any; or
(ii) holds shares of Series B in certificated form must:
(A) complete and manually sign the conversion notice on the back of the Series B certificate or a facsimile of the conversion notice;
(B) deliver the completed conversion notice and the certificated shares of Series B to be converted to the Conversion Agent;
(C) if required, furnish appropriate endorsements and transfer documents;
(D) if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled by virtue of Section 10(e); and
(E) if required, pay all transfer or similar taxes or duties, if any.
The conversion will be effective on the date on which a Holder has satisfied all of the foregoing requirements, to the extent applicable, which shall be the applicable Non-Mandatory Conversion Date. A Holder will not be required to pay any transfer or similar taxes or duties relating to the issuance or delivery of Common Stock if such Holder exercises its conversion rights, but such Holder will be required to pay any transfer or similar tax or duty that



may be payable relating to any transfer involved in the issuance or delivery of Common Stock in a name other than the name of such Holder. A certificate representing Common Stock will be issued and delivered only after all applicable taxes and duties, if any, payable by the Holder have been paid in full.
The person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record Holder(s) of such shares of Common Stock as of the Close of Business on the applicable Non-Mandatory Conversion Date. No allowance or adjustment, except as set forth in Section 11(a), shall be made in respect of dividends payable to Holders of Common Stock of record as of any date prior to such applicable Non-Mandatory Conversion Date. Prior to such applicable Non-Mandatory Conversion Date, shares of Common Stock issuable upon conversion of any shares of Series B shall not be deemed outstanding for any purpose, and Holders shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Series B.
In the event that a conversion is effected with respect to shares of Series B representing fewer than all the shares of Series B held by a Holder, upon such conversion the Corporation shall execute and the Registrar shall countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Series B as to which conversion was not effected.
The Corporation shall deliver the shares of Common Stock to which the Holder converting pursuant to Section 9 is entitled on or prior to the third Trading Day immediately following the applicable Non-Mandatory Conversion Date.
(c) Conversion Upon Make-Whole Acquisition.
(i) In the event of a Make-Whole Acquisition, each Holder shall have the option to convert its shares of Series B (a “Make-Whole Acquisition Conversion”) at the then applicable Conversion Rate during the period (the “Make-Whole Acquisition Conversion Period”) beginning on the effective date of the Make-Whole Acquisition (the “Make-Whole Acquisition Effective Date”) and ending on the date that is 30 days after the Make-Whole Acquisition Effective Date and receive an additional number of shares of Common Stock in the form of Make-Whole Shares as set forth in this Section 10(c); provided that, prior to the receipt of Stockholder Approval, notwithstanding anything herein to the contrary, any conversion in connection with a Make-Whole Acquisition shall be limited to conversion into such number of shares of Common Stock so that such conversion would not result in a Violation. The date of such Make-Whole Acquisition Conversion is referred to herein as the “Make-Whole Acquisition Conversion Date.”

(ii) The number of “Make-Whole Shares” shall be determined for the Series B by reference to the table below for the applicable Make-Whole Acquisition Effective Date and the applicable Make-Whole Acquisition Stock Price:
 
Effective Date$21.375$22.50$25.00$27.50$30.00$32.50$35.00$40.00
October 13, 200810.7854 9.8381 8.1076 6.7711 5.7228 4.8863 4.2143 3.2166 
October 13, 20099.7691 8.7338 6.8121 5.2906 4.0621 3.0530 2.2300 1.3069 
October 13, 2010 and thereafter9.3474 8.2446 6.1634 4.4726 3.0670 1.8785 0.8903 — 
Effective Date$45.00$50.00$55.00$60.00$70.00$80.00$90.00$100.00
October 13, 20082.5277 2.0384 1.6809 1.4108 1.0417 0.8038 0.6426 0.5256 
October 13, 20090.9877 0.7694 0.6160 0.5044 0.3599 0.2723 0.2160 0.1763 
October 13, 2010 and thereafter— — — — — — — — 
(A) The exact Make-Whole Acquisition Stock Prices and Effective Dates may not be set forth in the table above, in which case:
(1) if the Make-Whole Acquisition Stock Price is between two Make-Whole Acquisition Stock Price amounts in the table or the Make-Whole Acquisition Effective Date is between two dates in the table, the number of Make-Whole Shares will be determined by straight-line interpolation between the number of Make-Whole Shares set forth for the higher and lower Make-Whole Acquisition Stock Price amounts and the two Make-Whole Acquisition Effective Dates, as applicable, based on a 365-day year;
(2) if the Make-Whole Acquisition Stock Price is in excess of $100.00 per share (subject to adjustment pursuant hereto), no Make-Whole Shares will be issued upon conversion of the Series B; and



(3) if the Make-Whole Acquisition Stock Price is less than $21.375 per share (subject to adjustment pursuant hereto), no Make-Whole Shares will be issued upon conversion of the Series B.
(B) The Make-Whole Acquisition Stock Prices set forth in the table above (and the corresponding prices set forth in clauses (2) and (3) above) are subject to adjustment pursuant hereto and shall be adjusted as of any date the Conversion Rate is adjusted. The adjusted Make-Whole Acquisition Stock Prices (and corresponding prices set forth in clauses (2) and (3) above) shall equal the Make-Whole Acquisition Stock Prices (and corresponding prices set forth in clauses (2) and (3) above), respectively, applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Make-Whole Acquisition Stock Price adjustments and the denominator of which is the Conversion Rate as so adjusted. The number of Make-Whole Shares in the table above shall also be subject to adjustment in the same manner as the Conversion Rate pursuant to Section 11.
(iii) On or before the twentieth day prior to the date on which the Corporation anticipates consummating the Make-Whole Acquisition (or, if later, within two Business Days after the Corporation becomes aware of a Make-Whole Acquisition described in clause (i) of the definition of such term), a written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date on which the Make-Whole Acquisition is anticipated to be effected;
(B) the date, which shall be 30 days after the Make-Whole Acquisition Effective Date, by which the Make-Whole Acquisition conversion option must be exercised;
(C) the amount of cash, securities and other consideration payable per share of Common Stock or Series B, respectively; and
(D) the instructions a Holder must follow to exercise its conversion option in connection with such Make-Whole Acquisition.
(iv) To exercise a Make-Whole Acquisition Conversion option, a Holder must, no later than the Close of Business on the date by which the Make-Whole Acquisition Conversion option must be exercised as specified in the notice delivered under Section 10(c)(iii), comply with the procedures set forth in Section 10(b).
(v) If a Holder does not elect to exercise the Make-Whole Acquisition Conversion option pursuant to this Section 10(c), the shares of Series B or successor securities held by it shall remain outstanding but shall not be eligible to receive Make-Whole Shares.
(vi) Upon a Make-Whole Acquisition Conversion, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder thereof in the written notice provided to the Corporation or its successor as set forth in Section 10(b), deliver to the Holder such cash, securities or other property as are issuable with respect to Make-Whole Shares in the Make-Whole Acquisition.
(vii) In the event that a Make-Whole Acquisition Conversion is effected with respect to shares of Series B or successor securities representing fewer than all the shares of Series B or successor securities held by a Holder, upon such Make-Whole Acquisition Conversion, the Corporation or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to the Holder thereof, at the expense of the Corporation or its successors, a certificate evidencing the shares of Series B or such successor securities held by the Holder as to which a Make-Whole Acquisition Conversion was not effected.
(viii) If a Holder elects to convert its shares of Series B in connection with a Make-Whole Acquisition, such Holder shall not be entitled to an adjusted conversion price pursuant to Section 10(g) to the extent such Make-Whole Acquisition also constitutes a Fundamental Change.
(d) Registration of Common Stock. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock to be issued upon conversion of such Series B should be registered or the address to which the certificate or certificates representing such shares of Common Stock should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the Holder as shown on the records of the Corporation and to send the certificate or certificates representing such shares of Common Stock to the address of such Holder shown on the records of the Corporation.
(e) Dividends. If a Non-Mandatory Conversion Date on which a Holder elects to convert Series B is prior to the Close of Business on the Dividend Record Date relating to any declared dividend for the Dividend Period in which such Holder is electing to convert, such Holder will not have the right to receive any declared dividends for that Dividend Period. If a Non-Mandatory Conversion Date on which a Holder elects to convert Series B is after the Close of Business on the Dividend Record Date for any declared dividend and prior to the Dividend Payment Date, such Holder shall receive that dividend on the relevant



Dividend Payment Date if such Holder was the Holder of record at the Close of Business on the Dividend Record Date for that dividend. Notwithstanding the preceding sentence, if the Non-Mandatory Conversion Date is after the Close of Business on the Dividend Record Date and prior to the Open of Business on the Dividend Payment Date, whether or not such Holder was the Holder of record at the Close of Business on the Dividend Record Date, the Holder must pay to the Conversion Agent upon conversion of the shares of Series B an amount in cash equal to the dividend payable on the Dividend Payment Date for the then-current Dividend Period on the shares of Series B being converted.
(f) Outstanding Shares of Series B. Shares of Series B shall cease to be outstanding on the applicable Conversion Date, subject to the right of Holders of such shares to receive shares of Common Stock issuable upon conversion of such shares of Series B.
(g) Conversion Upon Fundamental Change.
(i) If the Reference Price in connection with a Fundamental Change is less than the then applicable Conversion Price, a Holder may convert each share of Series B during the period beginning on the effective date of the Fundamental Change and ending on the date that is 30 days after the effective date of such Fundamental Change at an adjusted conversion price equal to the greater of (1) the Reference Price and (2) $12.6250,
subject to adjustment as described herein (the “Base Price”), provided that, notwithstanding anything herein to the contrary, prior to the receipt of Stockholder Approval, any conversion in connection with a Fundamental Change shall be limited to conversion into such number of shares of Common Stock so that such conversion would not result in a Violation. The date of such conversion upon a Fundamental Change is referred to herein as the “Fundamental Change Conversion Date.”
(ii) The Base Price shall be adjusted as of any date the Conversion Rate of the Series B is adjusted pursuant hereto. The adjusted Base Price shall equal the Base Price applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Base Price adjustment and the denominator of which is the Conversion Rate as so adjusted. If the Reference Price is less than the Base Price, Holders shall receive a maximum of 79.2079 shares of Common Stock per share of Series B (subject to adjustment in a manner inverse to the adjustments to the Base Price).
(iii) On or before the 20th day prior to the date on which the Corporation anticipates consummating the Fundamental Change (or, if later, within two Business Days after the Corporation becomes aware of a Fundamental Change described in clause (i) of the definition of such term), a written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date on which the Fundamental Change is anticipated to be effected; and
(B) the date, which shall be 30 days after the effective date of a Fundamental Change, by which the Fundamental Change conversion option must be exercised.
(iv) On the effective date of a Fundamental Change, another written notice shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Corporation. Such notice shall contain:
(A) the date that shall be 30 days after the effective date of the Fundamental Change;
(B) the adjusted conversion price following the Fundamental Change;
(C) the amount of cash, securities and other consideration payable per share of Common Stock or Series B, respectively; and
(D) the instructions a Holder must follow to exercise its conversion option in connection with such Fundamental Change.

(v) To exercise its conversion option upon a Fundamental Change, a Holder must, no later than the Close of Business on the date by which the conversion option upon the Fundamental Change must be exercised as specified in the notice delivered under Section 10(g)(iv), comply with the procedures set forth in Section 10(b).
(vi) If a Holder does not elect to exercise its conversion option upon a Fundamental Change pursuant to this Section 10(g), the shares of Series B or successor securities held by it will remain outstanding but shall not thereafter be entitled to convert in accordance with Section 10(g).
(vii) Upon a conversion upon a Fundamental Change, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder thereof in the written notice provided to the Corporation or its successor as set forth in Section 10(b), deliver to the Holder such cash, securities or other property as are issuable with respect to the adjusted conversion price following the Fundamental Change.



(viii) In the event that a conversion upon a Fundamental Change is effected with respect to shares of Series B or successor securities representing fewer than all the shares of Series B or successor securities held by a Holder, upon such conversion the Corporation or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Series B or such successor securities held by the Holder as to which a conversion upon a Fundamental Change was not effected.
(ix) If a Holder elects to convert its shares of Series B in connection with a Fundamental Change, such Holder shall not be entitled to Make-Whole Shares pursuant to Section 10(c) to the extent such Fundamental Change also constitutes a Make-Whole Acquisition.
(h) A Holder cannot effect both a Make-Whole Acquisition Conversion and a Fundamental Change Conversion with respect to a share of Series B.
(i) Notwithstanding anything to the contrary in this Certificate of Designations, a Holder of shares of Series B shall not, for a period of 35 calendar days after any Conversion Date, sell any shares of Common Stock or other equity securities it receives upon conversion of the shares it converted on such Conversion Date.
11. Anti-Dilution Adjustments.
(a) The Conversion Rate shall be adjusted from time to time by the Corporation as follows:
(i) If the Corporation, at any time or from time to time while any of the Series B is outstanding, issues shares of Common Stock as a dividend or distribution on shares of Common Stock, or if the Corporation effects a share split or share combination in respect of the Common Stock, then the Conversion Rate shall be adjusted based on the following formula:
 
CR1
 = 
CR0
 ×   
OS1
    
OS0
where
 
CR0
  =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or combination, as applicable;
CR1
  =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable;
OS0
  =  the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable; and
OS1
  =  the number of shares of Common Stock outstanding immediately after such dividend or distribution, or the Close of Business on the effective date of such share split or share combination, as applicable.
The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in treasury by the Corporation.
(ii) Except as otherwise provided for by Section 11(a)(iv) below, if the Corporation, at any time or from time to time while any of the Series B is outstanding, distributes to all or substantially all holders of its outstanding shares of Common Stock any rights or warrants entitling them for a period of not more than 45 calendar days from the Record Date of such distribution to subscribe for or purchase shares of Common Stock at a price per share less than the Closing Price of the Common Stock on the Trading Day immediately preceding the Record Date of such distribution, the Conversion Rate shall be adjusted based on the following formula:
 



CR1
 = 
CR0
 ×   
OS0 + X
    
OS0 + Y
where
 
CR0
 =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such distribution;
CR1
 =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such distribution;
OS0
 =  the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such distribution;
X =  the total number of shares of Common Stock issuable pursuant to such rights or warrants; and
Y =  the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Closing Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution.
To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants upon the expiration or termination of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered.
In determining the aggregate price payable to exercise such rights or warrants, there shall be taken into account any amount payable on exercise thereof, with the value of such consideration, if other than Cash, to be determined in good faith by the Corporation’s Board of Directors.

(iii) If the Corporation, at any time or from time to time while any of the Series B is outstanding, shall, by dividend or otherwise, distribute to all or substantially all holders of its Common Stock shares of any class of Capital Stock of the Corporation (other than Common Stock as covered by Section 11(a)(i) above), evidences of its indebtedness, assets, property or rights or warrants to acquire the Corporation’s Capital Stock or other securities, but excluding (1) dividends or distributions as to which an adjustment under Section 11(a)(i), Section 11(a)(ii) or Section 11(a)(iv) hereof shall apply, (2) dividends or distributions paid exclusively in Cash and (3) Spin-Offs to which the provision set forth below in this Section 11(a)(iii) shall apply (any of such shares of Capital Stock, indebtedness, assets, property or rights or warrants to acquire the Corporation’s Common Stock or other securities, hereinafter in this Section 11(a)(iii) called the “Distributed Property”), then, in each such case the Conversion Rate shall be adjusted based on the following formula:
 
 
CR1 = CR0 × 
 
SP0
  
  
SP0 – FMV
  
where
 



CR0
 =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such distribution;
CR1
 =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such distribution;
SP0
 =  the average of the Closing Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV =  the fair market value (as determined in good faith by the Corporation’s Board of Directors) of the portion of Distributed Property with respect to each outstanding share of Common Stock on the Record Date for such distribution.
Notwithstanding the foregoing, if the then fair market value (as so determined) of the portion of the Distributed Property so distributed applicable to one share of Common Stock is equal to or greater than SP0 as set forth above, in lieu of the foregoing adjustment, the Corporation shall distribute to each Holder on the date the Distributed Property is distributed to holders of Common Stock, but without requiring such Holder to convert its shares of Series B, the amount of Distributed Property such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate on the record date fixed for determination for stockholders entitled to receive such distribution. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 11(a)(iii) by reference to the actual or when issued trading market for any securities, it shall in doing so consider the prices in such market over the same period used in computing the average of the Closing Prices of the Common Stock for purposes of calculating SP0 in the formula in this Section 11(a)(iii).

With respect to an adjustment pursuant to this Section 11(a)(iii) where there has been a payment of a dividend or other distribution on the Common Stock consisting of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Corporation (a “Spin-Off”), the Conversion Rate in effect immediately before the Close of Business on the tenth Trading Day immediately following, and including, the effective date of the Spin-Off shall be increased based on the following formula:
 
 
CR1 = CR0 × 
 
FMV + MP0
  
  
MP0
  
where
 



CR0
 =  
the Conversion Rate in effect immediately prior to the Close of Business on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off;
CR1
 =  
the new Conversion Rate in effect from and after the Close of Business on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off;
FMV =  the average of the Closing Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off; and
MP0
 =  the average of the Closing Prices of Common Stock over the 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off.
Such adjustment shall occur on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off (it being agreed that notwithstanding Section 10(a), the Holder of the Series B shall not be entitled to convert the Series B pursuant to an Early Conversion prior to such 10th Trading Day).
For purposes of this Section 11(a)(iii), Section 11(a)(i) and Section 11(a)(ii) hereof, any dividend or distribution to which this Section 11(a)(iii) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 11(a)(i) or 11(a)(ii) hereof applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets or shares of Capital Stock other than such shares of Common Stock or rights or warrants to which Section 11(a)(i) or 11(a)(ii) hereof applies (and any Conversion Rate adjustment required by this Section 11(a)(iii) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants to which Section 11(a)(i) or 11(a)(ii) hereof applies (and any further Conversion Rate adjustment required by Section 11(a)(i) and 11(a)(ii) hereof with respect to such dividend or distribution shall then be made), except (A) the Close of Business on the Record Date of such dividend or distribution shall be substituted for “the Close of Business on the Record Date,” “the Close of Business on the Record Date or the Close of Business on the effective date,” “after the Close of Business on the Record Date for such dividend or distribution or the Close of Business on the effective date of such share split or share combination” and “the Close of Business on the Record Date for such distribution” within the meaning of Section 11(a)(i) and Section 11(a)(ii) hereof and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding immediately prior to the Close of Business on the Record Date or the Close of Business on the effective date” within the meaning of Section 11(a)(i) hereof.
(iv) If the Corporation, at any time or from time to time while any of the Series B is outstanding, distributes rights or warrants to all holders of Common Stock entitling the holders thereof to subscribe for, purchase or convert into shares of the Corporation’s Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (x) are deemed to be transferred with such shares of Common Stock; (y) are not exercisable; and (z) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of Section 11(a)(iii) above, (and no adjustment to the Conversion Rate under Section 11(a)(iii) above will be required) until the occurrence of the earliest Trigger Event and a distribution or deemed distribution under the terms of such rights or warrants at which time an appropriate adjustment (if any is required) to the Conversion Rate shall be made in the same manner as provided for under Section 11(a)(iii) above. If any such rights or warrants are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 11(a)(iv) was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a Cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the



case of such rights or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights or warrants had not been issued.

(v) (1) If the Corporation, at any time or from time to time while any of the Series B is outstanding, makes a regular, quarterly Cash dividend or distribution to all or substantially all holders of Common Stock during any quarterly fiscal period that exceeds $0.27 (the “Initial Dividend Threshold”), the Conversion Rate shall be adjusted based on the following formula:
 
 
CR1 = CR0 × 
 
SP0
  
  
SP0 – C
  
where
 
CR0
 =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution;
CR1
 =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution;
SP0
 =  the average Closing Price of the Common Stock over the ten consecutive Trading Days ending on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution;
C =  the amount in Cash per share the Corporation distributes or dividends to holders of Common Stock in excess of the Initial Dividend Threshold.
The Initial Dividend Threshold shall be adjusted in a manner inversely proportional to adjustments to the Conversion Rate; provided that no adjustment shall be made to the Initial Dividend Threshold for any adjustment made to the Conversion Rate pursuant to clauses (1) or (2) of this Section 11(a)(v).
(2) If the Corporation pays any cash dividend or distribution that is not a regular, quarterly cash dividend or distribution to all or substantially all holders of Common Stock, the Conversion Rate shall be adjusted based on the following formula:
 
 
CR1 = CR0 × 
 
SP0
  
  
SP0 – C
  
where
 
CR0
 =  the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend or distribution;



CR1
 =  the new Conversion Rate in effect immediately after the Close of Business on the Record Date for such dividend or distribution;
SP0
 =  the average Closing Price of the Common Stock over the ten consecutive Trading Days ending on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution;
C =  the amount in Cash per share the Corporation distributes or dividends to holders of Common Stock
(3) Notwithstanding the foregoing, if the portion of the Cash so distributed applicable to one share of Common Stock is equal to or greater than SP0 as set forth above, in lieu of the foregoing adjustment, the Corporation shall distribute to each Holder on the date the Cash dividend or distribution is paid to holders of Common Stock, but without requiring such Holder to convert its shares of Series B, the amount of Cash such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate on the Record Date for such dividend or distribution. If such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
(4) For the avoidance of doubt, for purposes of this Section 11(a)(v), in the event of any reclassification of the Common Stock, as a result of which the Series B becomes convertible into more than one class of Common Stock, if an adjustment to the Conversion Rate is required pursuant to this Section 11(a)(v), references in this Section to one share of Common Stock or Closing Price of one share of Common Stock shall be deemed to refer to a unit or to the price of a unit consisting of the number of shares of each class of Common Stock into which the Series B is then convertible equal to the numbers of shares of such class issued in respect of one share of Common Stock in such reclassification. The above provisions of this paragraph shall similarly apply to successive reclassifications.
(vi) If the Corporation or any of its Subsidiaries makes a payment of Cash or other consideration in respect of a tender offer or exchange offer for all or any portion of the Common Stock, where such Cash and the value of any such other consideration included in the payment per share of Common Stock validly tendered or exchanged exceeds the Closing Price of the Common Stock on the Trading Day next succeeding the last date (the “expiration date”) on which tenders or exchanges may be made pursuant to such tender or exchange offer (as it may be amended), the Conversion Rate shall be increased based on the following formula:
 
 
CR1 = CR0 × 
 
AC + (SP1×OS1)
  
  
OS0 × SP1
  
where
 



CR0
 =  the Conversion Rate in effect immediately prior to the Close of Business on the expiration date;
CR1
 =  the new Conversion Rate in effect immediately after the Close of Business on the expiration date;
AC =  the aggregate value of all Cash and any other consideration (as determined in good faith by the Corporation’s Board of Directors) paid or payable for shares purchased in such tender or exchange offer;
OS0
 =  the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires;
OS1
 =  the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to such tender offer or exchange offer); and
SP1
 =  the average Closing Price of Common Stock over the ten consecutive Trading Days ending on the Trading Day next succeeding the expiration date.
If the Corporation or a Subsidiary is obligated to purchase shares of Common Stock pursuant to any such tender or exchange offer, but the Corporation or such Subsidiary is permanently prevented by applicable law from effecting any such purchases or all or any portion of such purchases are rescinded, then the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made or had only been made in respect of the purchases that had been effected. Except as set forth in the preceding sentence, if an adjustment to the Conversion Rate pursuant to this Section 11(a)(vi) with respect to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this Section 11(a)(vi).
(vii) For purposes of this Section 11(a) the term “Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any Cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of Cash, securities or other property, the date fixed for determination of shareholders entitled to receive such Cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

(viii) If application of the formulas provided in Sections 11(a)(i), 11(a)(ii), 11(a)(iii), 11(a)(iv), 11(a)(v) or 11(a)(vi) above would result in a decrease in the Conversion Rate, no adjustment (other than a readjustment as described in such sections) to the Conversion Rate shall be made except in the case of a share split or combination of the Common Stock.
(ix) If one or more events occur requiring an adjustment be made to the Conversion Rate for a particular period, adjustments to the Conversion Rate shall be determined by the Corporation’s Board of Directors to reflect the combined impact of such Conversion Rate adjustments, as set out in this Section 11(a), during such period.
(x) Notwithstanding any of the foregoing clauses in this Section 11, no adjustment in the Conversion Rate shall be required unless the adjustment would result in a change in the Conversion Rate of at least 1.00%; provided, however, that any adjustment which by reason of this Section 11(a)(x) is not required to be made shall be carried forward and the Corporation shall make such adjustment, regardless of whether the aggregate adjustment is less than 1.00%, within one year of the first such adjustment carried forward or in connection with any conversion of Series B. All calculations under this Section 11 shall be made to the nearest one-ten thousandth (1/10,000) of a cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be.
No adjustment in the Conversion Rate need be made (i) for issuances of Common Stock pursuant to any present or future plan for reinvestment of dividends or interest payable on the Corporation’s securities or the investment of additional optional amounts in shares of Common Stock under any plan, (ii) upon the issuance of any shares of Common Stock or options or rights to purchase shares pursuant to any present or future employee, director or consultant benefit plan or program of, or assumed by, the Corporation or any of its Subsidiaries, (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Series B was first issued,



(iv) for a change in the par value of the Common Stock, (v) for repurchases of shares of Common Stock in open market transactions or privately negotiated transactions, or (vi) for accumulated and unpaid dividends, other than as expressly contemplated by Section 11(a)(i).
No adjustment to the Conversion Rate need be made pursuant to Section 11(a)(i) through (ix) above for a transaction if Holders are permitted to participate in the transaction without conversion, concurrently with the holders of Common Stock, on a basis and with notice that the Board of Directors of the Corporation determines in good faith to be fair and appropriate in light of the basis and notice to holders of Common Stock participating in the transaction.
Whenever a provision of this Certificate of Designations requires the calculation of an average of the Closing Price over a span of multiple days, the Corporation will make appropriate adjustments to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Ex-Dividend Date of the event occurs, at any time during the period from which the average is to be calculated.

(xi) Upon conversion of the Series B, the Holders shall receive, in addition to any shares of Common Stock issuable upon such conversion, any associated rights issued under any shareholder rights agreement of the Corporation that provides that each share of Common Stock issued upon conversion of the Series B at any time prior to the distribution of separate certificates representing such rights will be entitled to receive such rights unless, prior to conversion, the rights have separated from the Common Stock, expired, terminated or been redeemed or exchanged in accordance with such rights plan, and no adjustment shall be made to the Conversion Rate pursuant to Section 11(a)(iv) hereof. If, prior to any conversion, the rights have separated from the Common Stock, the Conversion Rate shall be adjusted at the time of separation as if the Corporation distributed to all holders of Common Stock, shares of Capital Stock, evidences of indebtedness, assets, property or rights or warrants as described in Section 11(a)(iv) hereof, subject to readjustment in the event of the expiration, termination or redemption of such rights.
(xii) Subject to applicable stock exchange rules and listing standards, the Corporation shall be entitled to increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the best interests in the Corporation; provided the Corporation has given to the Conversion Agent and DTC at least 15 days’ prior notice of any such increase in the Conversion Rate and the period during which it will be in effect. Subject to applicable stock exchange rules and listing standards, the Corporation shall be entitled to increase the Conversion Rate, in addition to the events requiring an increase in the Conversion Rate pursuant to Section 11 hereof, as it in its discretion shall determine to be advisable in order to avoid or diminish any tax to shareholders in connection with any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Corporation to its shareholders or other events.
(xiii) Whenever the Conversion Rate is adjusted as herein provided, the Corporation will issue a notice to the Conversion Agent and DTC containing the relevant information and make this information available on the Corporation’s website. In addition, the Corporation shall provide upon the request of a Holder of Series B, to the extent not posted on the Corporation website, a brief statement setting forth in reasonable detail how the adjustment to the Conversion Rate was determined and setting forth the adjusted Conversion Rate.
(xiv) For purposes of this Section 11, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.
(xv) If the record date for a dividend or distribution on Common Stock occurs prior to a Mandatory Conversion Date and the payment date for a dividend or distribution on Common Stock occurs after a Mandatory Conversion Date, and such dividend or distribution would have resulted in an adjustment to the Conversion Rate if such dividend or distribution does not result in an adjustment to the Conversion Rate but were paid prior to such Mandatory Conversion Date, then without duplication the Corporation shall deem the Holders to be holders
of record of Common Stock for purposes of that dividend or distribution. In that case, the Holders will receive the number of shares of Common Stock issuable upon the applicable Mandatory Conversion Date together with the dividend or distribution on such shares of Common Stock so converted.
12. Reorganization Events.
(a) In the event of:



(i) any consolidation or merger of the Corporation with or into another Person or of another Person with or into the Corporation;
(ii) any sale, transfer, lease or conveyance to another Person of the property of the Company as an entirety or substantially as an entirety;
(iii) any statutory share exchange of the Corporation with another Person (other than in connection with a merger or acquisition); or
(iv) any liquidation, dissolution or termination of the Corporation;
in each case in which holders of Common Stock would be entitled to receive cash, securities or other property for their shares of Common Stock (any such event specified in this Section 12(a), a “Reorganization Event”), each share of Series B outstanding immediately prior to such Reorganization Event shall, without the consent of Holders, become convertible into the kind of cash, securities and other property receivable in such Reorganization Event by a holder of one share of Common Stock that was not the counterparty to the Reorganization Event or an affiliate of such other party (such cash, securities and other property, the “Exchange Property”).
(b) In the event that holders of the shares of the Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the “Exchange Property” that Holders of the Series B will be entitled to receive shall be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make an election (or of all such holders if none make an election). The number of units of Exchange Property for each share of Series B converted following the effective date of such Reorganization Event shall be determined based on the Conversion Rate then in effect on the applicable Conversion Date, determined as if the references to a “share of Common Stock” in this Certificate of Designations were to “unit of Exchange Property.”
(c) After a Reorganization Event, for purposes of determining whether a Mandatory Conversion Date has occurred, the term “Closing Price” shall be deemed to refer to the closing sale price, last quoted bid price or mid-point of the last bid and ask prices, as the case may be, of any publicly traded securities that comprise all or part of the Exchange Property. For purposes of this Section 12, references to Common Stock in the definition of “Trading Day” shall be replaced by references to any publicly traded securities that comprise all or part of the Exchange Property.

(d) The above provisions of this Section 12 shall similarly apply to successive Reorganization Events and the provisions of Section 11 shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.
(e) The Corporation (or any successor) shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 12 or the validity of any Reorganization Event.
13. Fractional Shares.
(a) No fractional shares of Common Stock shall be issued as a result of any conversion of shares of Series B.
(b) In lieu of any fractional share of Common Stock otherwise issuable in respect of any mandatory conversion pursuant to Section 10(a) or a conversion at the option of the Holder pursuant to Section 9, Section 10(c) or Section 10(g), the Corporation shall pay an amount in cash (computed to the nearest cent) equal to the same fraction of:
(i) in the case of a mandatory conversion pursuant to Section 10(a), a Make Whole Acquisition conversion pursuant to Section 10(c) or a Conversion Upon Fundamental Change pursuant to Section 10(g), the average of the Closing Prices over the five consecutive Trading Day period preceding the Trading Day immediately preceding the applicable Conversion Date; or
(ii) in the case of an Early Conversion pursuant to Section 9, the Closing Price of the Common Stock on the second Trading Day immediately preceding the Early Conversion Date.
(c) If more than one share of the Series B is surrendered for conversion at one time by or for the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Series B so surrendered.



14. Reservation of Common Stock.
(a) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares held in the treasury by the Corporation, solely for issuance upon the conversion of shares of Series B as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series B then outstanding. For purposes of this Section 14(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Series B shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b) Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon conversion of shares of Series B, as herein provided, shares of Common Stock acquired by the Corporation (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(c) All shares of Common Stock delivered upon conversion of the Series B shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(d) Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Series B, the Corporation shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.
(e) The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be listed on the New York Stock Exchange or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Series B; provided, however, that if the rules of such exchange or automated quotation system permit the Corporation to defer the listing of such Common Stock until the first conversion of Series B into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the Series B in accordance with the requirements of such exchange or automated quotation system at such time.
15. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series B may deem and treat the record holder of any share of Series B as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
16. Notices. All notices or communications in respect of Series B shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Certificate of Incorporation or Bylaws or by applicable law.
17. Preemptive or Subscription Rights. Except as expressly provided in any agreement between a Holder and the Corporation, no share of Series B shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

18. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series B from time to time to such extent, in such manner, and upon such terms as the Board or any duly authorized committee of the Board may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
19. Other Rights. The shares of Series B shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Corporation or as provided by applicable law.
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IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, does hereby affirm that this certificate is the act and deed of the Corporation and that the facts herein stated are true, and accordingly has hereunto set his hand this 13th day of October, 2008.
 
MORGAN STANLEY
By:  /s/ Walid A. Chammah
 Name:  Walid A. Chammah
 Title: Co-President



CERTIFICATE OF DESIGNATIONS OF PREFERENCES AND RIGHTS
OF THE
10% SERIES C NON-CUMULATIVE NON-VOTING PERPETUAL
PREFERRED STOCK
($1,000 LIQUIDATION PREFERENCE PER SHARE)
OF
MORGAN STANLEY
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MORGAN STANLEY, a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee of the Board of Directors of the Corporation adopted on October 12, 2008, the creation of 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share, liquidation preference $1,000 per share (“Series C”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series C, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock.” Each share of Series C shall be identical in all respects to every other share of Series C, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 3 below.
2. Number of Shares. The authorized number of shares of Series C shall be 1,160,791. Shares of Series C that are purchased, redeemed or otherwise acquired by the Corporation shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series C by any Subsidiary of the Corporation.
3. Dividends.
(a) Rate. Holders of shares of Series C shall be entitled to receive, only when, as and if declared by the Board of Directors or a duly authorized committee thereof out of funds of the Corporation legally available for payment, non-cumulative cash dividends on the liquidation preference of $1,000 per share at a rate per annum equal to 10%. Declared dividends on the Series C shall be payable from and including the date of initial issuance (in the case of the initial Dividend Period) or the immediately preceding Dividend Payment Date (in the case of Dividend Periods other than the initial Dividend Period), and shall be payable quarterly, in arrears, on each January 15, April 15, July 15 and October 15, commencing on January 15, 2009 (each such date a “Dividend Payment Date”). If any date on which dividends would otherwise be payable shall not be a Business Day (as defined below), then the date of payment of dividends
need not be made on such date, but such payment of dividends may be made on the next succeeding day that is a Business Day with the same force and effect as if made on the Dividend Payment Date, and no additional dividends shall be payable nor shall interest accrue on the amount payable from and after such Dividend Payment Date to the next succeeding Business Day. “Business Day” means any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions generally are authorized or obligated by law or executive order to be closed.
Dividends on the Series C shall not be cumulative; Holders of Series C shall not be entitled to receive any dividends not declared by the Board of Directors or a duly authorized committee thereof and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so declared. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series C payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on that Dividend Payment Date or at any future time, whether or not dividends on the Series C are declared for any future Dividend Period. Declared and unpaid dividends shall not bear interest.
Dividends that are payable on the Series C on any Dividend Payment Date will be payable to holders of record of Series C as they appear on the stock register of the Corporation on the applicable Dividend Record Date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each,



a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
The term “Dividend Period” means the period from and including each Dividend Payment Date to but excluding the next succeeding Dividend Payment Date or any earlier redemption date (other than the initial Dividend Period, which shall commence on and include the date of initial issuance of the Series C and shall end on but exclude the next Dividend Payment Date). Dividends payable on the Series C shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) Priority of Dividends. The Series C will rank (i) senior to the Common Stock (as defined below) and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series C, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series C (issued with the requisite consent of the Holders of the Series C, if required) and (iii) at least equally with each other class or series of Preferred Stock (as defined below) that the Corporation may issue with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. So long as any share of Series C remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series C has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to (i) repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan; (ii) an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a Subsidiary of the Corporation, for any class or series of Junior Stock; (iii) the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged; (iv) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock. In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. Incorporated, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series C and any shares of Parity Stock, all dividends declared on the Series C and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series C and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any other stock ranking, as to dividends, equally with or junior to the Series C, from time to time out of any funds legally available for such payment, and the Series C shall not be entitled to participate in any such dividends.
4. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, Holders of Series C shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities, if any, to creditors of the Corporation and subject to the rights of holders of any shares of capital
stock of the Corporation then outstanding ranking senior to or pari passu with the Series C in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series C as to such distribution, a liquidating distribution in an amount equal to $1,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series C will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.



(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all Holders of Series C and all holders of any stock of the Corporation ranking equally with the Series C as to such distribution, the amounts paid to the Holders of Series C and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the Holders of Series C and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series C and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series C will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 4 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference on the Series C and any other shares of the Corporation’s stock ranking equally as to such liquidation distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the Holders of Series C receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
5. Voting Rights.
(a) General. The Holders of Series C shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.

(b) Right to Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series C, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more Dividend Periods, whether or not for consecutive Dividend Periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”); provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors; and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series C or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series C or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series C and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four regular dividend periods following the Nonpayment.
If and when dividends for at least four regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series C and any other class or series of Voting Preferred Stock, the holders of the Series C and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed.
Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series C together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any



vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series C and all Voting Preferred Stock when they have the voting rights
described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series C or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
The term “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series C as to payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series A (the “Series A”) and the Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock (the “Series B”), in each case, if outstanding, and any class or series of Preferred Stock, whether or not cumulative, that the Corporation may issue in the future, to the extent their like voting rights are exercisable at such time. Whether a plurality, majority or other portion of the shares of Series C and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the relative liquidation preferences of the shares voted.
(c) Other Voting Rights. So long as any shares of Series C are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series C and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designations to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series C with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series C. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designations, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series C, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series C, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series C remain outstanding or are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding as securities of the Corporation or such other entity as permitted by clause (x) or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series C, taken as a whole;
provided, however, that for all purposes of this Section 5(c), the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series C with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and shall not require the affirmative vote or consent of, the holders of outstanding shares of Series C. For purposes of clarification, no Holder of Series C shall have any voting rights with respect to any binding share exchange, reclassification, merger or consolidation which complies with the provisions of clause (iii)(x) and (y) hereof.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 5(c) for which a vote is otherwise required would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series C for this purpose), then only such series of Preferred Stock as are adversely affected by and otherwise entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock that are otherwise entitled to vote on the matter are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall



be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status and that is otherwise entitled to vote thereon.
(d) Changes for Clarification. Without the consent of the holders of the Series C, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series C, the Corporation may amend, alter, supplement or repeal any terms of the Series C:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series C that is not inconsistent with the provisions of this Certificate of Designations.

(e) Changes after Provision for Redemption. No vote or consent of the holders of Series C shall be required pursuant to this Section 5 or otherwise if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series C shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series C (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series C is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series C and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series C are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
6. Redemption.
(a) Optional Redemption. The Series C may not be redeemed by the Corporation prior to October 15, 2011. On or after October 15, 2011, subject to obtaining any then required regulatory approval, the Corporation, at its option, may redeem, in whole at any time or in part from time to time, the shares of Series C at the time outstanding, upon notice given as provided in Section 6(c) below, at a redemption price equal to $1,100 per share, together (except as otherwise provided herein below), for the purposes of the redemption price only, with an amount equal to dividends accumulated but unpaid for the then current Dividend Period at the rate set forth in Section 3 to, but excluding, the date fixed for redemption (regardless of whether any dividends are actually declared for that Dividend Period). The redemption price for any shares of Series C shall be payable on the redemption date to the Holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any accrued and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the Holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the Holder of record of the redeemed shares of Series C on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.
(b) No Sinking Fund. The Series C will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series C will have no right to require the redemption or repurchase of any shares of Series C.

(c) Notice of Redemption. Notice of every redemption of shares of Series C shall be given by first class mail, postage prepaid, addressed to the Holders of record of the shares of Series C to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series C designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series C. Notwithstanding the foregoing, if depositary shares representing interests in the Series C are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the Holders of Series C at such time and in any manner permitted by such facility. Each such notice given to a Holder shall state: (1) the redemption date; (2) the number of shares of Series C to be redeemed and, if less than all the shares held by such Holder are to be redeemed, the number of such shares to be redeemed from such Holder; (3) the



redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series C at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Corporation may determine to be fair and equitable. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series C shall be redeemed from time to time. If fewer than all the shares of Series C represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the Holders of any shares of Series C so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares of Series C so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the Holders of the shares of Series C so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
(f) Regulatory. Redemption of the Series C by the Corporation is subject to its receipt of any required prior approvals from the Federal Reserve. The Corporation hereby confirms that it is the Corporation’s intention that, at the time of any redemption of the Series C, the Corporation will repay the liquidation preference of any shares of Series C redeemed in
accordance with this Section 6 only out of the net proceeds received by the Corporation or its Subsidiaries from the issuance or sale of securities which will qualify as non-restricted core capital (as such term is defined in 12 C.F.R. 225 (Appendix A)) at the time of such issuance or sale.
7. Rank. Any stock of any class or classes or series of the Corporation shall be deemed to rank:
(a) prior to shares of the Series C, either as to dividends or upon liquidation, dissolution or winding up, or both, if the holders of stock of such class or classes or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the Holders of shares of the Series C;
(b) on a parity with shares of the Series C, either as to dividends or upon liquidation, dissolution or winding up, or both, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series C, if the holders of stock of such class or classes or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributed upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority of one over the other as between the holders of such stock and the Holders of shares of Series C (the term “Parity Preferred Stock” being used to refer to any stock on a parity with the shares of Series C, either as to dividends or upon liquidation, dissolution or winding up, or both, as the content may require); and
(c) junior to shares of the Series C, either as to dividends or upon liquidation, dissolution or winding up, or both, if such class or classes or series shall be common stock or if the Holders of the Series C shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of stock of such class or classes or series.
The Series C shall rank, as to dividends and upon liquidation, dissolution or winding up, on a parity with the Series A, the Series B and any Parity Preferred Stock issued hereafter.
8. Additional Definitions. As used herein with respect to Series C:
Common Stock” means the common stock, $0.01 par value, of the Corporation.
Holder” means the Person in whose name the shares of Series C are registered, which may be treated by the Corporation, Transfer Agent, Registrar and dividend disbursing agent as the absolute owner of the shares of Series C for the purpose of disbursing dividends and for all other purposes.



Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series C as to the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation. Junior Stock includes the Common Stock.
Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series C in the payment of dividends and rights in dissolution, liquidation and winding up of the Corporation.
Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series C.
Registrar” shall mean BNY Mellon Shareowner Services, acting in its capacity as registrar for the Series C, and its successors and assigns or any other registrar appointed by the Corporation.
Subsidiary” means with respect to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries.
Transfer Agent” shall mean BNY Mellon Shareowner Services, acting in its capacity as transfer agent for the Series C, and its respective successors and assigns or any other transfer agent appointed by the Corporation.
9. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series C may deem and treat the record holder of any share of Series C as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
10. Notices. All notices or communications in respect of Series C shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Certificate of Incorporation or Bylaws or by applicable law.
11. Preemptive or Subscription Rights. Except as expressly provided in any agreement between a Holder and the Corporation, no share of Series C shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
12. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series C from time to time to such extent, in such manner, and
upon such terms as the Board or any duly authorized committee of the Board may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
13. Other Rights. The shares of Series C shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Corporation or as provided by applicable law. Holders of Series C shall have no right to exchange or convert such shares into any other security.
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IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, does hereby affirm that this certificate is the act and deed of the Corporation and that the facts herein stated are true, and accordingly has hereunto set his hand this 13th day of October, 2008.
 
MORGAN STANLEY
By: /s/ Walid A. Chammah
 Name: Walid A. Chammah
 Title: Co-President



CERTIFICATE OF DESIGNATIONS
OF
FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES D
OF
MORGAN STANLEY
Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby certify:
The board of directors of the Corporation (the “Board of Directors”) or an applicable committee of the Board of Directors, in accordance with the certificate of incorporation and bylaws of the Corporation and applicable law, adopted the following resolution on October 26, 2008 creating a series of 10,000,000 shares of Preferred Stock of the Corporation designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series D”.
RESOLVED, that pursuant to the provisions of the certificate of incorporation and the bylaws of the Corporation and applicable law, a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:
Part 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series D” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 10,000,000.
Part 2. Standard Provisions. The Standard Provisions contained in Annex A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.
Part. 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Annex A hereto) as defined below:
(a) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(b) “Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year.
(c) “Junior Stock” means the Common Stock and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.
(d) “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.
(e) “Minimum Amount” means $2,500,000,000.
(f) “Parity Stock” means any class or series of stock of the Corporation (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Corporation’s (i) Series A Floating Rate Non-Cumulative Preferred Stock; (ii) Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock; and (iii) Series C Non-Cumulative Non-Voting Perpetual Preferred Stock.
(g) “Signing Date” means October 26, 2008.
Part. 4. Certain Voting Matters. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Designated Preferred Stock and any Voting Parity Stock has been cast or given on any matter on which the holders of shares of Designated Preferred Stock are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amount of the shares voted or covered by the consent as if the Corporation were liquidated on the record date for such vote or consent, if any, or, in the absence of a record date, on the date for such vote or consent. For purposes of determining the voting rights of the holders of Designated Preferred Stock under Section 7 of the Standard Provisions forming



part of this Certificate of Designations, each holder will be entitled to one vote for each $1,000 of liquidation preference to which such holder’s shares are entitled.
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IN WITNESS WHEREOF, Morgan Stanley has caused this Certificate of Designations to be signed by Colm Kelleher, its Executive Vice President and Chief Financial Officer, this 28th day of October, 2008.
 
MORGAN STANLEY
By: /s/ Colm Kelleher
Name:Colm Kelleher
Title:Executive Vice President and Chief Financial Officer



ANNEX A
STANDARD PROVISIONS
Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.
Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:
(a) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.
(b) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
(c) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s stockholders.
(d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.
(e) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.
(f) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.
(g) “Charter” means the Corporation’s certificate or articles of incorporation, articles of association, or similar organizational document.
(h) “Dividend Period” has the meaning set forth in Section 3(a).
(i) “Dividend Record Date” has the meaning set forth in Section 3(a).
(j) “Liquidation Preference” has the meaning set forth in Section 4(a).

(k) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.
(l) “Preferred Director” has the meaning set forth in Section 7(b).
(m) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Designated Preferred Stock.
(n) “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to October 13, 2008).
(o) “Share Dilution Amount” has the meaning set forth in Section 3(b).
(p) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.



(q) “Successor Preferred Stock” has the meaning set forth in Section 5(a).
(r) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.
Section 3. Dividends.
(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but
excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.
Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.
Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).
(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the Corporation solely for the purpose of market-making, stabilization or customer facilitation transactions in Junior Stock or Parity Stock in the ordinary course of its business; (iii) purchases by a broker-dealer subsidiary of the Corporation of capital stock of the Corporation for resale pursuant to an offering by the Corporation of such capital stock underwritten by such broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in connection with a stockholders’ rights plan or any redemption or repurchase of rights pursuant to any stockholders’ rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the



beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.
Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.
Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).
(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash,



securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
Section 5. Redemption.
(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; providedthat (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).
The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.
(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.
(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of



Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).
Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.
Section 7. Voting Rights.
(a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or



by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.
(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to
time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.
Section 8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.



Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
Section 11. Replacement Certificates. The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.
Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.




CERTIFICATE OF ELIMINATION OF
THE FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES D,
OF
MORGAN STANLEY
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Company”), in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, hereby certifies as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the State of Delaware and authority granted in the Certificate of Incorporation of the Company, as theretofore amended, the Board of Directors of the Company, by resolution duly adopted, authorized the issuance of a series of 10,000,000 (ten million) shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series D, par value $0.01 per share (the “Preferred Stock”), and established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions thereof, and, on October 28, 2008, filed a Certificate of Designation with respect to such Preferred Stock in the office of the Secretary of State of the State of Delaware.
2. That the Board of Directors of the Company has adopted resolutions approving the repurchase of said Preferred Stock, including resolutions authorizing each officer of the Company to execute and deliver such further documentation, and to take all such actions as any officer shall deem necessary or desirable, in furtherance of the repurchase of such Preferred Stock, which includes the execution and filing of this Certificate, and said Preferred Stock has been repurchased by the Company.
3. That no shares of said Preferred Stock are outstanding and no shares thereof will be issued subject to said Certificate of Designation.
4. That, accordingly, all matters set forth in the Certificate of Designation with respect to the Preferred Stock be, and hereby are, eliminated from the Certificate of Incorporation, as heretofore amended, of the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer this 23rd day of June, 2009.
 
MORGAN STANLEY
By: /s/ Martin M. Cohen
 Name: Martin M. Cohen
 Office: Assistant Secretary and Counsel



CERTIFICATE OF ELIMINATION OF
THE 10% SERIES B NON-CUMULATIVE NON-VOTING PERPETUAL CONVERTIBLE
PREFERRED STOCK ($1,000 LIQUIDATION PREFERENCE PER SHARE)
OF
MORGAN STANLEY
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Company”), in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, hereby certifies as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the State of Delaware and authority granted in the Certificate of Incorporation of the Company, as theretofore amended, the Board of Directors of the Company, by resolution duly adopted, authorized the issuance of a series of 7,839,209 (seven million eight hundred thirty-nine thousand two hundred nine) shares of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock, par value $0.01 per share, liquidation preference $1,000 per share (the “Preferred Stock”), and established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions thereof, and, on October 10, 2008, filed a Certificate of Designation with respect to such Preferred Stock, and, on October 13, 2008, amended such Certificate of Designation with respect to such Preferred Stock, in the office of the Secretary of State of the State of Delaware.
2. That the Board of Directors of the Company has adopted resolutions approving the conversion of said Preferred Stock into common stock of the Company, par value $0.01 per share (the “Common Stock”), including resolutions authorizing each officer of the Company to execute and deliver such further documentation, and to take all such actions as any officer shall deem necessary or desirable, in furtherance of the conversion of such Preferred Stock, which includes the execution and filing of this Certificate, and said Preferred Stock has been converted into Common Stock.
3. That no shares of said Preferred Stock are outstanding and no shares thereof will be issued subject to said Certificate of Designation.
4. That, accordingly, all matters set forth in the Certificate of Designation with respect to the Preferred Stock be, and hereby are, eliminated from the Certificate of Incorporation, as heretofore amended, of the Company.
[Remainder of Page Intentionally Blank]




IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer this 20th day of July, 2011.
 
MORGAN STANLEY
  By: /s/ Martin M. Cohen
Name: Martin M. Cohen
Title: Corporate Secretary
[Signature Page to Series B Certificate of Elimination]



STATE OF DELAWARE
CERTIFICATE OF MERGER OF
DOMESTIC CORPORATIONS
Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:
FIRST: The name of the surviving corporation is Morgan Stanley                                                 , and the name of the corporation being merged into this surviving corporation is MSDW Credit Products Inc.                                                 .
SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations.
THIRD: The name of the surviving corporation is Morgan Stanley                                         a Delaware Corporation.
FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of Incorporation.
FIFTH: The merger is to become effective on December 29, 2011                        .
SIXTH: The Agreement of Merger is on file at c/o Morgan Stanley, 1585 Broadway, New York, New York                    , the place of business of the surviving corporation.
SEVENTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.
IN WITNESS WHEREOF, said surviving Corporation has caused this certificate to be signed by an authorized officer, the 29th day of December, A.D., 2011.

By: /s/ Aaron Guth
  Authorized Officer
Name: Aaron Guth
 Print or Type
Title: Assistant Secretary

 



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES E
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on September 24, 2013, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, par value $0.01 per share, liquidation preference $25,000 per share (“Series E”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series E, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E.” Each share of Series E shall be identical in all respects to every other share of Series E, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series E shall be 34,500. Shares of Series E that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series E by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series E:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure
that there is, at all relevant times when the Series E is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series E, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(i) “Dividend Payment Date” means January 15, April 15, July 15, and October 15 of each year, subject to adjustment as described in Section 4(a).



(j) “Dividend Period” has the meaning set forth in Section 4(a).
(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series E as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means September 30, 2013.
(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series E in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”) and the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”).

(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series E.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series E as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A and the Series C. Whether a plurality, majority or other portion of the shares of Series E and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series E will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on January 15, 2014. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 7.125% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, October 15, 2023 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 4.32% with respect to each Dividend Period from and including October 15, 2023 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series E after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series E on any Dividend Payment Date will be payable to holders of record of Series E as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series E issued on the Original Issue Date will commence on and include the Original Issue Date of the Series E and will end on and



exclude the January 15, 2014 Dividend Payment Date, and (ii) for any share of Series E issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series E for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series E for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series E issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the October 15, 2023 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series E shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series E as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).

Dividends on shares of the Series E will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series E payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series E are declared for any future Dividend Period.
(b) Priority of Dividends. The Series E will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series E, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series E (issued with the requisite consent of the holders of the Series E, if required) and (iii) equally with the Series A, the Series C and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series E, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series E remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all



outstanding shares of Series E has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series E and any shares of Parity Stock, all dividends declared on the Series E and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series E and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series E, from time to time out of any funds legally available for such payment, and the Series E shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series E will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series E shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series E in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series E as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series E will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series E and all holders of any stock of the Corporation ranking equally with the Series E as to such distribution, the amounts paid to the holders of Series E and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series E and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series E and on which dividends



accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series E will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series E and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series E receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series E (i) in whole or in part, from time to time, on any Dividend Payment Date on or after October 15, 2023 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series E shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after September 24, 2013, (ii) any proposed change in those laws or regulations that is announced or becomes effective after September 24, 2013, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after September 24, 2013, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series E then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series E is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series E will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series E will have no right to require the redemption or repurchase of any shares of Series E.
(c) Notice of Redemption. Notice of every redemption of shares of Series E shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series E designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series E. Notwithstanding the foregoing, if the depositary shares representing interests in the Series E are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series E at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series E to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series E at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series E shall be redeemed from time to



time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series E so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

7. Voting Rights.
(a) General. The holders of Series E shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series E, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series E or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series E or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series E and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series E and any other class or series of Voting Preferred Stock, the holders of the Series E and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series E together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series E and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series E or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.



(c) Other Voting Rights. So long as any shares of Series E are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series E and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series E with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series E. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series E, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series E, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series E remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series E, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series E, Series A or Series C, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series E with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series E.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series E for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series E, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series E, the Corporation may amend, alter, supplement or repeal any terms of the Series E:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series E that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series E shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series E shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series E (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series E is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series E and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series E are



entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series E may deem and treat the record holder of any share of Series E as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series E shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series E shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

11. Other Rights. The shares of Series E shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 27th day of September, 2013.
 
MORGAN STANLEY
By  
 /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES F
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on December 5, 2013, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, par value $0.01 per share, liquidation preference $25,000 per share (“Series F”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series F, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F.” Each share of Series F shall be identical in all respects to every other share of Series F, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series F shall be 39,100. Shares of Series F that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series F by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series F:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure
that there is, at all relevant times when the Series F is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series F, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(i) “Dividend Payment Date” means January 15, April 15, July 15, and October 15 of each year, subject to adjustment as described in Section 4(a).
(j) “Dividend Period” has the meaning set forth in Section 4(a).



(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series F as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means December 10, 2013.
(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series F in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”) and the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”).
(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series F.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series F as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C and the Series E. Whether a plurality, majority or other portion of the shares of Series F and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series F will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on January 15, 2014. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 6.875% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, January 15, 2024 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.94% with respect to each Dividend Period from and including January 15, 2024 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series F after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series F on any Dividend Payment Date will be payable to holders of record of Series F as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series F issued on the Original Issue Date will commence on and include the Original Issue Date of the Series F and will end on and



exclude the January 15, 2014 Dividend Payment Date, and (ii) for any share of Series F issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series F for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series F for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series F issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the January 15, 2024 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series F shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series F as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series F will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series F payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series F are declared for any future Dividend Period.
(b) Priority of Dividends. The Series F will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series F, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series F (issued with the requisite consent of the holders of the Series F, if required) and (iii) equally with the Series A, the Series C, the Series E and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series F, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series F remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares



of Series F has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series F and any shares of Parity Stock, all dividends declared on the Series F and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series F and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series F, from time to time out of any funds legally available for such payment, and the Series F shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series F will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series F shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series F in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series F as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series F will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series F and all holders of any stock of the Corporation ranking equally with the Series F as to such distribution, the amounts paid to the holders of Series F and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series F and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series F and on which dividends



accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series F will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series F and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series F receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series F (i) in whole or in part, from time to time, on any Dividend Payment Date on or after January 15, 2024 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series F shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after December 5, 2013, (ii) any proposed change in those laws or regulations that is announced or becomes effective after December 5, 2013, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after December 5, 2013, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series F then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series F is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series F will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series F will have no right to require the redemption or repurchase of any shares of Series F.
(c) Notice of Redemption. Notice of every redemption of shares of Series F shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series F designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series F. Notwithstanding the foregoing, if the depositary shares representing interests in the Series F are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series F at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series F to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series F at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series F shall be redeemed from time to



time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series F so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

7. Voting Rights.
(a) General. The holders of Series F shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series F, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series F or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series F or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series F and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series F and any other class or series of Voting Preferred Stock, the holders of the Series F and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series F together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series F and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series F or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.



(c) Other Voting Rights. So long as any shares of Series F are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series F and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series F with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series F. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series F, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series F, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series F remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series F, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series F, Series A, Series C or Series E, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series F with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series F.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series F for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred
Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series F, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series F, the Corporation may amend, alter, supplement or repeal any terms of the Series F:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series F that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series F shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series F shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series F (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series F is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series F and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series F are



entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series F may deem and treat the record holder of any share of Series F as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series F shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series F shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

11. Other Rights. The shares of Series F shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.




IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 9th day of December, 2013.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer
[Signature Page to the Certificate of Designation]



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
6.625% NON-CUMULATIVE PREFERRED STOCK, SERIES G
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on April 22, 2014, the creation of 6.625% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share, liquidation preference $25,000 per share (“Series G”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series G, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “6.625% Non-Cumulative Preferred Stock, Series G.” Each share of Series G shall be identical in all respects to every other share of Series G, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series G shall be 20,000. Shares of Series G that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series G by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series G:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Certificate of Designation” means this Certificate of Designation relating to the Series G, as it may be amended or supplemented from time to time.
(e) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(f) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(g) “Dividend Payment Date” means January 15, April 15, July 15, and October 15 of each year, subject to adjustment as described in Section 4(a).
(h) “Dividend Period” has the meaning set forth in Section 4(a).
(i) “Dividend Record Date” has the meaning set forth in Section 4(a).
(j) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(k) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series G as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.



(l) “Liquidation Preference” has the meaning set forth in Section 5(b).
(m) “Nonpayment” has the meaning set forth in Section 7(b).
(n) “Original Issue Date” means April 29, 2014.
(o) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series G in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), and the Corporation’s Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”).
(p) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series G.
(q) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(r) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(s) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series G as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have
been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F and the Series H. Whether a plurality, majority or other portion of the shares of Series G and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series G will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on July 15, 2014. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 6.625%. In the event that the Corporation issues additional shares of Series G after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series G on any Dividend Payment Date will be payable to holders of record of Series G as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series G issued on the Original Issue Date will commence on and include the Original Issue Date of the Series G and will end on and exclude the July 15, 2014 Dividend Payment Date, and (ii) for any share of Series G issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series G for any Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends for the initial Dividend Period for shares of Series G issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement.
Holders of Series G shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series G as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series G will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series G payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for



that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series G are declared for any future Dividend Period.

(b) Priority of Dividends. The Series G will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series G, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series G (issued with the requisite consent of the holders of the Series G, if required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series H and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series G, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series G remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series G has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series G and any shares of Parity Stock, all dividends declared on the Series G and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series G and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.

Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series G, from time to time out of any funds legally available for such payment, and the Series G shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series G will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series G shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series G in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series G as to such distribution, a liquidating distribution in an



amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series G will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series G and all holders of any stock of the Corporation ranking equally with the Series G as to such distribution, the amounts paid to the holders of Series G and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series G and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series G and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series G will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series G and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series G receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series G (i) in whole or in part, from time to time, on any Dividend Payment Date on or after July 15, 2019 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series G shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after April 22, 2014, (ii) any proposed change in those laws or regulations that is announced or becomes effective after April 22, 2014, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after April 22, 2014, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series G then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series G is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series G will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series G will have no right to require the redemption or repurchase of any shares of Series G.

(c) Notice of Redemption. Notice of every redemption of shares of Series G shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for



redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series G designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series G. Notwithstanding the foregoing, if the depositary shares representing interests in the Series G are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series G at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series G to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series G at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series G shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series G so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Voting Rights.
(a) General. The holders of Series G shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series G, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series G or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series G or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series G and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series G and any other class or series of Voting Preferred Stock, the holders of the Series G and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by



the holders of record of a majority of the outstanding shares of the Series G together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series G and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series G or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series G are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series G and any Voting Preferred Stock at the time outstanding
and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series G with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series G. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series G, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series G, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series G remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series G, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series G, Series A, Series C, Series E, Series F, or Series H or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series G with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series G.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series G for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.

(d) Changes for Clarification. Without the consent of the holders of the Series G, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series G, the Corporation may amend, alter, supplement or repeal any terms of the Series G:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series G that is not inconsistent with the provisions of this Certificate of Designation.



(e) Changes after Provision for Redemption. No vote or consent of the holders of Series G shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series G shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series G (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series G is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series G and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series G are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series G may deem and treat the record holder of any share of Series G as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series G shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series G shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11. Other Rights. The shares of Series G shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 28th day of April, 2014.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer
[Signature Page to Series G Certificate of Designation]



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES H
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on April 22, 2014, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, par value $0.01 per share, liquidation preference $25,000 per share (“Series H”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series H, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H.” Each share of Series H shall be identical in all respects to every other share of Series H, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series H shall be 52,000. Shares of Series H that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series H by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series H:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure
that there is, at all relevant times when the Series H is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series H, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(i) “Dividend Payment Date” means January 15 and July 15 of each year, commencing on July 15, 2014 and ending on July 15, 2019 and thereafter January 15, April 15, July 15, and October 15 of each year, subject to adjustment as described in Section 4(a).



(j) “Dividend Period” has the meaning set forth in Section 4(a).
(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series H as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means April 29, 2014.
(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series H in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), and the Corporation’s 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (“Series G”).
(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series H.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series H as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F and the Series G. Whether a plurality, majority or other portion of the shares of Series H and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series H will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, semi-annually in arrears on the 15th day of January and July of each year, commencing on July 15, 2014 and ending on July 15, 2019 and thereafter quarterly in arrears on the 15th day of January, April, July and October of each year. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 5.45% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, July 15, 2019 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.61% with respect to each Dividend Period from and including July 15, 2019 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series H after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series H on any Dividend Payment Date will be payable to holders of record of Series H as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized



committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).

A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series H issued on the Original Issue Date will commence on and include the Original Issue Date of the Series H and will end on and exclude the July 15, 2014 Dividend Payment Date, and (ii) for any share of Series H issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series H for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series H for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series H issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the July 15, 2019 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.

The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series H shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series H as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series H will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series H payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series H are declared for any future Dividend Period.
(b) Priority of Dividends. The Series H will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series H, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series H (issued with the requisite consent of the holders of the Series H, if



required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series G and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series H, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series H remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series H has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series H and any shares of Parity Stock, all dividends declared on the Series H and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series H and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series H, from time to time out of any funds legally available for such payment, and the Series H shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series H will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series H shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series H in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series H as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series H will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.




(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series H and all holders of any stock of the Corporation ranking equally with the Series H as to such distribution, the amounts paid to the holders of Series H and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series H and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series H and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series H will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series H and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series H receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series H (i) in whole or in part, from time to time, on any Dividend Payment Date on or after July 15, 2019 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series H shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after April 22, 2014, (ii) any proposed change in those laws or regulations that is announced or becomes effective after April 22, 2014, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after April 22, 2014, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series H then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series H is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series H will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series H will have no right to require the redemption or repurchase of any shares of Series H.
(c) Notice of Redemption. Notice of every redemption of shares of Series H shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series H designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series H. Notwithstanding the foregoing, if the depositary shares representing interests in the Series H are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series H at such time and in any manner permitted by such facility. Each such notice



given to a holder shall state: (1) the redemption date; (2) the number of shares of Series H to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series H at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series H shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series H so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Voting Rights.
(a) General. The holders of Series H shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series H, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series H or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series H or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series H and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series H and any other class or series of Voting Preferred Stock, the holders of the Series H and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series H together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series H and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy



shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series H or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series H are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series H and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series H with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series H. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series H, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series H, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series H remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series H, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series H, Series A, Series C, Series E, Series F, or Series G, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series H with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series H.

If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series H for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series H, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series H, the Corporation may amend, alter, supplement or repeal any terms of the Series H:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series H that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series H shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series H shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.



(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series H (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series H is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series H and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series H are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series H may deem and treat the record holder of any share of Series H as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series H shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.

10. No Preemptive Rights. No share of Series H shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11. Other Rights. The shares of Series H shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 28th day of April, 2014.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer
[Signature Page to Series H Certificate of Designation]



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES I
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on September 11, 2014, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, par value $0.01 per share, liquidation preference $25,000 per share (“Series I”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series I, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I.” Each share of Series I shall be identical in all respects to every other share of Series I, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series I shall be 46,000. Shares of Series I that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series I by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series I:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time
and from time to time, provided that the Corporation shall use its best efforts to ensure that there is, at all relevant times when the Series I is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series I, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(i) “Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year, subject to adjustment as described in Section 4(a).



(j) “Dividend Period” has the meaning set forth in Section 4(a).
(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series I as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means September 18, 2014.
(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series I in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (“Series G”), and the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”).
(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series I.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series I as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series G and the Series H. Whether a plurality, majority or other portion of the shares of Series I and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series I will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on January 15, 2015. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 6.375% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, October 15, 2024 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.708% with respect to each Dividend Period from and including October 15, 2024 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series I after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series I on any Dividend Payment Date will be payable to holders of record of Series I as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of



the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).

A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series I issued on the Original Issue Date will commence on and include the Original Issue Date of the Series I and will end on and exclude the January 15, 2015 Dividend Payment Date, and (ii) for any share of Series I issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series I for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series I for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series I issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the October 15, 2024 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series I shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series I as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series I will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series I payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series I are declared for any future Dividend Period.
(b) Priority of Dividends. The Series I will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series I, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series I (issued with the requisite consent of the holders of the Series I, if required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series G, the Series H and each other



class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series I, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series I remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series I has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series I and any shares of Parity Stock, all dividends declared on the Series I and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series I and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series I, from time to time out of any funds legally available for such payment, and the Series I shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series I will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series I shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series I in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series I as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series I will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series I and all



holders of any stock of the Corporation ranking equally with the Series I as to such distribution, the amounts paid to the holders of Series I and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series I and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series I and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series I will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series I and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series I receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series I (i) in whole or in part, from time to time, on any Dividend Payment Date on or after October 15, 2024 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series I shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after September 11, 2014, (ii) any proposed change in those laws or regulations that is announced or becomes effective after September 11, 2014, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after September 11, 2014, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series I then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series I is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series I will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series I will have no right to require the redemption or repurchase of any shares of Series I.
(c) Notice of Redemption. Notice of every redemption of shares of Series I shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series I designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series I. Notwithstanding the foregoing, if the depositary shares representing interests in the Series I are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series I at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series I to be redeemed and, if less than all the



shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series I at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series I shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series I so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Voting Rights.
(a) General. The holders of Series I shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series I, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series I or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series I or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series I and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series I and any other class or series of Voting Preferred Stock, the holders of the Series I and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series I together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series I and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent



directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series I or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series I are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series I and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series I with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series I. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series I, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series I, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series I remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series I, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series I, Series A, Series C, Series E, Series F, Series G, or Series H, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series I with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series I.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series I for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series I, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series I, the Corporation may amend, alter, supplement or repeal any terms of the Series I:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series I that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series I shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series I shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series I (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or



such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series I is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series I and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series I are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.

8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series I may deem and treat the record holder of any share of Series I as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series I shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series I shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11. Other Rights. The shares of Series I shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 17th day of September, 2014.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer
Signature Page to Certificate of Designation



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES J
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on March 12, 2015, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, par value $0.01 per share, liquidation preference $25,000 per share (“Series J”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series J, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J.” Each share of Series J shall be identical in all respects to every other share of Series J, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series J shall be 60,000. Shares of Series J that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series J by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series J:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure
that there is, at all relevant times when the Series J is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series J, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.



(i) “Dividend Payment Date” means January 15 and July 15 of each year, commencing on July 15, 2015 and ending on July 15, 2020 and thereafter January 15, April 15, July 15 and October 15 of each year, subject to adjustment as described in Section 4(a).
(j) “Dividend Period” has the meaning set forth in Section 4(a).
(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series J as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means March 19, 2015.
(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series J in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (“Series G”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”) and the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”).
(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series J.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series J as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series G, the Series H and the Series I. Whether a plurality, majority or other portion of the shares of Series J and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.
(a) Rate. Holders of Series J will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, semi-annually in arrears on the 15th day of January and July of each year, commencing on July 15, 2015 and ending on July 15, 2020 and thereafter quarterly in arrears on the 15th day of January, April, July and October of each year. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 5.55% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, July 15, 2020 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.81% with respect to each Dividend Period from and including July 15, 2020 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series J after the Original Issue Date, dividends on



such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series J on any Dividend Payment Date will be payable to holders of record of Series J as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series J issued on the Original Issue Date will commence on and include the Original Issue Date of the Series J and will end on and exclude the July 15, 2015 Dividend Payment Date, and (ii) for any share of Series J issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series J for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series J for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series J issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the July 15, 2020 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series J shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series J as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series J will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series J payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for



that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series J are declared for any future Dividend Period.
(b) Priority of Dividends. The Series J will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series J, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series J (issued with the requisite consent of the holders of the Series J, if required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series G, the Series H, the Series I and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series J, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series J remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series J has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
 
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series J and any shares of Parity Stock, all dividends declared on the Series J and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series J and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series J, from time to time out of any funds legally available for such payment, and the Series J shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series J will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series J shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series J in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series J as to such distribution, a liquidating distribution in an



amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series J will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series J and all holders of any stock of the Corporation ranking equally with the Series J as to such distribution, the amounts paid to the holders of Series J and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series J and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series J and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series J will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series J and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series J receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series J (i) in whole or in part, from time to time, on any Dividend Payment Date on or after July 15, 2020 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series J shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after March 12, 2015, (ii) any proposed change in those laws or regulations that is announced or becomes effective after March 12, 2015, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after March 12, 2015, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series J then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series J is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series J will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series J will have no right to require the redemption or repurchase of any shares of Series J.
(c) Notice of Redemption. Notice of every redemption of shares of Series J shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether



or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series J designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series J. Notwithstanding the foregoing, if the depositary shares representing interests in the Series J are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series J at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series J to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series J at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series J shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series J so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Voting Rights.
(a) General. The holders of Series J shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series J, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series J or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series J or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series J and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series J and any other class or series of Voting Preferred Stock, the holders of the Series J and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series J together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as



a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series J and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series J or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series J are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series J and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series J with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series J. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series J, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series J, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series J remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series J, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series J, Series A, Series C, Series E, Series F, Series G, Series H or Series I, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series J with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series J.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series J for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series J, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series J, the Corporation may amend, alter, supplement or repeal any terms of the Series J:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the Series J that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series J shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent



would otherwise be required pursuant to such Section, all outstanding shares of Series J shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series J (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series J is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series J and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series J are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series J may deem and treat the record holder of any share of Series J as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

9. Notices. All notices or communications in respect of Series J shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series J shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11. Other Rights. The shares of Series J shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 18th day of March, 2015.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
 Title: Assistant Treasurer
Signature Page to Certificate of Designation



CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES K
(Liquidation Preference $25,000 per share)
OF
MORGAN STANLEY
 
 
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
 
 
Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on January 24, 2017, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, par value $0.01 per share, liquidation preference $25,000 per share (“Series K”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series K, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1. Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K.” Each share of Series K shall be identical in all respects to every other share of Series K, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2. Number of Shares. The authorized number of shares of Series K shall be 40,000. Shares of Series K that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series K by any subsidiary of the Corporation.
3. Definitions. As used herein with respect to Series K:
(a) “Board of Directors” means the board of directors of the Corporation.
(b) “Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c) “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.

(d) “Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure that there is, at all relevant times when the Series K is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) “Certificate of Designation” means this Certificate of Designation relating to the Series K, as it may be amended or supplemented from time to time.
(f) “Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.



(h) “Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.
(i) “Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year, subject to adjustment as described in Section 4(a).
(j) “Dividend Period” has the meaning set forth in Section 4(a).
(k) “Dividend Record Date” has the meaning set forth in Section 4(a).
(l) “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(m) “Fixed Rate Period” has the meaning set forth in Section 4(a).
(n) “Floating Rate Period” has the meaning set forth in Section 4(a).
(o) “Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series K as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(p) “LIBOR” has the meaning set forth in Section 4(a).
(q) “Liquidation Preference” has the meaning set forth in Section 5(b).
(r) “London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.
(s) “Nonpayment” has the meaning set forth in Section 7(b).
(t) “Original Issue Date” means January 31, 2017.

(u) “Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series K in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (“Series G”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”) and the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, liquidation preference $25,000 per share (“Series J”).
(v) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series K.
(w) “Preferred Stock Directors” has the meaning set forth in Section 7(b).
(x) “Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(y) “Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series K as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series G, the Series H, the Series I and the Series J. Whether a plurality, majority or other portion of the shares of Series K and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4. Dividends.



(a) Rate. Holders of Series K will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on April 15, 2017. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 5.850% with respect to each Dividend Period from and including the Original Issue Date to, but excluding, April 15, 2027 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.491% with respect to each Dividend Period from and including April 15, 2027 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series K after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series K on any Dividend Payment Date will be payable to holders of record of Series K as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series K issued on the Original Issue Date will commence on and include the Original Issue Date of the Series K and will end on and exclude the April 15, 2017 Dividend Payment Date, and (ii) for any share of Series K issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series K for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series K for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series K issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date up to and including the April 15, 2027 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i) LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.
(ii) If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate.



The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series K shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series K as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series K will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series K payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series K are declared for any future Dividend Period.
(b) Priority of Dividends. The Series K will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series K, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series K (issued with the requisite consent of the holders of the Series K, if required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series G, the Series H, the Series I, the Series J and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series K, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series K remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series K has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series K and any shares of Parity Stock, all dividends declared on the Series K and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series K and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and



any stock ranking, as to dividends, equally with or junior to the Series K, from time to time out of any funds legally available for such payment, and the Series K shall not be entitled to participate in any such dividends.
(c) Restrictions on the Payment of Dividends. Dividends on the Series K will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.

5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series K shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series K in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series K as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series K will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series K and all holders of any stock of the Corporation ranking equally with the Series K as to such distribution, the amounts paid to the holders of Series K and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series K and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series K and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series K will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series K and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series K receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

6. Redemption.
(a) Optional Redemption. The Corporation may, at its option, redeem the Series K (i) in whole or in part, from time to time, on any Dividend Payment Date on or after April 15, 2027 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series K shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.



A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after January 24, 2017, (ii) any proposed change in those laws or regulations that is announced or becomes effective after January 24, 2017, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after January 24, 2017, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series K then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series K is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b) No Sinking Fund. The Series K will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series K will have no right to require the redemption or repurchase of any shares of Series K.
(c) Notice of Redemption. Notice of every redemption of shares of Series K shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series K designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series K. Notwithstanding the foregoing, if the depositary shares representing interests in the Series K are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series K at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series K to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series K at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series K shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series K so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7. Voting Rights.
(a) General. The holders of Series K shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series K, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a



majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series K or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series K or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series K and any such series of Voting Preferred Stock shall have been fully paid for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid on the Series K and any other class or series of Voting Preferred Stock, the holders of the Series K and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series K together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series K and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series K or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c) Other Voting Rights. So long as any shares of Series K are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series K and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series K with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;

(ii) Amendment of Series K. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series K, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series K, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series K remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series K, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series K, Series A, Series C, Series E, Series F, Series G, Series H, Series I or Series J, or the creation and issuance, or an increase in



the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series K with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series K.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series K for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d) Changes for Clarification. Without the consent of the holders of the Series K, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series K, the Corporation may amend, alter, supplement or repeal any terms of the Series K:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or

(ii) to make any provision with respect to matters or questions arising with respect to the Series K that is not inconsistent with the provisions of this Certificate of Designation.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series K shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series K shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series K (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series K is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series K and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series K are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series K may deem and treat the record holder of any share of Series K as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9. Notices. All notices or communications in respect of Series K shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10. No Preemptive Rights. No share of Series K shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11. Other Rights. The shares of Series K shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



IN WITNESS WHEREOF, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 30th day of January, 2017.
 
MORGAN STANLEY
By /s/ Kevin Sheehan
 Name: Kevin Sheehan
Title: Assistant Treasurer



STATE OF DELAWARE
CERTIFICATE OF MERGER OF
DOMESTIC LIMITED LIABILITY COMPANY
INTO A
DOMESTIC CORPORATION
Pursuant to Title 8, Section 264(c) of the Delaware General Corporation Law and Title 6, Section 18-209 of the Delaware Limited Liability Company Act, the undersigned corporation executed the following Certificate of Merger:
FIRST: The name of the surviving corporation is Morgan Stanley, a Delaware Corporation, and the name of the limited liability company being merged into this surviving corporation is Morgan Stanley Portfolio Management LLC.
SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by the surviving corporation and the merging limited liability company.
THIRD: The name of the surviving corporation is Morgan Stanley.
FOURTH: The merger is to become effective on upon filing.
FIFTH: The Agreement of Merger is on file at 1585 Broadway New York, NY 10036, the place of business of the surviving corporation.
SIXTH: A copy of the Agreement of Merger will be furnished by the corporation on request, without cost, to any stockholder of any constituent corporation or member of any constituent limited liability company.
SEVENTH: The Certificate of Incorporation of the surviving corporation shall be it’s Certificate of Incorporation
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed by an authorized officer, the 27th day of April, A.D., 2017.
 
By: /s/ Aaron Guth
  Authorized Officer
Name: Aaron Guth
 Print or Type
Title: Assistant Secretary





CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
4.875% NON-CUMULATIVE PREFERRED STOCK, SERIES L


(Liquidation Preference $25,000 per share)


OF


MORGAN STANLEY
_________________________

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware
_________________________


Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on November 18, 2019, the creation of 4.875% Non-Cumulative Preferred Stock, Series L, par value $0.01 per share, liquidation preference $25,000 per share (“Series L”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series L, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1.Designation. The distinctive serial designation of such series of preferred stock is “4.875% Non-Cumulative Preferred Stock, Series L.” Each share of Series L shall be identical in all respects to every other share of Series L, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.

2.Number of Shares. The authorized number of shares of Series L shall be 20,000. Shares of Series L that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series L by any subsidiary of the Corporation.

3.Definitions. As used herein with respect to Series L:

(a)Board of Directors” means the board of directors of the Corporation.

(b)Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.

(c)Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.

(d)Certificate of Designation” means this Certificate of Designation relating to the Series L, as it may be amended or supplemented from time to time.




(e)Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.

(f)Common Stock” means the common stock, par value $0.01 per share, of the Corporation.

(g)Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year, subject to adjustment as described in Section 4(a).

(h)Dividend Period” has the meaning set forth in Section 4(a).

(i)Dividend Record Date” has the meaning set forth in Section 4(a).

(j)Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

(k)Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series L as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.

(l)Liquidation Preference” has the meaning set forth in Section 5(b).

(m)Nonpayment” has the meaning set forth in Section 7(b).

(n)Original Issue Date” means November 25, 2019.

(o)Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series L in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (“Series G”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, liquidation preference $25,000 per share (“Series J”) and the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, liquidation preference $25,000 per share (“Series K”).

(p)Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series L.

(q)Preferred Stock Directors” has the meaning set forth in Section 7(b).




(r)Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).

(s)Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series L as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series G, the Series H, the Series I, the Series J and the Series K. Whether a plurality, majority or other portion of the shares of Series L and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.

4.Dividends.

(a)Rate. Holders of Series L will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on January 15, 2020. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 4.875%. In the event that the Corporation issues additional shares of Series L after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.

Dividends that are payable on Series L on any Dividend Payment Date will be payable to holders of record of Series L as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series L issued on the Original Issue Date will commence on and include the Original Issue Date of the Series L and will end on and exclude the January 15, 2020 Dividend Payment Date, and (ii) for any share of Series L issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series L for any Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends for the initial Dividend Period for shares of Series L issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement.
Holders of Series L shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series L as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series L will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series L payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series L are declared for any future Dividend Period.
(b)Priority of Dividends. The Series L will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series L, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series L (issued with the requisite consent of the holders of the Series L, if required) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series G, the Series H, the Series I, the Series J, the Series K and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series L, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.




So long as any share of Series L remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series L has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;
the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;
any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or
any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series L and any shares of Parity Stock, all dividends declared on the Series L and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series L and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series L, from time to time out of any funds legally available for such payment, and the Series L shall not be entitled to participate in any such dividends.
(a)Restrictions on the Payment of Dividends. Dividends on the Series L will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.

5.Liquidation Rights.

(a)Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series L shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series L in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is



made to or set aside for the holders of Common Stock and any other classes or series of capital stock of the Corporation ranking junior to the Series L as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series L will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.

(b)Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series L and all holders of any stock of the Corporation ranking equally with the Series L as to such distribution, the amounts paid to the holders of Series L and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series L and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series L and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series L will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.

(c)Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series L and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series L receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

6.Redemption.

(a)Optional Redemption. The Corporation may, at its option, redeem the Series L (i) in whole or in part, from time to time, on any Dividend Payment Date on or after January 15, 2025 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series L shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after November 18, 2019, (ii) any proposed change in those laws or regulations that is announced or becomes effective after November 18, 2019, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after November 18, 2019, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series L then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series L is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.



(b)No Sinking Fund. The Series L will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series L will have no right to require the redemption or repurchase of any shares of Series L.

(c)Notice of Redemption. Notice of every redemption of shares of Series L shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series L designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series L. Notwithstanding the foregoing, if the depositary shares representing interests in the Series L are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series L at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series L to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d)Partial Redemption. In case of any redemption of only part of the shares of Series L at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series L shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e)Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series L so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

7.Voting Rights.

(a)General. The holders of Series L shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.

(b)Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series L, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series L or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series L or other Voting Preferred Stock, and delivered to the Secretary of the



Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series L and any such series of Voting Preferred Stock shall have been fully paid for at least four consecutive regular dividend periods following the Nonpayment.

If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid on the Series L and any other class or series of Voting Preferred Stock, the holders of the Series L and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series L together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series L and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series L or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c)Other Voting Rights. So long as any shares of Series L are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series L and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i)    Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series L with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii)    Amendment of Series L. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series L, taken as a whole; or
(iii)    Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series L, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series L remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series L, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series L, Series A, Series C, Series E, Series F, Series G, Series H, Series I, Series J or Series K, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series L with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be



deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series L.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series L for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d)Changes for Clarification. Without the consent of the holders of the Series L, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series L, the Corporation may amend, alter, supplement or repeal any terms of the Series L:

(i)    to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii)    to make any provision with respect to matters or questions arising with respect to the Series L that is not inconsistent with the provisions of this Certificate of Designation.
(e)Changes after Provision for Redemption. No vote or consent of the holders of Series L shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series L shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.

(f)Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series L (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series L is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series L and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series L are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.

8.Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series L may deem and treat the record holder of any share of Series L as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

9.Notices. All notices or communications in respect of Series L shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.

10.No Preemptive Rights. No share of Series L shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

11.Other Rights. The shares of Series L shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



In Witness Whereof, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 22nd day of November, 2019.


MORGAN STANLEY
By/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer







CERTIFICATE OF ELIMINATION OF
THE 6.625% NON-CUMULATIVE PREFERRED STOCK, SERIES G,
OF
MORGAN STANLEY
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Company”), in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, hereby certifies as follows:
1.That, pursuant to Section 151 of the General Corporation Law of the State of Delaware and authority granted in the Certificate of Incorporation of the Company, as theretofore amended, the Board of Directors of the Company, by resolution duly adopted, authorized the issuance of a series of 20,000 (twenty thousand) shares of 6.625% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share, liquidation preference $25,000 per share (the “Preferred Stock”), and established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions thereof, and, on April 28, 2014, filed a Certificate of Designation with respect to such Preferred Stock in the office of the Secretary of State of the State of Delaware.

2.That, pursuant to the authority conferred upon the Preferred Stock Financing Committee of the Board of Directors of the Company (the “Preferred Stock Financing Committee”) by the Board of Directors of the Company, the Preferred Stock Financing Committee has adopted resolutions authorizing the issuance of said Preferred Stock (including the terms upon which said Preferred Stock shall be redeemable), including resolutions authorizing each officer of the Company to take any and all actions, to execute and deliver any and all documents, agreements and instruments and to take any and all steps deemed by any such officer to be necessary or desirable to carry out the purpose and intent of such resolutions, which includes the execution and filing of this Certificate, and said Preferred Stock has been redeemed by the Company.

3.That no shares of said Preferred Stock are outstanding and no shares thereof will be issued subject to said Certificate of Designation.

4.That, accordingly, all matters set forth in the Certificate of Designation with respect to the Preferred Stock be, and hereby are, eliminated from the Certificate of Incorporation, as heretofore amended, of the Company.

[Remainder of Page Intentionally Blank]



IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer this 15th day of January, 2020.
MORGAN STANLEY
By:/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer




CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES M


(Liquidation Preference $1,000 per share)


OF


MORGAN STANLEY
_________________________

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware
_________________________


Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Board of Directors of the Corporation adopted on February 19, 2020, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M, par value $0.01 per share, liquidation preference $1,000 per share (“Series M”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series M, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1.Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M.” Each share of Series M shall be identical in all respects to every other share of Series M, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.

2.Number of Shares. The authorized number of shares of Series M shall be 400,000. Shares of Series M that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series M by any subsidiary of the Corporation.

3.Definitions. As used herein with respect to Series M:

(a)Board of Directors” means the board of directors of the Corporation.

(b)Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.

(c)Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.

(d)Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure that there is, at all relevant times when the Series M is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.

(e)Certificate of Designation” means this Certificate of Designation relating to the Series M, as it may be amended or supplemented from time to time.

(f)Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.



(g)Common Stock” means the common stock, par value $0.01 per share, of the Corporation.

(h)Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.

(i)Dividend Payment Date” means March 15 and September 15 of each year, commencing on March 15, 2021 and ending on September 15, 2026 and thereafter March 15, June 15, September 15 and December 15 of each year, subject to adjustment as described in Section 4(a).

(j)Dividend Period” has the meaning set forth in Section 4(a).

(k)Dividend Record Date” has the meaning set forth in Section 4(a).

(l)Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

(m)Fixed Rate Period” has the meaning set forth in Section 4(a).

(n)Floating Rate Period” has the meaning set forth in Section 4(a).

(o)Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series M as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.

(p)LIBOR” has the meaning set forth in Section 4(a).

(q)Liquidation Preference” has the meaning set forth in Section 5(b).

(r)London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.

(s)Nonpayment” has the meaning set forth in Section 7(b).

(t)Original Issue Date” means October 2, 2020.

(u)Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series M in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity Stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, liquidation preference $25,000 per share (“Series J”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, liquidation preference $25,000 per share (“Series K”), the Corporation’s previously issued 4.875% Non-Cumulative Preferred Stock, Series L, liquidation preference $25,000 per share (“Series L”) and the Corporation’s Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series N, liquidation preference $100,000 per share (“Series N”).

(v)Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series M.

(w)Preferred Stock Directors” has the meaning set forth in Section 7(b).

(x)Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).



(y)Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series M as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series J, the Series K, the Series L and the Series N. Whether a plurality, majority or other portion of the shares of Series M and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.

4.Dividends.

(a)Rate. Holders of Series M will be entitled to receive, only when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from September 15, 2020 (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, semi-annually in arrears on the 15th day of March and September of each year, commencing on March 15, 2021 and ending on September 15, 2026 and thereafter quarterly in arrears on the 15th day of March, June, September and December of each year. These dividends will accrue on the liquidation preference amount of $1,000 per share at a rate per annum equal to 5.875% with respect to each Dividend Period from and including September 15, 2020 to, but excluding, September 15, 2026 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 4.435% with respect to each Dividend Period from and including September 15, 2026 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series M after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
    
References to the “accrual” (or similar terms) of dividends in this Certificate of Designation refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
Dividends that are payable on Series M on any Dividend Payment Date will be payable to holders of record of Series M as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series M issued on the Original Issue Date will commence on and include September 15, 2020 and will end on and exclude the March 15, 2021 Dividend Payment Date, and (ii) for any share of Series M issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series M for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series M for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series M issued on the Original Issue Date will be calculated from September 15, 2020. If any scheduled Dividend Payment Date up to and including the September 15, 2026 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends, if so declared, will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i)    LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.



(ii)    If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If the banks so selected by the Calculation Agent are not quoting as set forth above, LIBOR for that Dividend Determination Date will be the same as LIBOR for the immediately preceding Dividend Period, or, if there was no such Dividend Period, the dividend payable will be based on the initial dividend rate. The Calculation Agent’s determination of LIBOR and the calculation of the amount of dividends for each Dividend Period shall be final and binding absent manifest error.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series M shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series M as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series M will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series M payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series M are declared for any future Dividend Period.
(b)Priority of Dividends. The Series M will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series M, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series M (issued with the requisite consent of the holders of the Series M) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series J, the Series K, the Series L, the Series N and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series M, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. If at any time the Corporation has failed to pay, on the applicable Dividend Payment Date, accrued dividends on any shares that rank senior in priority to the Series M with respect to dividends, the Corporation may not pay any dividends on the Series M or redeem or otherwise repurchase any shares of Series M until the Corporation has paid or set aside for payment the full amount of the unpaid dividends on the shares that rank senior in priority with respect to dividends that must, under the terms of such shares, be paid before the Corporation may pay dividends on, or redeem or repurchase, the Series M.

So long as any share of Series M remains outstanding, no dividend or distribution shall be paid or declared or funds set aside for payment on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, and no shares of Parity Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, other than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Preferred Stock and such Parity Stock during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series M has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation with respect to the Junior Stock shall not apply to:



repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment plan or stockholder stock purchase plan;

purchases or repurchases of shares of Junior Stock pursuant to a contractually binding requirement to buy Junior Stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;

an exchange, redemption, reclassification or conversion of any class or series of Junior Stock for any class or series of Junior Stock;

the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;

any declaration of a dividend payable solely in Junior Stock in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan (so long as such right to stock or other property only consists of Junior Stock or the right to purchase Junior Stock), or the redemption or repurchase of rights pursuant to the plan; or

any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

        The foregoing limitation with respect to the Parity Stock shall not apply to:
purchases or repurchases of shares of Parity Stock pursuant to a contractually binding requirement to buy Parity Stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;

an exchange, redemption, reclassification or conversion of any class or series of Parity Stock for any class or series of Parity Stock;

the purchase of fractional interests in shares of Parity Stock under the conversion or exchange provisions of Parity Stock or the security being converted or exchanged; or

any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, (i) to engage in any market-making transactions in Junior Stock or Parity Stock in the ordinary course of business or (ii) to acquire record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than for the beneficial ownership by the Corporation or any subsidiaries of the Corporation), including as trustees or custodians.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) in full upon the Series M and any shares of Parity Stock, all dividends declared on the Series M and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series M and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.



Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series M, from time to time out of any funds legally available for such payment, and the Series M shall not be entitled to participate in any such dividends.
(a)Restrictions on the Payment of Dividends. Dividends on the Series M may be subject to the Corporation’s receipt of required prior approval by the Federal Reserve Board (or any successor appropriate federal banking agency) and will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.

5.Liquidation Rights.

(a)Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series M shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series M in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any of Junior Stock, a liquidating distribution in an amount equal to $1,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series M will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.

The Series M may be fully subordinated to interests held by the U.S. government in the event of a receivership, insolvency, liquidation, or similar proceeding, including a proceeding under the “orderly liquidation authority” provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended.
(b)Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series M and all holders of any stock of the Corporation ranking equally with the Series M as to such distribution, the amounts paid to the holders of Series M and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series M and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of preferred stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series M and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series M will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.

(c)Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series M and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series M receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

6.Redemption.




(a)Optional Redemption. The Corporation may, at its option, redeem the Series M (i) in whole or in part, from time to time, on any Dividend Payment Date on or after September 15, 2026 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $1,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series M shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the Original Issue Date, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the Original Issue Date, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the Original Issue Date, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $1,000 per share of Series M then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series M is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b)No Sinking Fund. The Series M will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series M will have no right to require the redemption or repurchase of any shares of Series M.

(c)Notice of Redemption. Notice of every redemption of shares of Series M shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be not less than 30 days nor more than 60 days before the date fixed for redemption, provided that, if the shares of Series M are held in book-entry form through The Depository Trust Company (“DTC”), the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series M designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series M. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series M to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d)Regulatory Approval. Any redemption of the Series M is subject to the Corporation’s receipt of required prior approval, if any, by the Federal Reserve Board (or any successor appropriate federal banking agency), and to the satisfaction of conditions, if any, set forth in the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the redemption of the Series M.

(e)Partial Redemption. In case of any redemption of only part of the shares of Series M at the time outstanding, the shares to be redeemed shall be selected pro rata, provided that, if the shares of Series M are held in book-entry form through DTC, the shares of Series M to be redeemed shall be selected in accordance with DTC procedures. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series M shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.




(f)Effectiveness of Redemption. If notice of redemption has been duly given and if on or prior to the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series M so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

7.Voting Rights.

(a)General. The holders of Series M shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law. For the avoidance of doubt, the shares of Series M shall not be entitled to vote generally in the election of directors, including following Nonpayment events.

(b)Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series M, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of three semi-annual or six quarterly full dividend payments, whether or not for consecutive Dividend Periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s Common Stock may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors (to the extent that such requirements are then applicable to the Corporation). In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the then outstanding shares of Series M or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series M or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series M and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following the Nonpayment.

If and when dividends for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series M and any other class or series of Voting Preferred Stock, the holders of the Series M and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following a Nonpayment, the Corporation may take account of any dividend payment (at the same rate and amount otherwise payable on the Series M) it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series M together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series M and all Voting Preferred Stock when they have the voting rights described above (voting together as a



single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s Common Stock may be listed) that listed companies must have a majority of independent directors (to the extent such requirements are then applicable to the Corporation). Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series M or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c)Other Voting Rights. So long as any shares of Series M are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series M and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting (to the extent permitted by the procedures for voting and consents in Section 7(f) below) or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i)    Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series M with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii)    Amendment of Series M. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series M, taken as a whole; or
(iii)    Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series M, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series M remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series M, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series M, Series A, Series C, Series E, Series F, Series H, Series I, Series J, Series K, Series L or Series N, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series M with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series M.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series M for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and two-thirds approval of each series that will have a diminished status.
(d)Changes for Clarification. Without the consent of the holders of the Series M, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series M, the Corporation may amend, alter, supplement or repeal any terms of the Series M to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent.




(e)Changes after Provision for Redemption. No vote or consent of the holders of Series M shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series M shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.

(f)Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series M (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series M is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series M and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series M are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.

8.Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series M may deem and treat the record holder of any share of Series M as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

9.Notices. All notices or communications in respect of Series M shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.

10.No Conversion Rights. The Series M will not be convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Corporation.

11.No Preemptive Rights. No share of Series M shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

12.Other Rights. The shares of Series M shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.

13.Effectiveness. This Certificate of Designation shall become effective as of October 2, 2020.



























In Witness Whereof, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 1st day of October, 2020.


                            
MORGAN STANLEY
By/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer




CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES N


(Liquidation Preference $100,000 per share)


OF


MORGAN STANLEY
_________________________

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware
_________________________


Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Board of Directors of the Corporation adopted on February 19, 2020, the creation of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series N, par value $0.01 per share, liquidation preference $100,000 per share (“Series N”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series N, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1.Designation. The distinctive serial designation of such series of preferred stock is “Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series N.” Each share of Series N shall be identical in all respects to every other share of Series N, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.

2.Number of Shares. The authorized number of shares of Series N shall be 3,000. Shares of Series N that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series N by any subsidiary of the Corporation.

3.Definitions. As used herein with respect to Series N:

(a)Board of Directors” means the board of directors of the Corporation.

(b)Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.

(c)Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.

(d)Calculation Agent” means, at any time, the person or entity appointed by the Corporation and serving as such agent at such time. The Corporation may terminate any such appointment and may appoint a successor agent at any time and from time to time, provided that the Corporation shall use its best efforts to ensure that there is, at all relevant times when the Series N is outstanding, a person or entity appointed and serving as such agent. The Calculation Agent may be a person or entity affiliated with the Corporation.

(e)Certificate of Designation” means this Certificate of Designation relating to the Series N, as it may be amended or supplemented from time to time.

(f)Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.




(g)Common Stock” means the common stock, par value $0.01 per share, of the Corporation.

(h)Dividend Determination Date” means, for each Dividend Period during the Floating Rate Period, the second London Business Day immediately preceding the first day of such Dividend Period.

(i)Dividend Payment Date” means March 15 and September 15 of each year, commencing on March 15, 2021 and ending on March 15, 2023 and thereafter March 15, June 15, September 15 and December 15 of each year, subject to adjustment as described in Section 4(a).

(j)Dividend Period” has the meaning set forth in Section 4(a).

(k)Dividend Record Date” has the meaning set forth in Section 4(a).

(l)Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

(m)Fixed Rate Period” has the meaning set forth in Section 4(a).

(n)Floating Rate Period” has the meaning set forth in Section 4(a).

(o)Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series N as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.

(p)LIBOR” has the meaning set forth in Section 4(a).

(q)Liquidation Preference” has the meaning set forth in Section 5(b).

(r)London Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is a day on which dealings in U.S. dollars are transacted in the London interbank market.

(s)Nonpayment” has the meaning set forth in Section 7(b).

(t)Original Issue Date” means October 2, 2020.

(u)Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series N in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity Stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A”), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, liquidation preference $25,000 per share (“Series J”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, liquidation preference $25,000 per share (“Series K”), the Corporation’s previously issued 4.875% Non-Cumulative Preferred Stock, Series L, liquidation preference $25,000 per share (“Series L”) and the Corporation’s Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M, liquidation preference $1,000 per share (“Series M”).

(v)Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series N.

(w)Preferred Stock Directors” has the meaning set forth in Section 7(b).

(x)Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).



(y)Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series N as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series J, the Series K, the Series L and the Series M. Whether a plurality, majority or other portion of the shares of Series N and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.

4.Dividends.

(a)Rate. Holders of Series N will be entitled to receive, only when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from September 15, 2020 (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, semi-annually in arrears on the 15th day of March and September of each year, commencing on March 15, 2021 and ending on March 15, 2023 and thereafter quarterly in arrears on the 15th day of March, June, September and December of each year. These dividends will accrue on the liquidation preference amount of $100,000 per share at a rate per annum equal to 5.30% with respect to each Dividend Period from and including September 15, 2020 to, but excluding, March 15, 2023 (the “Fixed Rate Period”) and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related Dividend Determination Date plus 3.16% with respect to each Dividend Period from and including March 15, 2023 (the “Floating Rate Period”). In the event that the Corporation issues additional shares of Series N after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.

References to the “accrual” (or similar terms) of dividends in this Certificate of Designation refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
Dividends that are payable on Series N on any Dividend Payment Date will be payable to holders of record of Series N as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series N issued on the Original Issue Date will commence on and include September 15, 2020 and will end on and exclude the March 15, 2021 Dividend Payment Date, and (ii) for any share of Series N issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment Date. Dividends payable on the Series N for any Dividend Period during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series N for any Dividend Period during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the Dividend Period. Dividends for the initial Dividend Period for shares of Series N issued on the Original Issue Date will be calculated from September 15, 2020. If any scheduled Dividend Payment Date up to and including the March 15, 2023 scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement. If any scheduled Dividend Payment Date thereafter is not a Business Day, then the Dividend Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next calendar month, in which case the Dividend Payment Date will be brought forward to the immediately preceding day that is a Business Day, and, in either case, dividends, if so declared, will accrue to, but excluding, the date dividends are paid.
For any Dividend Period during the Floating Rate Period, LIBOR (the London interbank offered rate) shall be determined by the Calculation Agent on the Dividend Determination Date in the following manner:
(i)    LIBOR will be the rate for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, that appears on Reuters screen page “LIBOR01”, or any successor page, at approximately 11:00 a.m., London time, on that Dividend Determination Date.



(ii)    If no such rate appears, then the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, selected by the Calculation Agent as directed by the Corporation, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for a period of three months, commencing on the first day of such Dividend Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on that Dividend Determination Date and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time. If at least two quotations are provided, LIBOR determined on that Dividend Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, LIBOR will be determined for the first day of such Dividend Period as the arithmetic mean of the rates quoted at approximately 11:00 a.m., New York time, on that Dividend Determination Date, by three major banks in New York City, selected by the Calculation Agent as directed by the Corporation, for loans in U.S. dollars to leading European banks, for a period of three months, commencing on the first day of such Dividend Period, and in a principal amount that is representative of a single transaction in U.S. dollars in that market at that time.
(iii)    Otherwise, the Calculation Agent, after consulting such sources as it deems comparable to any of the foregoing quotations or display page, or any such source as it deems reasonable from which to estimate LIBOR or any of the foregoing lending rates, shall determine three-month LIBOR for the applicable Dividend Period in its sole discretion.
Notwithstanding the foregoing clauses (ii) and (iii):
(A)    If the Calculation Agent determines on the relevant Dividend Determination Date that the LIBOR base rate has been discontinued, then the Calculation Agent will use a substitute or successor base rate that it has determined in its sole discretion is most comparable to the LIBOR base rate, provided that if the Calculation Agent determines there is an industry-accepted substitute or successor base rate, then the Calculation Agent shall use such substitute or successor base rate; and
(B)    If the Calculation Agent has determined a substitute or successor base rate in accordance with the foregoing, the Calculation Agent in its sole discretion may determine what business day convention to use, the definition of business day, the Dividend Determination Date to be used and any other relevant methodology for calculating such substitute or successor base rate, including any adjustment factor needed to make such substitute or successor base rate comparable to the LIBOR base rate, in a manner that is consistent with industry-accepted practices for such substitute or successor base rate.
The Calculation Agent’s determination of any dividend rate, and its calculation of the amount of dividends for any Dividend Period, will be on file at the Corporation’s principal offices, will be made available to any stockholder upon request and will be final and binding in the absence of manifest error.
Reuters” means Reuters 3000 Xtra Service or any successor service.
Holders of Series N shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series N as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series N will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series N payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series N are declared for any future Dividend Period.
(b)Priority of Dividends. The Series N will rank (i) senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series N, (ii) junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series N (issued with the requisite consent of the holders of the Series N) and (iii) equally with the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series J, the Series K, the Series L, the Series M and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series N, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. If at any time the Corporation has failed to pay, on the applicable Dividend Payment Date, accrued dividends on any shares



that rank senior in priority to the Series N with respect to dividends, the Corporation may not pay any dividends on the Series N or redeem or otherwise repurchase any shares of Series N until the Corporation has paid or set aside for payment the full amount of the unpaid dividends on the shares that rank senior in priority with respect to dividends that must, under the terms of such shares, be paid before the Corporation may pay dividends on, or redeem or repurchase, the Series N.

So long as any share of Series N remains outstanding, no dividend or distribution shall be paid or declared or funds set aside for payment on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, and no shares of Parity Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, other than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Preferred Stock and such Parity Stock during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series N has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation with respect to the Junior Stock shall not apply to:
repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment plan or stockholder stock purchase plan;

purchases or repurchases of shares of Junior Stock pursuant to a contractually binding requirement to buy Junior Stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;

an exchange, redemption, reclassification or conversion of any class or series of Junior Stock for any class or series of Junior Stock;

the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;

any declaration of a dividend payable solely in Junior Stock in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan (so long as such right to stock or other property only consists of Junior Stock or the right to purchase Junior Stock), or the redemption or repurchase of rights pursuant to the plan; or

any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

The foregoing limitation with respect to the Parity Stock shall not apply to:
purchases or repurchases of shares of Parity Stock pursuant to a contractually binding requirement to buy Parity Stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;

an exchange, redemption, reclassification or conversion of any class or series of Parity Stock for any class or series of Parity Stock;

the purchase of fractional interests in shares of Parity Stock under the conversion or exchange provisions of Parity Stock or the security being converted or exchanged; or

any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, (i) to engage in any market-making transactions in Junior Stock or Parity Stock in the ordinary course of business or (ii) to acquire record ownership in Junior Stock or Parity Stock for the beneficial



ownership of any other persons (other than for the beneficial ownership by the Corporation or any subsidiaries of the Corporation), including as trustees or custodians.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) in full upon the Series N and any shares of Parity Stock, all dividends declared on the Series N and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series N and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series N, from time to time out of any funds legally available for such payment, and the Series N shall not be entitled to participate in any such dividends.
(a)Restrictions on the Payment of Dividends. Dividends on the Series N may be subject to the Corporation’s receipt of required prior approval by the Federal Reserve Board (or any successor appropriate federal banking agency) and will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.

5.Liquidation Rights.

(a)Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series N shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series N in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any of Junior Stock, a liquidating distribution in an amount equal to $100,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series N will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.

The Series N may be fully subordinated to interests held by the U.S. government in the event of a receivership, insolvency, liquidation, or similar proceeding, including a proceeding under the “orderly liquidation authority” provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended.
(b)Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series N and all holders of any stock of the Corporation ranking equally with the Series N as to such distribution, the amounts paid to the holders of Series N and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series N and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of preferred stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series N and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series N will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.



(c)Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series N and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series N receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

6.Redemption.

(a)Optional Redemption. The Corporation may, at its option, redeem the Series N (i) in whole or in part, from time to time, on any Dividend Payment Date after October 2, 2025 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $100,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series N shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the Original Issue Date, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the Original Issue Date, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the Original Issue Date, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $100,000 per share of Series N then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series N is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b)No Sinking Fund. The Series N will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series N will have no right to require the redemption or repurchase of any shares of Series N.

(c)Notice of Redemption. Notice of every redemption of shares of Series N shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be not less than 30 days nor more than 60 days before the date fixed for redemption, provided that, if the depositary shares representing the Series N are held in book-entry form through The Depository Trust Company (“DTC”), the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series N designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series N. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series N to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.




(d)Regulatory Approval. Any redemption of the Series N is subject to the Corporation’s receipt of required prior approval, if any, by the Federal Reserve Board (or any successor appropriate federal banking agency), and to the satisfaction of conditions, if any, set forth in the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the redemption of the Series N.

(e)Partial Redemption. In case of any redemption of only part of the shares of Series N at the time outstanding, the shares to be redeemed shall be selected pro rata, provided that, if the depositary shares representing the Series N are held in book-entry form through DTC, the shares of Series N to be redeemed shall be selected in accordance with DTC procedures. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series N shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(f)Effectiveness of Redemption. If notice of redemption has been duly given and if on or prior to the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series N so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

7.Voting Rights.

(a)General. The holders of Series N shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law. For the avoidance of doubt, the shares of Series N shall not be entitled to vote generally in the election of directors, including following Nonpayment events.

(b)Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series N, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of three semi-annual or six quarterly full dividend payments, whether or not for consecutive Dividend Periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s Common Stock may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors (to the extent that such requirements are then applicable to the Corporation). In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the then outstanding shares of Series N or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series N or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series N and any such series of Voting Preferred Stock shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following the Nonpayment.

If and when dividends for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following a Nonpayment have been fully paid (or declared and a sum sufficient for such payment shall have been set aside) on the Series N and any other class or series of Voting



Preferred Stock, the holders of the Series N and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least the equivalent of two consecutive semi-annual Dividend Periods or four consecutive quarterly Dividend Periods following a Nonpayment, the Corporation may take account of any dividend payment (at the same rate and amount otherwise payable on the Series N) it elects to pay for any dividend period after the regular dividend date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series N together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series N and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s Common Stock may be listed) that listed companies must have a majority of independent directors (to the extent such requirements are then applicable to the Corporation). Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series N or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c)Other Voting Rights. So long as any shares of Series N are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series N and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting (to the extent permitted by the procedures for voting and consents in Section 7(f) below) or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i)    Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series N with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii)    Amendment of Series N. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially and adversely affect the special rights, preferences, privileges and voting powers of the Series N, taken as a whole; or
(iii)    Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series N, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series N remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series N, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series N, Series A, Series C, Series E, Series F, Series H, Series I, Series J, Series K, Series L or Series M, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series N with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series N.



If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series N for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and two-thirds approval of each series that will have a diminished status.
(d)Changes for Clarification. Without the consent of the holders of the Series N, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series N, the Corporation may amend, alter, supplement or repeal any terms of the Series N to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent.

(e)Changes after Provision for Redemption. No vote or consent of the holders of Series N shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of Series N shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.

(f)Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series N (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series N is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series N and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series N are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.

8.Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series N may deem and treat the record holder of any share of Series N as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

9.Notices. All notices or communications in respect of Series N shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.

10.No Conversion Rights. The Series N will not be convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Corporation.

11.No Preemptive Rights. No share of Series N shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

12.Other Rights. The shares of Series N shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.

13.Effectiveness. This Certificate of Designation shall become effective as of October 2, 2020.








In Witness Whereof, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 1st day of October, 2020.


                            
MORGAN STANLEY
By/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer











CERTIFICATE OF ELIMINATION OF
THE FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES J,

OF
MORGAN STANLEY
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware

Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Company”), in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, hereby certifies as follows:
1.That, pursuant to Section 151 of the General Corporation Law of the State of Delaware and authority granted in the Certificate of Incorporation of the Company, as theretofore amended, the Board of Directors of the Company, by resolution duly adopted, authorized the issuance of a series of 60,000 (sixty thousand) shares of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J, par value $0.01 per share, liquidation preference $25,000 per share (the “Preferred Stock”), and established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions thereof, and, on March 18, 2015, filed a Certificate of Designation with respect to such Preferred Stock in the office of the Secretary of State of the State of Delaware.
2.That, pursuant to the authority conferred upon the Preferred Stock Financing Committee of the Board of Directors of the Company (the “Preferred Stock Financing Committee”) by the Board of Directors of the Company, the Preferred Stock Financing Committee has adopted resolutions authorizing the issuance of said Preferred Stock (including the terms upon which said Preferred Stock shall be redeemable), including resolutions authorizing each officer of the Company to take any and all actions, to execute and deliver any and all documents, agreements and instruments and to take any and all steps deemed by any such officer to be necessary or desirable to carry out the purpose and intent of such resolutions, which includes the execution and filing of this Certificate, and said Preferred Stock has been redeemed by the Company.
3.That no shares of said Preferred Stock are outstanding and no shares thereof will be issued subject to said Certificate of Designation.
4.That, accordingly, all matters set forth in the Certificate of Designation with respect to the Preferred Stock be, and hereby are, eliminated from the Certificate of Incorporation, as heretofore amended, of the Company.

[Remainder of Page Intentionally Blank]



IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer this 15th day of April, 2021.
MORGAN STANLEY
By:/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer
[Signature Page to Series J Certificate of Elimination]


CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF THE
4.250% NON-CUMULATIVE PREFERRED STOCK, SERIES O


(Liquidation Preference $25,000 per share)


OF


MORGAN STANLEY
_________________________

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware
_________________________


Morgan Stanley, a Delaware corporation (hereinafter called the “Corporation”), DOES HEREBY CERTIFY that, pursuant to resolutions of the Preferred Stock Financing Committee (the “Committee”) of the Board of Directors of the Corporation adopted on October 18, 2021, the creation of 4.250% Non-Cumulative Preferred Stock, Series O, par value $0.01 per share, liquidation preference $25,000 per share (“Series O”), of the Corporation was authorized and the designation, preferences, privileges, voting rights, and other special rights and qualifications, limitations and restrictions of the Series O, in addition to those set forth in the Certificate of Incorporation and Bylaws of the Corporation, are fixed as follows:
1.Designation. The distinctive serial designation of such series of preferred stock is “4.250% Non-Cumulative Preferred Stock, Series O.” Each share of Series O shall be identical in all respects to every other share of Series O, except as to the respective dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a) below.
2.Number of Shares. The authorized number of shares of Series O shall be 52,000. Shares of Series O that are redeemed, purchased or otherwise acquired by the Corporation, or converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock; provided that this Section 2 shall not apply to any purchase or other acquisition of shares of Series O by any subsidiary of the Corporation.
3.Definitions. As used herein with respect to Series O:
(a)Board of Directors” means the board of directors of the Corporation.
(b)Bylaws” means the amended and restated bylaws of the Corporation, as they may be amended from time to time.
(c)Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.



(d)Certificate of Designation” means this Certificate of Designation relating to the Series O, as it may be amended or supplemented from time to time.
(e)Certification of Incorporation” shall mean the amended and restated certificate of incorporation of the Corporation, as it may be amended from time to time, and shall include this Certificate of Designation.
(f)Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(g)Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year, subject to adjustment as described in Section 4(a).
(h)Dividend Period” has the meaning set forth in Section 4(a).
(i)Dividend Record Date” has the meaning set forth in Section 4(a).
(j)Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
(k)Junior Stock” means any class or series of capital stock of the Corporation that ranks junior to Series O as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Junior Stock includes the Common Stock.
(l)Liquidation Preference” has the meaning set forth in Section 5(b).
(m)Nonpayment” has the meaning set forth in Section 7(b).
(n)Original Issue Date” means October 25, 2021.
(o)Parity Stock” means any other class or series of stock of the Corporation that ranks equally with the Series O in the payment of dividends, whether cumulative or non-cumulative, and the distribution of assets upon liquidation, dissolution or winding up of the Corporation. Parity Stock includes the Corporation’s previously issued Floating Rate Non-Cumulative Preferred Stock, Series A, liquidation preference $25,000 per share (“Series A), the Corporation’s previously issued 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, liquidation preference $1,000 per share (“Series C”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, liquidation preference $25,000 per share (“Series E”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, liquidation preference $25,000 per share (“Series F”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, liquidation preference $25,000 per share (“Series H”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, liquidation preference $25,000 per share (“Series I”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, liquidation preference $25,000 per share (“Series K”), the Corporation’s previously issued 4.875% Non-Cumulative Preferred Stock, Series L, liquidation preference $25,000 per share (“Series L”), the Corporation’s previously issued Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M, liquidation preference $1,000 per share (“Series M”) and the Corporation’s previously issued



Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series N, liquidation preference $100,000 per share (“Series N”).
(p)Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series O.
(q)Preferred Stock Directors” has the meaning set forth in Section 7(b).
(r)Regulatory Capital Treatment Event” has the meaning set forth in Section 6(a).
(s)Voting Preferred Stock” means any other class or series of Preferred Stock of the Corporation ranking equally with the Series O as to dividends (whether cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation and upon which like voting rights have been conferred and are exercisable. Voting Preferred Stock includes the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series K, the Series L, the Series M and the Series N. Whether a plurality, majority or other portion of the shares of Series O and any other Voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the liquidation amounts of the shares voted.
4.Dividends.
(a)Rate. Holders of Series O will be entitled to receive, when, as and if declared by the Board of Directors or a duly authorized committee of the Board of Directors, out of funds legally available for the payment of dividends under Delaware law, non-cumulative cash dividends from the Original Issue Date (in the case of the initial Dividend Period only) or the immediately preceding Dividend Payment Date, quarterly in arrears on each Dividend Payment Date, commencing on January 15, 2022. These dividends will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 4.250%. In the event that the Corporation issues additional shares of Series O after the Original Issue Date, dividends on such shares may accrue from the Original Issue Date or any other date specified by the Board of Directors or an authorized committee thereof at the time such additional shares are issued.
Dividends that are payable on Series O on any Dividend Payment Date will be payable to holders of record of Series O as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board of Directors or a duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).
A “Dividend Period” is the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date or any earlier redemption date, except that (i) the initial Dividend Period for any share of Series O issued on the Original Issue Date will commence on and include the Original Issue Date of the Series O and will end on and exclude the January 15, 2022 Dividend Payment Date, and (ii) for any share of Series O issued after the Original Issue Date, the initial Dividend Period for such shares may commence on and include the Original Issue Date or such other date as the Board of Directors or a duly authorized committee of the Board of Directors shall determine and publicly disclose and shall end on and exclude the next Dividend Payment



Date. Dividends payable on the Series O for any Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends for the initial Dividend Period for shares of Series O issued on the Original Issue Date will be calculated from the Original Issue Date. If any scheduled Dividend Payment Date is not a Business Day, then the payment will be made on the next succeeding Business Day and no additional dividends will accrue as a result of that postponement.
Holders of Series O shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series O as specified in this Section 4 (subject to the other provisions of this Certificate of Designation).
Dividends on shares of the Series O will not be cumulative. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series O payable in respect of any Dividend Period before the related Dividend Payment Date, such dividend will not accrue and the Corporation will have no obligation to pay a dividend for that Dividend Period on the Dividend Payment Date or at any future time, whether or not dividends on the Series O are declared for any future Dividend Period.
(b)Priority of Dividends. The Series O will rank senior to the Common Stock and any class or series of the Corporation’s capital stock expressly stated to be junior to the Series O, junior to any class or series of the Corporation’s capital stock expressly stated to be senior to the Series O (issued with the requisite consent of the holders of the Series O, if required) and equally with the Series A, the Series C, the Series E, the Series F, the Series H, the Series I, the Series K, the Series L, the Series M, the Series N and each other class or series of Preferred Stock the Corporation may issue that is not expressly stated to be senior or junior to the Series O, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
So long as any share of Series O remains outstanding, no dividend or distribution shall be paid or declared on Junior Stock, and no Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly, during a Dividend Period, unless the full dividend for the latest completed Dividend Period on all outstanding shares of Series O has been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing limitation shall not apply to:
·    repurchases, redemptions or other acquisitions of shares of Junior Stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or (2) a dividend reinvestment or stockholder stock purchase plan;
·    an exchange, redemption, reclassification or conversion of any class or series of Junior Stock, or any junior stock of a subsidiary of the Corporation, for any class or series of Junior Stock;

·    the purchase of fractional interests in shares of Junior Stock under the conversion or exchange provisions of Junior Stock or the security being converted or exchanged;



·    any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to the plan; or

·    any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.
In addition, the foregoing limitation shall not restrict the ability of Morgan Stanley & Co. LLC, or any other affiliate of the Corporation, to engage in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a related Dividend Period) in full upon the Series O and any shares of Parity Stock, all dividends declared on the Series O and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) shall be declared pro rata so that the respective amounts of such dividends shall bear the same ratio to each other as all accrued but unpaid dividends per share on the Series O and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the related Dividend Period) bear to each other.
Subject to the foregoing, dividends (payable in cash, securities or other property) may be determined by the Board of Directors or a duly authorized committee of the Board of Directors and may be declared and paid on the Common Stock and any stock ranking, as to dividends, equally with or junior to the Series O, from time to time out of any funds legally available for such payment, and the Series O shall not be entitled to participate in any such dividends.
(c)Restrictions on the Payment of Dividends. Dividends on the Series O will not be declared, paid or set aside for payment if the Corporation fails to comply, or if and to the extent such act would cause the Corporation to fail to comply, with applicable laws and regulations, including the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) applicable to the Corporation.
5.Liquidation Rights.
(a)Voluntary or Involuntary Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series O shall be entitled to receive out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, after satisfaction of all liabilities to creditors, if any, of the Corporation and subject to the rights of holders of any shares of capital stock of the Corporation then outstanding ranking senior to or pari passu with the Series O in respect of distributions upon liquidation, dissolution or winding up of the Corporation, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of



capital stock of the Corporation ranking junior to the Series O as to such distribution, a liquidating distribution in an amount equal to $25,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date). Holders of the Series O will not be entitled to any other amounts from the Corporation after they have received their full liquidation preference.
(b)Partial Payment. If in any distribution described in Section 5(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preference (as defined below) in full to all holders of Series O and all holders of any stock of the Corporation ranking equally with the Series O as to such distribution, the amounts paid to the holders of Series O and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preference of the holders of Series O and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than Series O and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable). Holders of the Series O will not be entitled to any other amounts from the Corporation after they have received the full amounts provided for in this Section 5 and will have no right or claim to any of the Corporation’s remaining assets.
(c)Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series O and any other shares of the Corporation’s stock ranking equally as to the Liquidation Preference, the holders of other stock of the Corporation ranking junior as to the Liquidation Preference shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.
(d)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with or into any other corporation or other entity, including a merger or consolidation in which the holders of Series O receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
6.Redemption.
(a)Optional Redemption. The Corporation may, at its option, redeem the Series O (i) in whole or in part, from time to time, on any Dividend Payment Date on or after January 15, 2027 or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Treatment Event (as defined below), in each case upon notice given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together with (except as otherwise provided herein below) any declared and unpaid dividends to, but excluding, the date fixed for redemption, without accumulation of any undeclared dividends. The redemption price for any shares of Series O shall be payable on the redemption date to the holder of such shares against



surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared and unpaid dividend for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
A “Regulatory Capital Treatment Event” means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after October 18, 2021, (ii) any proposed change in those laws or regulations that is announced or becomes effective after October 18, 2021, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after October 18, 2021, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation preference amount of $25,000 per share of Series O then outstanding as “Additional Tier 1” capital (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor appropriate federal banking agency) as then in effect and applicable, for so long as any share of Series O is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Corporation as that term is defined in Section 3(q) of the Federal Deposit Insurance Act or any successor provision.
(b)No Sinking Fund. The Series O will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series O will have no right to require the redemption or repurchase of any shares of Series O.
(c)Notice of Redemption. Notice of every redemption of shares of Series O shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series O designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series O. Notwithstanding the foregoing, if the depositary shares representing interests in the Series O are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series O at such time and in any manner permitted by such facility. Each such notice given to a holder shall state: (1) the redemption date; (2) the number of shares of Series O to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.
(d)Partial Redemption. In case of any redemption of only part of the shares of Series O at the time outstanding, the shares to be redeemed shall be selected either pro rata or by lot. Subject to the provisions hereof, the Corporation shall have



full power and authority to prescribe the terms and conditions upon which shares of Series O shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(e)Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of any shares of Series O so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
7.Voting Rights.
(a)General. The holders of Series O shall not have any voting rights except as set forth below and as determined by the Board of Directors or an authorized committee thereof or as otherwise from time to time required by law.
(b)Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any shares of the Series O, or any other Voting Preferred Stock, shall have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment”), the holders of such shares, voting together as a class with holders of any and all other series of Voting Preferred Stock then outstanding, will be entitled to vote for the election of a total of two additional members of the Board of Directors (the “Preferred Stock Directors”), provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors and provided further that the Board of Directors shall at no time include more than two Preferred Stock Directors. In that event, the number of directors on the Board of Directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series O or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), and at each subsequent annual meeting. Such request to call a special meeting for the initial election of the Preferred Stock Directors after a Nonpayment shall be made by written notice, signed by the requisite holders of Series O or other Voting Preferred Stock, and delivered to the Secretary of the Corporation in such manner as provided for in Section 9 below, or as may otherwise be required by law. The voting rights will continue until dividends on the shares of the Series O and any



such series of Voting Preferred Stock shall have been fully paid for at least four consecutive regular dividend periods following the Nonpayment.
If and when dividends for at least four consecutive regular dividend periods following a Nonpayment have been fully paid on the Series O and any other class or series of Voting Preferred Stock, the holders of the Series O and all other holders of Voting Preferred Stock shall be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment), the term of office of each Preferred Stock Director so elected shall terminate and the number of directors on the Board of Directors shall automatically decrease by two. In determining whether dividends have been paid for at least four consecutive regular dividend periods following a Nonpayment, the Corporation may take account of any dividend it elects to pay for any dividend period after the regular dividend payment date for that period has passed. Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series O together with all series of Voting Preferred Stock then outstanding (voting together as a single class) to the extent such holders have the voting rights described above. So long as a Nonpayment shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election after a Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series O and all Voting Preferred Stock when they have the voting rights described above (voting together as a single class); provided that the filling of each vacancy shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange on which the Corporation’s securities may be listed) that listed companies must have a majority of independent directors. Any such vote to remove, or to fill a vacancy in the office of, a Preferred Stock Director may be taken only at a special meeting called at the request of the holders of record of at least 20% of the Series O or of any other series of Voting Preferred Stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(c)Other Voting Rights. So long as any shares of Series O are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least two-thirds of the shares of Series O and any Voting Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i)    Authorization of Senior Stock. Any amendment or alteration of the provisions of the Certificate of Incorporation or this Certificate of Designation to authorize or create, or increase the authorized amount of, any shares of any class or series of stock of the Corporation ranking senior to the Series O with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation;
(ii)    Amendment of Series O. Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or this Certificate of Designation, whether by merger, consolidation or otherwise, so as to materially



and adversely affect the special rights, preferences, privileges and voting powers of the Series O, taken as a whole; or
(iii)    Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series O, or of a merger or consolidation of the Corporation with another entity, unless in each case (x) the shares of Series O remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series O, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized or issued Series O, Series A, Series C, Series E, Series F, Series H, Series I, Series K, Series L, Series M or Series N, or the creation and issuance, or an increase in the authorized or issued amount, of any other class or series of Preferred Stock ranking equally with the Series O with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers of, and will not require the affirmative vote or consent of, the holders of outstanding shares of Series O.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all other series of Voting Preferred Stock (including the Series O for this purpose), then only such series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other series of Preferred Stock. If all series of a class of Preferred Stock are not equally affected by the proposed amendment, alteration, repeal, share exchange, reclassification, merger or consolidation described above, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
(d)Changes for Clarification. Without the consent of the holders of the Series O, so long as such action does not adversely affect the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series O, the Corporation may amend, alter, supplement or repeal any terms of the Series O:
(i)    to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of Designation that may be defective or inconsistent; or
(ii)    to make any provision with respect to matters or questions arising with respect to the Series O that is not inconsistent with the provisions of this Certificate of Designation.
(e)Changes after Provision for Redemption. No vote or consent of the holders of Series O shall be required pursuant to Section 7(b), (c) or (d) above if, at or prior to the time when the act with respect to which any such vote or consent would



otherwise be required pursuant to such Section, all outstanding shares of Series O shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been set aside for such redemption, in each case pursuant to Section 6 above.
(f)Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series O (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors or a duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable law and any national securities exchange or other trading facility on which the Series O is listed or traded at the time. Whether the vote or consent of the holders of a plurality, majority or other portion of the shares of Series O and any Voting Preferred Stock has been cast or given on any matter on which the holders of shares of Series O are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amounts of the shares voted or covered by the consent.
8.Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for the Series O may deem and treat the record holder of any share of Series O as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
9.Notices. All notices or communications in respect of Series O shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Certificate of Incorporation or Bylaws or by applicable law.
10.No Preemptive Rights. No share of Series O shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
11.Other Rights. The shares of Series O shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.



In Witness Whereof, Morgan Stanley has caused this certificate to be signed by Kevin Sheehan, its Assistant Treasurer, this 22nd day of October, 2021.


MORGAN STANLEY
By/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer






CERTIFICATE OF ELIMINATION OF
THE FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES H,
OF
MORGAN STANLEY
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Morgan Stanley, a corporation organized and existing under the laws of the State of Delaware (the “Company”), in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, hereby certifies as follows:
1.That, pursuant to Section 151 of the General Corporation Law of the State of Delaware and authority granted in the Certificate of Incorporation of the Company, as theretofore amended (the “Certificate of Incorporation”), the Board of Directors of the Company, by resolution duly adopted, authorized the issuance of a series of 52,000 (fifty two thousand) shares of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series H, par value $0.01 per share, liquidation preference $25,000 per share (the “Preferred Stock”), and established the designation, preferences, privileges, voting rights, and other special rights, and the qualifications, limitations or restrictions thereof, and, on April 28, 2014, filed a Certificate of Designation (the “Certificate of Designation”) with respect to such Preferred Stock in the office of the Secretary of State of the State of Delaware.
2.That, pursuant to the authority conferred upon the Preferred Stock Financing Committee of the Board of Directors of the Company (the “Preferred Stock Financing Committee”) by the Board of Directors of the Company, the Preferred Stock Financing Committee has adopted resolutions authorizing the issuance of said Preferred Stock (including the terms upon which said Preferred Stock shall be redeemable), including resolutions authorizing each officer of the Company to take any and all actions, to execute and deliver any and all documents, agreements and instruments and to take any and all steps deemed by any such officer to be necessary or desirable to carry out the purpose and intent of such resolutions, which includes the execution and filing of this Certificate, and said Preferred Stock has been redeemed by the Company.
3.That no shares of said Preferred Stock are outstanding and no shares thereof will be issued subject to said Certificate of Designation.
4.That, accordingly, all matters set forth in the Certificate of Designation with respect to the Preferred Stock be, and hereby are, eliminated from the Certificate of Incorporation.
[Remainder of Page Intentionally Blank]




IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer this 18th day of January, 2022.
MORGAN STANLEY
By:/s/ Kevin Sheehan
Name: Kevin Sheehan
Title: Assistant Treasurer

[Signature Page to Series H Certificate of Elimination]

EXHIBIT 4.1
DESCRIPTION OF THE SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of February 24, 2022, Morgan Stanley has three classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (1) common stock; (2) seven series of depositary shares representing interests in preferred stock; and (3) Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 of Morgan Stanley Finance LLC (and Morgan Stanley’s guarantee with respect thereto).
Authorized Capital Stock
Morgan Stanley’s authorized capital stock consists of 3,500,000,000 shares of common stock, par value $0.01 per share, and 30,000,000 shares of preferred stock, par value $0.01 per share.
DESCRIPTION OF COMMON STOCK
The following description of common stock is a summary and does not purport to be complete. You should refer to our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws. Copies of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws are incorporated by reference as Exhibits to the Form 10-K. We encourage you to read these documents.
Voting Rights. Each holder of Morgan Stanley’s common stock has one vote per share on all matters voted on generally by the stockholders, including the election of directors. Except as otherwise required by law or as provided with respect to any series of preferred stock, the holders of Morgan Stanley’s common stock will possess all voting power. At each annual meeting of stockholders, the Board of Directors will be elected by a majority vote or, in the event of a contested election, a plurality vote of all votes cast at such meeting to hold office until the next annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified. Because Morgan Stanley’s certificate of incorporation does not provide for cumulative voting rights, the holders of a majority of the voting power of the then outstanding shares of capital stock entitled to be voted generally in the election of directors, which is referred to as the “voting stock,” represented at a meeting will be able to elect all the directors standing for election at the meeting.
Dividends. The holders of Morgan Stanley’s common stock are entitled to share equally in dividends as may be declared by the Board of Directors out of funds legally available therefor, but only after payment of dividends required to be paid on outstanding shares of offered preferred stock and any other class or series of stock having preference over the common stock as to dividends.
Liquidation Rights. Upon voluntary or involuntary liquidation, dissolution or winding up of Morgan Stanley, the holders of the common stock will share pro rata in the assets remaining after payments to creditors and holders of any offered preferred stock and any other class or series of stock having preference over the common stock upon liquidation, dissolution or winding up that may be then outstanding.
Because Morgan Stanley is a holding company, its rights and the rights of holders of its capital stock, including the holders of its common stock, to participate in the distribution of assets of any of Morgan Stanley’s subsidiaries upon the subsidiary’s liquidation or recapitalization will be subject to the prior claims of the subsidiary’s creditors and preferred shareholders, except to the extent Morgan Stanley may itself be a creditor with recognized claims against the subsidiary or a holder of preferred stock of the subsidiary.
Other Rights and Preferences. There are no preemptive or other subscription rights, conversion rights or redemption or sinking fund provisions with respect to shares of Morgan Stanley’s common stock. All of the issued shares of Morgan Stanley’s common stock are fully paid and non-assessable.
Listing. Morgan Stanley’s common stock is traded on the New York Stock Exchange under the trading symbol “MS.”
DESCRIPTION OF DEPOSITARY SHARES REPRESENTING INTERESTS IN SHARES OF PREFERRED STOCK
The following description is a summary and does not purport to be complete. You should refer to our Amended and Restated Certificate of Incorporation, the certificate of designation relating to each series of Listed Preferred Stock (as defined below) and the deposit agreement relating to each series of depositary shares for the complete

    


terms of that series of Listed Preferred Stock and related depositary shares. Copies of our Amended and Restated Certificate of Incorporation and these certificates of designations and deposit agreements are incorporated by reference as Exhibits to the Form 10-K. We encourage you to read these documents.
Depositary Shares
As of December 31, 2021, Morgan Stanley has the following depositary shares registered under Section 12 of the Exchange Act:
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate Non-Cumulative Preferred Stock, Series A, $0.01 par value, which is referred to as the Series A Preferred Stock;
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, $0.01 par value, which is referred to as the Series E Preferred Stock;
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, $0.01 par value, which is referred to as the Series F Preferred Stock;
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I, $0.01 par value, which is referred to as the Series I Preferred Stock;
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, $0.01 par value, which is referred to as the Series K Preferred Stock;
Depositary Shares, each representing 1/1,000th interest in a share of 4.875% Non-Cumulative Preferred Stock, Series L, $0.01 par value, which is referred to as the Series L Preferred Stock; and
Depositary Shares, each representing 1/1,000th interest in a share of 4.250% Non-Cumulative Preferred Stock, Series O, $0.01 par value, which is referred to as the Series O Preferred Stock.
Morgan Stanley refers to the above series of preferred stock represented by depositary shares collectively as the “Listed Preferred Stock.”
The shares of each series of Listed Preferred Stock have been deposited under a deposit agreement for such series among Morgan Stanley, The Bank of New York Mellon, acting as depositary, which is referred to as the Preferred Stock Depositary, and the holders from time to time of depositary receipts issued under the agreement (each such deposit agreement, with respect to the series of Listed Preferred Stock to which it relates, a “deposit agreement”). Subject to the terms of the deposit agreement, each holder of a depositary share will be entitled, in proportion to the fraction of a share of Listed Preferred Stock represented by that depositary share, to all the rights and preferences of the Listed Preferred Stock represented by that depositary share, including dividend, voting and liquidation rights.
The depositary shares are evidenced by depositary receipts issued under the deposit agreement. Depositary receipts are distributed to those persons purchasing the fractional shares of the related series of Listed Preferred Stock. Immediately following the issuance of shares of a series of Listed Preferred Stock, Morgan Stanley deposited those shares with the Preferred Stock Depositary, which then issued and delivered the depositary receipts to the purchasers. Depositary receipts have been and will only be issued evidencing whole depositary shares. A depositary receipt may evidence any number of whole depositary shares.
Dividends and Other Distributions. The Preferred Stock Depositary will distribute all cash dividends or other cash distributions received on the related series of Listed Preferred Stock to the record holders of depositary receipts relating to those series in proportion to the number of the depositary shares evidenced by depositary receipts those holders own.
If Morgan Stanley makes a distribution other than in cash, the Preferred Stock Depositary will distribute the property it receives to the record holders of depositary receipts in proportion to the number of depositary shares evidenced by depositary receipts those holders own, unless the Preferred Stock Depositary determines that the distribution cannot be made proportionately among those holders or that it is not feasible to make the distribution. In that event, the Preferred Stock Depositary may, with Morgan Stanley’s approval, sell the property and distribute the net proceeds to the holders in proportion to the number of depositary shares evidenced by depositary receipts they own.
The amount distributed to holders of depositary shares will be reduced by any amounts required to be withheld by Morgan Stanley or the Preferred Stock Depositary on account of taxes or other governmental charges.
    


Withdrawal of Stock. Upon surrender of the depositary receipts at the corporate trust office of the Preferred Stock Depositary and upon payment of the taxes, charges and fees provided for in the deposit agreement and compliance with any other requirement of the deposit agreement, the holder of the depositary shares evidenced by those depositary receipts is entitled to delivery of the number of whole shares of the related series of Listed Preferred Stock and all money or other property, if any, represented by those shares. Holders of depositary receipts representing any number of whole shares of Listed Preferred Stock will be entitled to receive whole shares of the related series of Listed Preferred Stock, but those holders of whole shares of Listed Preferred Stock will not thereafter be entitled to deposit those shares of Listed Preferred Stock with the Preferred Stock Depositary or to receive depositary shares therefor. If the depositary receipts delivered by the holder evidence a number of depositary shares in excess of the number representing whole shares of the related series of Listed Preferred Stock to be withdrawn, the Preferred Stock Depositary will deliver to the holder at the same time a new depositary receipt evidencing the excess number of depositary shares.
Voting the Listed Preferred Stock. Upon receiving notice of any meeting at which the holders of any series of the Listed Preferred Stock are entitled to vote, the Preferred Stock Depositary will mail the information contained in the notice of the meeting to the record holders of the depositary receipts relating to that series of Listed Preferred Stock. Each record holder of the depositary receipts on the record date, which will be the same date as the record date for the related series of Listed Preferred Stock, may instruct the Preferred Stock Depositary how to exercise his or her voting rights. The Preferred Stock Depositary will endeavor, insofar as practicable, to vote or cause to be voted the maximum number of whole shares of the Listed Preferred Stock represented by those depositary shares in accordance with those instructions received sufficiently in advance of the meeting, and Morgan Stanley will agree to take all reasonable action that may be deemed necessary by the Preferred Stock Depositary in order to enable the Preferred Stock Depositary to do so. The Preferred Stock Depositary will abstain from voting shares of the Listed Preferred Stock for which it does not receive specific instructions from the holder of the depositary shares representing them.
Redemption of Depositary Shares. Depositary shares will be redeemed from any proceeds received by the Preferred Stock Depositary resulting from the redemption, in whole or in part, of the series of the Listed Preferred Stock represented by those depositary shares. The redemption price per depositary share will equal the applicable fraction of the redemption price per share payable with respect to the series of the Listed Preferred Stock. If Morgan Stanley redeems shares of a series of Listed Preferred Stock held by the Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the same redemption date the number of depositary shares representing the shares of Listed Preferred Stock that it redeems. If less than all the depositary shares will be redeemed, the depositary shares to be redeemed will be selected by lot or substantially equivalent method determined by the Preferred Stock Depositary.
After the date fixed for redemption, the depositary shares called for redemption will no longer be deemed to be outstanding, and all rights of the holders of the depositary shares will cease, except the right to receive the monies payable and any other property to which the holders were entitled upon the redemption upon surrender to the Preferred Stock Depositary of the depositary receipts evidencing the depositary shares. Any funds deposited by Morgan Stanley with the Preferred Stock Depositary for any depositary shares that the holders fail to redeem will be returned to it after a period of two years from the date the funds are deposited.
Amendment and Termination of the Deposit Agreement. Morgan Stanley may amend the form of depositary receipt evidencing the depositary shares and any provision of the deposit agreement at any time and from time to time by agreement with the Preferred Stock Depositary. However, any amendment that materially and adversely alters the rights of the holders of depositary receipts will not be effective unless it has been approved by the holders of at least a majority of the depositary shares then outstanding, and no amendment may impair the right of any holder of any depositary receipts, described above under “—Withdrawal of Stock,” to receive shares of the related series of Listed Preferred Stock and any money or other property represented by those depositary shares, except in order to comply with mandatory provisions of applicable law. Morgan Stanley may terminate the deposit agreement at any time with at least 60 days’ prior written notice to the Preferred Stock Depositary. Within 30 days of the date of the notice, the Preferred Stock Depositary will deliver or make available for delivery to holders of depositary receipts, upon surrender of the depositary receipts evidencing the depositary shares and upon payment of any applicable taxes or governmental charges to be paid by the holders as described below, the number of whole shares of the related series of Listed Preferred Stock as are represented by the depositary receipts. The deposit agreement will automatically terminate after there has been a final distribution on the related series of Listed Preferred Stock in connection with any liquidation, dissolution or winding up of Morgan Stanley and that distribution has been made to the holders of depositary shares.
Charges of Preferred Stock Depositary. Morgan Stanley will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. Morgan Stanley will pay all charges of the Preferred Stock Depositary in connection with the initial deposit of the related series of Listed Preferred Stock, the initial issuance of the depositary shares, all withdrawals of shares of the related series of Listed Preferred Stock by holders of depositary shares and the registration of transfers of title to any depositary shares. However, holders of
    


depositary shares will pay other transfer and other taxes and governmental charges and the other charges expressly provided in the deposit agreement to be for their accounts.
Limitation on Liability of Company and Preferred Stock Depositary. Neither the Preferred Stock Depositary nor Morgan Stanley will be liable if it is prevented or delayed by law, by any provision of Morgan Stanley’s certificate of incorporation or of the depositary shares or by any circumstance beyond its control from performing its obligations under the deposit agreement. The obligations of Morgan Stanley and the Preferred Stock Depositary under the deposit agreement will be limited to performance with best judgment and in good faith of their duties thereunder, except that they will be liable for negligence or willful misconduct in the performance of their duties thereunder, and they will not be obligated to appear in, prosecute or defend any legal proceeding related to any depositary receipts, depositary shares or related series of Listed Preferred Stock unless satisfactory indemnity is furnished.
Corporate Trust Office of Preferred Stock Depositary. The address of the Preferred Stock Depositary’s corporate trust office is 240 Greenwich Street, 7E, New York, New York 10286. The Preferred Stock Depositary will act as transfer agent, registrar and redemption agent for depositary receipts.
Resignation and Removal of Preferred Stock Depositary. The Preferred Stock Depositary may resign at any time by delivering to Morgan Stanley written notice of its election to do so, and Morgan Stanley may at any time remove the Preferred Stock Depositary. Any resignation or removal will take effect upon the appointment of a successor Preferred Stock Depositary. A successor must be appointed by Morgan Stanley within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and a combined capital and surplus of at least $50,000,000.
Reports to Holders. Morgan Stanley will deliver all required reports and communications to holders of the Listed Preferred Stock to the Preferred Stock Depositary, and it will forward those reports and communications to the holders of depositary shares.
Inspection by Holders. Upon request, the Preferred Stock Depositary will provide for inspection to the holders of depositary shares the transfer books of the depositary and the list of holders of receipts; provided that any requesting holder certifies to the Preferred Stock Depositary that such inspection is for a proper purpose reasonably related to such person’s interest as an owner of depositary shares evidenced by the receipts.
Listing. The depositary shares representing the Series A Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the Series I Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock and the Series O Preferred Stock are traded on the New York Stock Exchange under the trading symbols “MS/PA,” “MS/PE,” “MS/PF,” “MS/PI,” “MS/PK,” “MS/PL” and “MS/PO,” respectively.
Existing Preferred Stock
As described above, Morgan Stanley has depositary shares registered under Section 12 of the Exchange Act that represent interests in the Listed Preferred Stock. This section describes the Listed Preferred Stock, as well as other series of preferred stock issued by Morgan Stanley that are also relevant to describing the Listed Preferred Stock.
Unless otherwise indicated, the terms and provisions described below relate to each of the Series A Preferred Stock, the Series C Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the Series I Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock (collectively, the “Existing Preferred Stock”). Other than as described below, the terms of the Series A Preferred Stock, the Series C Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the Series I Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock are substantially similar.
Rank. Each series of Existing Preferred Stock ranks on a parity with each other and with the offered preferred stock as to payment of dividends and amounts payable upon liquidation, dissolution or winding up, except that the certificate of designation for the Series A Preferred Stock states that such series ranks, as to dividends, junior to any future issuance of cumulative preferred stock. Each series of Existing Preferred Stock ranks prior to the common stock as to payment of dividends and amounts payable on liquidation, dissolution or winding up. The shares of the Existing Preferred Stock are fully paid and nonassessable and have no preemptive rights.
Conversion. No shares of the Series A Preferred Stock, the Series C Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the Series I Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock or the Series O Preferred Stock are convertible at the option of the holder, or otherwise, into common stock.
    


Dividends. Holders of Existing Preferred Stock are entitled to receive, when and as declared by the Board of Directors out of legally available funds, cash dividends payable quarterly (except with respect to the Series M Preferred Stock and the Series N Preferred Stock, for which dividends are currently payable semi-annually) at the rate specified below.
Series A Preferred Stock: noncumulative cash dividends at a per annum rate equal to the greater of (1) 4% and (2) three-month U.S. Dollar LIBOR on the related dividend determination date plus .70%.
Series C Preferred Stock: noncumulative cash dividends at a per annum rate equal to 10%.
Series E Preferred Stock: noncumulative cash dividends at a per annum rate equal to 7.125% with respect to each dividend period from and including September 30, 2013 to, but excluding, October 15, 2023 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 4.32% with respect to each dividend period from and including October 15, 2023.
Series F Preferred Stock: noncumulative cash dividends at a per annum rate equal to 6.875% with respect to each dividend period from and including December 10, 2013 to, but excluding, January 15, 2024 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 3.94% with respect to each dividend period from and including January 15, 2024.
Series I Preferred Stock: noncumulative cash dividends at a per annum rate equal to 6.375% with respect to each dividend period from and including September 18, 2014 to, but excluding, October 15, 2024 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 3.708% with respect to each dividend period from and including October 15, 2024.
Series K Preferred Stock: noncumulative cash dividends at a per annum rate equal to 5.85% with respect to each dividend period from and including January 31, 2017 to, but excluding, April 15, 2027 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 3.491% with respect to each dividend period from and including April 15, 2027.
Series L Preferred Stock: noncumulative cash dividends at a per annum rate equal to 4.875%.
Series M Preferred Stock: noncumulative cash dividends at a per annum rate equal to 5.875% with respect to each dividend period from and including September 15, 2020 to, but excluding, September 15, 2026 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 4.435% with respect to each dividend period from and including September 15, 2026.
Series N Preferred Stock: noncumulative cash dividends at a per annum rate equal to 5.30% with respect to each dividend period from and including September 15, 2020 to, but excluding, March 15, 2023 and at a rate per annum equal to the three-month U.S. dollar LIBOR on the related dividend determination date plus 3.16% with respect to each dividend period from and including March 15, 2023.
Series O Preferred Stock: noncumulative cash dividends at a per annum rate equal to 4.250%.
Each series of Existing Preferred Stock is noncumulative preferred stock. Accordingly, if the Board of Directors (or a duly authorized committee thereof) does not declare a dividend on the Series A Preferred Stock, the Series C Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the Series I Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock or the Series O Preferred Stock in respect of any dividend period before the related dividend payment date, Morgan Stanley will have no obligation to pay a dividend for that dividend period on such dividend payment date or at any future time.
Each series of Existing Preferred Stock will be junior as to payment of dividends to any preferred stock that may be issued in the future that is expressly senior as to dividends to the Existing Preferred Stock. If at any time Morgan Stanley has failed to pay accumulated dividends on any preferred stock that is senior to a series of Existing Preferred Stock as to payment of dividends, Morgan Stanley may not pay any dividends on the junior series of Existing Preferred Stock or redeem or otherwise repurchase any shares of the junior series of Existing Preferred Stock until it has paid in full, or set aside for payment, such accumulated but unpaid dividends on those senior shares.
Morgan Stanley will not declare or pay or set aside for payment, dividends for the latest dividend period on any series of offered preferred stock ranking on a parity as to payment of dividends with any series of Existing Preferred Stock, unless it also declares or pays or sets aside for payment the accrued dividends on the outstanding shares of such series for the latest dividend payment period. Morgan Stanley must declare, pay or set aside for payment any amounts on the offered preferred stock ratably in proportion to the respective amounts of unpaid dividends described in the preceding sentence.
    


Except as described above, and subject to some additional exceptions set forth in the relevant certificate of designations, unless Morgan Stanley has paid full accrued dividends on the outstanding shares of each series of Existing Preferred Stock for the latest dividend payment period with respect to each such series, Morgan Stanley may not during a divided period for any series:
declare or pay a dividend or distribution on common stock or any preferred stock that ranks junior to such series as to dividend rights and as to rights on liquidation, dissolution or winding up, or
redeem, purchase or otherwise acquire Morgan Stanley’s common stock or any preferred stock that ranks junior to, or, in the case of Series M Preferred Stock and Series N Preferred Stock, that ranks junior to or on a parity with, such series as to dividend rights and as to rights on liquidation, dissolution or winding up.
Redemption. The Existing Preferred Stock is not and will not be subject to any mandatory redemption, sinking fund provision or other similar provision. The Existing Preferred Stock is redeemable, subject to receipt of any required regulatory approvals, in whole or in part, upon 30 days’ notice as follows:
the Series A Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus accrued and unpaid dividends, regardless of whether dividends are actually declared, to but excluding the date of redemption;
the Series C Preferred Stock is redeemable at a redemption price of $1,100.00 per share plus accrued and unpaid dividends, regardless of whether dividends are actually declared, to but excluding the date of redemption;
the Series E Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after October 15, 2023 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series F Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after January 15, 2024 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series I Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after October 15, 2024 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series K Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after April 15, 2027 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series L Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after January 15, 2025 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series M Preferred Stock is redeemable at a redemption price of $1,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after September 15, 2026 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements;
the Series N Preferred Stock is redeemable at a redemption price of $100,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part after October 2, 2025 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements; and
the Series O Preferred Stock is redeemable at a redemption price of $25,000.00 per share plus any declared and unpaid dividends to but excluding the date fixed for redemption (i) in whole or in part on or after January 15, 2027 or (ii) in whole but not in part at any time within 90 days of certain changes to regulatory capital requirements.
Liquidation Rights. In the event of any liquidation, dissolution or winding up of Morgan Stanley, the holders of shares of Existing Preferred Stock will be entitled to receive, out of the assets of Morgan Stanley available for
    


distribution to stockholders, liquidating distributions before any distribution is made to holders of any class or series of capital stock ranking junior to the Existing Preferred Stock as to rights upon liquidation, dissolution or winding up of Morgan Stanley’s common stock. The liquidating distribution that each series of Existing Preferred Stock is entitled to receive is as follows:
the Series A Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series C Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $1,000 per share, together with an amount equal to all dividends, if any, that have been declared but not paid prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series E Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series F Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series I Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series K Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series L Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series M Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $1,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date);
the Series N Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $100,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date); and
the Series O Preferred Stock will be entitled to receive a liquidating distribution in an amount equal to $25,000.00 per share, together with an amount equal to all dividends, if any, that have been declared but not paid with respect to such series prior to the date of payment of such distribution (but without any accumulation in respect of dividends that have not been declared prior to such payment date).
However, holders of shares of the Existing Preferred Stock will not be entitled to receive the liquidation price of their shares until Morgan Stanley has paid or set aside an amount sufficient to pay in full the liquidation preference of any class or series of Morgan Stanley’s capital stock ranking senior as to rights upon liquidation, dissolution or winding up.
If, upon any liquidation, dissolution or winding up of Morgan Stanley, assets of Morgan Stanley then distributable are insufficient to pay in full the amounts payable with respect to the Existing Preferred Stock and any other preferred stock ranking on a parity with the Existing Preferred Stock as to rights upon liquidation, dissolution or winding up, the holders of the Existing Preferred Stock and of that other preferred stock will share ratably in any distribution in proportion to the full respective preferential amounts to which they are entitled. After Morgan Stanley
    


has paid the full amount of the liquidating distribution to which they are entitled, the holders of the Existing Preferred Stock will not be entitled to any further participation in any distribution of assets by Morgan Stanley.
Voting Rights. Holders of Existing Preferred Stock do not have any voting rights except as described below or as otherwise from time to time required by law. Whenever dividends on any series of Existing Preferred Stock have not been declared and paid for the equivalent of six or more dividend periods (or, for the Series M Preferred Stock and the Series N Preferred Stock, three semi-annual or six quarterly full dividend periods), whether or not consecutive, the authorized number of directors of Morgan Stanley shall be automatically increased by two and the holders of shares of Existing Preferred Stock, voting together as a class with holders of any and all other series of preferred stock having similar voting rights that are exercisable, will be entitled to elect two directors to fill such newly created directorships at Morgan Stanley’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting. These voting rights will continue for each series of Existing Preferred Stock until dividends on such shares have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for such payment) for at least four regular dividend periods (or, for the Series M Preferred Stock and the Series N Preferred Stock, the equivalent of two consecutive semi-annual dividend periods or four consecutive quarterly dividend periods) following the nonpayment. The term of office of all directors elected by the holders of preferred stock will terminate immediately upon the termination of the right of holders of preferred stock to vote for directors.
So long as any shares of Existing Preferred Stock remain outstanding, Morgan Stanley will not, without the consent of the holders of at least two-thirds of the shares of Existing Preferred Stock outstanding at the time, voting together as a single class with holders of any and all other series of preferred stock having similar voting rights that are exercisable
amend or alter any provision of Morgan Stanley’s amended and restated certificate of incorporation or the certificate of designations of preferences and rights with respect to any series of the Existing Preferred Stock to authorize or create, or increase the authorized amount of, any class or series of stock ranking senior to any series of Existing Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up;
amend, alter or repeal any provision of Morgan Stanley’s amended and restated certificate of incorporation or the certificate of designations of preferences and rights with respect to any series of the Existing Preferred Stock if such amendment, alteration or repeal would cause a material and adverse effect with respect to the special rights, preferences, privileges and voting powers of any Existing Preferred Stock, whether by merger, consolidation or otherwise. For purposes of the preceding sentence any increase in the authorized amount of common stock or preferred stock or the creation and issuance of other series of Morgan Stanley’s common stock or preferred stock ranking on a parity with or junior to the Existing Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up will not be deemed to materially and adversely affect the special rights, preferences, privileges and voting powers of any Existing Preferred Stock; or
consummate any binding share exchange or reclassification involving any series of Existing Preferred Stock, or merger or consolidation of Morgan Stanley with another entity, unless in each case (x) the shares of Existing Preferred Stock remain outstanding or are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remain outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Existing Preferred Stock immediately prior to such consummation, taken as a whole.
Agents and Registrar for Existing Preferred Stock. The transfer agent, dividend disbursing agent and registrar for each series of Existing Preferred Stock is The Bank of New York Mellon.

    


DESCRIPTION OF THE GLOBAL MEDIUM-TERM NOTES, SERIES A, FIXED RATE STEP-UP SENIOR NOTES DUE 2026 OF MORGAN STANLEY FINANCE LLC (AND MORGAN STANLEY’S GUARANTEE WITH RESPECT THERETO)
The following description of the 2026 Notes (as defined below) is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the MSFL Senior Debt Indenture (as defined below), which is incorporated by reference as an Exhibit to the Form 10-K. We encourage you to read the MSFL Senior Debt Indenture for additional information.
On February 22, 2016, Morgan Stanley Finance LLC (“MSFL”), a wholly-owned finance subsidiary of Morgan Stanley, issued its Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 (the “2026 Notes”) in an aggregate principal amount of $5,000,000. The 2026 Notes were issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The 2026 Notes will mature on February 23, 2026. As of December 31, 2021, $5,000,000 in aggregate principal amount of the 2026 Notes was outstanding.
The 2026 Notes are senior debt securities of MSFL. The 2026 Notes constitute part of its senior debt, are issued under the MSFL Senior Debt Indenture, as defined below under “-Indenture,” and rank on a parity with all of its other unsecured and unsubordinated debt. The 2026 Notes are fully and unconditionally guaranteed by Morgan Stanley and holders of the 2026 Notes should assume that in any bankruptcy, resolution or similar proceeding, they would not have any priority over and should be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
The Series A medium-term notes issued under the MSFL Senior Debt Indenture (including the 2026 Notes) constitute a single series under that indenture, together with any medium-term notes MSFL issues in the future under that indenture that it designates as being part of that series. MSFL may create and issue additional notes with the same terms as previous issuances of Series A medium-term notes, so that the additional notes will be considered as part of the same issuance as the earlier notes.
The 2026 Notes are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed by, a bank.
The terms of the MSFL Senior Debt Indenture have been amended since the 2026 Notes were issued and those amendments do not apply to the 2026 Notes. The below description of the terms of the MSFL Senior Debt Indenture is of the terms that apply to the 2026 Notes, which differ from those that apply to securities issued by MSFL under the MSFL Senior Debt Indenture after such amendments.
Listing
The 2026 Notes are traded on the New York Stock Exchange under the trading symbol “MS/26C.”
Interest Payments
The 2026 Notes bear interest from the date of issuance as follows:
from and including the original issue date to but excluding February 23, 2021: 3.50% per annum;
from and including February 23, 2021 to but excluding February 23, 2023: 3.75% per annum;
from and including February 23, 2023 to but excluding February 23, 2024: 4.00% per annum;
from and including February 23, 2024 to but excluding February 23, 2025: 4.25% per annum; and
from and including February 23, 2025 to but excluding the maturity date: 5.00% per annum.
How Interest Is Calculated. Interest on the 2026 Notes will be computed on the basis of a 360-day year of twelve 30-day months.
How Interest Accrues. Interest on the 2026 Notes accrues from and including the most recent interest payment date to which interest has been paid or duly provided for. Interest will accrue to but excluding the next interest payment date, or, if earlier, the date on which the principal has been paid or duly made available for payment, except as described below under “-If a Payment Date Is Not a Business Day.”
When Interest Is Paid. Payments of interest on the 2026 Notes will be made on each February 23 and August 23, commencing August 23, 2016.
    


Amount of Interest Payable. Interest payments for the 2026 Notes will include accrued interest from and including the last date in respect of which interest has been paid to but excluding the relevant interest payment date or date of maturity.
If a Payment Date Is Not a Business Day. If any scheduled interest payment date is not a business day, the issuer will pay interest on the next business day, but interest on that payment will not accrue during the period from and after the scheduled interest payment date. If the scheduled maturity date is not a business day, the issuer may pay interest, if any, and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date. For these purposes, a “business day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
General Terms of the 2026 Notes
In the below sections, all references to “debt securities” refer to Series A medium-term notes issued by MSFL under the MSFL Senior Debt Indenture. The following description of the terms of the debt securities contains certain general terms that may apply to the debt securities, including the 2026 Notes.
MSFL has summarized below the material provisions of the MSFL Senior Debt Indenture and the debt securities, including the guarantee of Morgan Stanley. These descriptions are only summaries, and each investor should refer to the MSFL Senior Debt Indenture and any applicable supplements thereto, which describe completely the terms and definitions summarized below and contain additional information regarding the debt securities. Where appropriate, MSFL uses parentheses to refer you to the particular sections of the MSFL Senior Debt Indenture. Any reference to particular sections or defined terms of the MSFL Senior Debt Indenture in any statement qualifies the entire statement and incorporates by reference the applicable section or definition into that statement.
Morgan Stanley Guarantee of Debt Securities Issued by MSFL
The payments due, including any property deliverable under any debt securities issued by MSFL, will be fully and unconditionally guaranteed by Morgan Stanley. If, for any reason, MSFL does not make any required payment in respect of any debt security issued by it when due, Morgan Stanley will cause the payment to be made at the same address at which MSFL is obligated to make such payment. MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of the securities in a bankruptcy, resolution or similar proceeding. Accordingly, holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Morgan Stanley’s guarantees of the payments due on debt securities issued by MSFL will be unsecured senior obligations of Morgan Stanley. In addition, if MSFL were to merge with and into Morgan Stanley pursuant to the terms of the MSFL Senior Debt Indenture, the guarantee will terminate.
Indenture
The 2026 Notes are issued under a Senior Indenture dated as of February 16, 2016 among MSFL, Morgan Stanley, as guarantor, and The Bank of New York Mellon, a New York banking corporation, as trustee. That indenture, as it has been and may be supplemented from time to time (to the extent that such supplements apply to the 2026 Notes), is called the MSFL Senior Debt Indenture.
Covenants Restricting Pledges, Mergers and Other Significant Corporate Actions
Negative Pledge of Morgan Stanley. Because Morgan Stanley is a holding company, its assets consist primarily of the securities of its subsidiaries. The negative pledge provisions of the MSFL Senior Debt Indenture limit Morgan Stanley’s ability to pledge some of these securities. The MSFL Senior Debt Indenture provides that Morgan Stanley will not, and will not permit any subsidiary to, create, assume, incur or guarantee any indebtedness for borrowed money that is secured by a pledge, lien or other encumbrance except for liens specifically permitted by such senior indenture on:
the voting securities of Morgan Stanley & Co. LLC, Morgan Stanley & Co. International plc, Morgan Stanley Smith Barney LLC or any subsidiary succeeding to any substantial part of the business now conducted by any of those corporations, which are referred to collectively as the “principal subsidiaries,” or
the voting securities of a subsidiary that owns, directly or indirectly, the voting securities of any of the principal subsidiaries, other than directors’ qualifying shares,
without making effective provisions so that the guarantee issued under the MSFL Senior Debt Indenture will be secured equally and ratably with indebtedness so secured.
    


For these purposes, “subsidiary” means any corporation, partnership or other entity of which at the time of determination Morgan Stanley owns or controls directly or indirectly more than 50% of the shares of the voting stock or equivalent interest, and “voting securities” means stock of any class or classes having general voting power under ordinary circumstances to elect a majority of the board of directors, managers or trustees of the relevant subsidiary, other than stock that carries only the conditional right to vote upon the happening of an event, whether or not that event has happened. (MSFL Senior Debt Indenture, Section 13.10).
Merger or Consolidation of MSFL, as Issuer, or Morgan Stanley, as Guarantor, Under the MSFL Senior Debt Indenture. The MSFL Senior Debt Indenture provides that neither MSFL, as issuer, nor Morgan Stanley, as guarantor, will merge or consolidate with any other person, unless:
MSFL or Morgan Stanley, as applicable, will be the continuing person; or
the successor person by merger or consolidation to MSFL or Morgan Stanley, as applicable:
will be a person organized under the laws of the United States, a state of the United States or the District of Columbia; and
will expressly assume all of MSFL’s or Morgan Stanley’s obligations, as applicable, under the indenture and the debt securities or the guarantees, as applicable, issued under the indenture; and
immediately after the merger or consolidation, MSFL, Morgan Stanley or that successor person, as the case may be, in its capacity as issuer or guarantor, as applicable, will not be in default in the performance of the covenants and conditions of the indenture applicable to it. (MSFL Senior Debt Indenture, Sections 9.01 and 13.11).
For the avoidance of doubt, the successor person referred to in this section may be Morgan Stanley or any subsidiary of Morgan Stanley.
Sale, Lease or Conveyance by MSFL, as Issuer, or Morgan Stanley, as Guarantor, Under the MSFL Senior Debt Indenture. The MSFL Senior Debt Indenture provides that neither MSFL, as issuer, nor Morgan Stanley, as guarantor, will sell, lease or convey all or substantially all of its assets to any other person, unless:
the person that acquires all or substantially all of the assets of MSFL or of Morgan Stanley, as applicable:
will be a person organized under the laws of the United States, a state of the United States or the District of Columbia; and
will expressly assume all of MSFL’s or Morgan Stanley’s obligations, as applicable, under the indenture and the debt securities or the guarantees, as applicable, issued under the indenture; and
immediately after the sale, lease or conveyance, that acquiring person, in its capacity as issuer or guarantor, as applicable, will not be in default in the performance of the covenants and conditions of the indenture applicable to it. (MSFL Senior Debt Indenture, Sections 9.01 and 13.11).
For the avoidance of doubt, the acquiring person referred to in this section may be Morgan Stanley or any subsidiary of Morgan Stanley.
Absence of Protections against All Potential Actions of the Issuer and the Guarantor. There are no covenants or other provisions in the MSFL Senior Debt Indenture that would afford holders of debt securities additional protection in the event of a recapitalization transaction, a change of control of the issuer or the guarantor, as applicable, or a highly leveraged transaction. The merger covenants described above would only apply if the recapitalization transaction, change of control or highly leveraged transaction were structured to include a merger or consolidation of the issuer or the guarantor, as applicable, or a sale, lease or conveyance of all or substantially all of the assets of the issuer or the guarantor, as applicable.
Events of Default
The MSFL Senior Debt Indenture provides holders of debt securities with remedies if MSFL, as issuer, fails to perform specific obligations or if MSFL becomes bankrupt. The MSFL Senior Debt Indenture permits the issuance of debt securities in one or more series, and, in many cases, whether an event of default has occurred is determined on a series by series basis.
An event of default is defined under the MSFL Senior Debt Indenture, with respect to any series of debt securities issued by MSFL under that indenture, as being:
    


default in payment of any principal of the debt securities of that series, either at maturity or upon any redemption, by declaration or otherwise;
default for 30 days in payment of any interest on any debt securities of that series;
default for 60 days after written notice in the observance or performance by MSFL of any covenant or agreement in the debt securities of that series or the indenture (other than a covenant or warranty with respect to the debt securities of that series the breach or nonperformance of which is otherwise included in the definition of “event of default”);
events of bankruptcy, insolvency or reorganization of MSFL; or
any other event of default provided in the supplemental indenture under which that series of debt securities is issued. (MSFL Senior Debt Indenture, Section 5.01).
The 2026 Notes do not have the benefit of any cross-default or cross-acceleration provisions with other indebtedness of MSFL or Morgan Stanley. In addition, under the MSFL Senior Debt Indenture, a covenant default by Morgan Stanley, as guarantor, or an event of bankruptcy, insolvency or reorganization of Morgan Stanley, as guarantor, does not constitute an event of default.
Acceleration of Debt Securities upon an Event of Default. The MSFL Senior Debt Indenture provides that:
if an event of default due to the default in payment of principal of, or any premium or interest on, any series of debt securities issued under that indenture, or due to the default in the performance or breach of any other covenant or warranty of the issuer applicable to the debt securities of that series but not applicable to all outstanding debt securities issued under that indenture occurs and is continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding debt securities of each affected series, voting as one class, by notice in writing to the issuer and to the trustee, if given by security holders, may declare the principal of all debt securities of all affected series and interest accrued thereon to be due and payable immediately; and
if an event of default due to a default in the performance of any other covenants or agreements of the issuer in that indenture applicable to all outstanding debt securities issued under that indenture or due to specified events of bankruptcy, insolvency or reorganization of the issuer, occurs and is continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of all outstanding debt securities issued under that indenture, voting as one class, by notice in writing to the issuer and to the trustee, if given by security holders, may declare the principal of all those debt securities and interest accrued thereon to be due and payable immediately. (MSFL Senior Debt Indenture, Section 5.01).
Notwithstanding these notice provisions, the holders of debt securities issued by MSFL and guaranteed by Morgan Stanley under the MSFL Senior Debt Indenture have no right to declare the principal of those debt securities and interest accrued thereon to be due and payable immediately if Morgan Stanley fails to observe or perform any covenant under such indenture or in the event of the bankruptcy, insolvency or reorganization of Morgan Stanley, as guarantor of such securities.
Annulment of Acceleration and Waiver of Defaults. The MSFL Senior Debt Indenture provides that:
In some circumstances, if any and all events of default under that indenture, other than the non-payment of the principal of the securities that has become due as a result of an acceleration, have been cured, waived or otherwise remedied, then the holders of a majority in aggregate principal amount of all series of outstanding debt securities affected, voting as one class, may waive past defaults and rescind and annul past declarations of acceleration of the debt securities. (MSFL Senior Debt Indenture, Section 5.01).
Prior to the acceleration of any debt securities, the holders of a majority in aggregate principal amount of all series of outstanding debt securities with respect to which an event of default has occurred and is continuing, voting as one class, may waive any past default or event of default, other than a default in the payment of principal or interest (unless such default has been cured and an amount sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the trustee) or a default in respect of a covenant or provision in that indenture that cannot be modified or amended without the consent of the holder of each debt security affected. (MSFL Senior Debt Indenture, Section 5.10).
Indemnification of Trustee for Actions Taken on Your Behalf. The MSFL Senior Debt Indenture contains a provision entitling the trustee, subject to the duty of the trustee during a default to act with the required standard of care, to be indemnified by the holders of debt securities issued under that indenture before proceeding to exercise any trust or power at the request of holders. (MSFL Senior Debt Indenture, Section 6.02). Subject to these provisions and some other limitations, the holders of a majority in aggregate principal amount of each series of outstanding
    


debt securities of each affected series, voting as one class, may direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee. (MSFL Senior Debt Indenture, Section 5.09).
Limitation on Actions by You as an Individual Holder. The MSFL Senior Debt Indenture provides that no individual holder of debt securities may institute any action against the issuer or the guarantor under that indenture, except actions for payment of overdue principal and interest, unless the following actions have occurred:
the holder must have previously given written notice to the trustee of the continuing default;
the holders of not less than 25% in aggregate principal amount of the outstanding debt securities of each affected series, treated as one class, must have (1) requested the trustee to institute that action and (2) offered the trustee reasonable indemnity;
the trustee must have failed to institute that action within 60 days after receipt of the request referred to above; and
the holders of a majority in principal amount of the outstanding debt securities of each affected series, voting as one class, must not have given directions to the trustee inconsistent with those of the holders referred to above. (MSFL Senior Debt Indenture, Sections 5.06 and 5.09).
Annual Certification. The MSFL Senior Debt Indenture contains a covenant that the issuer will file annually with the trustee a certificate of no default or a certificate specifying any default that exists. (MSFL Senior Debt Indenture, Section 3.05).
Discharge, Defeasance and Covenant Defeasance
The issuer or the guarantor has the ability to eliminate most or all of the obligations of the issuer and the guarantor on any series of debt securities prior to maturity if the issuer or the guarantor complies with the following provisions. (MSFL Senior Debt Indenture, Section 10.01).
Discharge of Indenture. If at any time the issuer has:
paid or caused to be paid the principal of and interest on all of the outstanding debt securities in accordance with their terms (or the guarantor has done the same);
delivered to the trustee for cancellation all of the outstanding debt securities; or
irrevocably deposited with the trustee cash or, in the case of a series of debt securities payable only in U.S. dollars, U.S. government obligations in trust for the benefit of the holders of any series of debt securities issued under that indenture that have either become due and payable, or are by their terms due and payable within one year or are scheduled for redemption within one year, in an amount certified to be sufficient to pay on each date that they become due and payable, the principal of and interest on, and any mandatory sinking fund payments for, those debt securities (or the guarantor has done the same);
and if, in any such case, the issuer or the guarantor also pays or causes to be paid all other sums payable by the issuer or the guarantor under the indenture with respect to the securities of such series, then that indenture shall cease to be of further effect with respect to the securities of such series, except as to certain rights and with respect to the transfer and exchange of securities, rights of the holders to receive payment and certain other rights and except that the deposit of cash or U.S. government obligations for the benefit of holders of a series of debt securities that are due and payable or are due and payable within one year or are scheduled for redemption within one year will discharge obligations under the indenture relating only to that series of debt securities.
Defeasance of a Series of Securities at Any Time. The issuer or the guarantor may also discharge all obligations of the issuer and the guarantor, other than as to transfers and exchanges, under any series of debt securities at any time, which is referred to as “defeasance.”
The issuer and the guarantor, may be released with respect to any outstanding series of debt securities from the obligations imposed by Section 13.10 and Section 13.11 and Section 9.01, which sections contain the covenants described above limiting liens and consolidations, mergers, asset sales and leases, and elect not to comply with those sections without creating an event of default or a default. Discharge under those procedures is called “covenant defeasance.”
Defeasance or covenant defeasance may be effected only if, among other things:
    


The issuer or the guarantor irrevocably deposits with the trustee cash or, in the case of debt securities payable only in U.S. dollars, U.S. government obligations, as trust funds in an amount certified to be sufficient to pay on each date that they become due and payable or a combination of the above sufficient to pay the principal of and interest on, and any mandatory sinking fund payments for, all outstanding debt securities of the series being defeased.
The issuer or the guarantor delivers to the trustee an opinion of counsel to the effect that:
the beneficial owners of the series of debt securities being defeased will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance or covenant defeasance; and
the defeasance or covenant defeasance will not otherwise alter those beneficial owners’ U.S. federal income tax treatment of principal and interest payments on the series of debt securities being defeased.
In the case of a defeasance, but not in the case of covenant defeasance, this opinion must be based on a ruling of the Internal Revenue Service or a change in U.S. federal income tax law occurring after the date of this prospectus, since that result would not occur under current tax law.
Modification of the MSFL Senior Debt Indenture
Modifications Without Consent of Holders. The issuer, the guarantor and the trustee may enter into supplemental indentures without the consent of the holders of debt securities issued under a particular indenture to:
secure any debt securities (and to secure the guarantee of any debt securities securities);
evidence the assumption by a successor of the obligations of the issuer or the guarantor (including to evidence the merger of MSFL with and into Morgan Stanley and, in such case, to evidence the elimination of the guarantee);
add covenants for the protection of the holders of debt securities;
cure any ambiguity or correct any inconsistency;
add to, change or eliminate any of the provisions of the indenture in respect of all or any securities of any series; provided that any such addition, change or elimination (i) shall neither (a) apply to any security issued prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (b) modify the rights of any holder of such security with respect to such provision or (ii) shall become effective only when there is no such security outstanding;
establish the forms or terms of debt securities of any series; or
evidence the acceptance of appointment by a successor trustee. (MSFL Senior Debt Indenture, Section 8.01).
Modifications with Consent of Holders. The issuer, the guarantor and the trustee, with the consent of the holders of not less than a majority in aggregate principal amount of each affected series of outstanding debt securities, voting as one class, may add any provisions to, or change in any manner or eliminate any of the provisions of, the applicable indenture or modify in any manner the rights of the holders of those debt securities. However, the issuer, the guarantor and the trustee may not make any of the following changes to any outstanding debt security without the consent of each holder that would be affected by such change:
extend the final maturity of the principal;
reduce the principal amount;
reduce the rate or extend the time of payment of interest;
reduce any amount payable on redemption;
change the currency in which the principal and any amount of original issue discount, premium, or interest thereon is payable;
modify or amend the provisions for conversion of any currency into another currency;
reduce the amount of any original issue discount security payable upon acceleration or provable in bankruptcy;
    


alter the terms on which holders of the debt securities may convert or exchange debt securities for stock or other securities of the issuer or of other entities or for other property or the cash value of the property, other than in accordance with the antidilution provisions or other similar adjustment provisions included in the terms of the debt securities;
alter certain provisions of the indenture relating to debt securities not denominated in U.S. dollars;
impair the right of any holder to institute suit for the enforcement of any payment on any debt security when due;
remove the guarantee (except upon the merger of MSFL with and into Morgan Stanley); or
reduce the percentage of debt securities the consent of whose holders is required for modification of the indenture (MSFL Senior Debt Indenture, Section 8.02).
Replacement of Debt Securities
At the expense of the holder, the issuer may, in its discretion, replace any debt securities that become mutilated, destroyed, lost or stolen or are apparently destroyed, lost or stolen. The mutilated debt securities must be delivered to the trustee, the paying agent and the registrar, in the case of registered debt securities, or satisfactory evidence of the destruction, loss or theft of the debt securities must be delivered to the issuer, the guarantor, the paying agent, the registrar, in the case of registered debt securities, and the trustee. At the expense of the holder, an indemnity that is satisfactory to the issuer, the guarantor, the principal paying agent, the registrar, in the case of registered debt securities, and the trustee may be required before a replacement debt security will be issued.
Concerning the Issuer’s and the Guarantor’s Relationship with the Trustee
Morgan Stanley, MSFL and other subsidiaries of Morgan Stanley and affiliates of MSFL maintain ordinary banking relationships and credit facilities with The Bank of New York Mellon, a New York banking corporation (including as successor to JPMorgan Chase Bank, N.A. and J.P. Morgan Trust Company, National Association).
Governing Law
The debt securities, Morgan Stanley’s guarantee of debt securities issued by MSFL and the MSFL Senior Debt Indenture will be governed by, and construed in accordance with, the laws of the State of New York.

    
EXHIBIT 4.4


ELEVENTH SUPPLEMENTAL SENIOR INDENTURE
BETWEEN
MORGAN STANLEY
AND
THE BANK OF NEW YORK MELLON
as successor to JPMorgan Chase Bank, N.A. (formerly known as
JPMorgan Chase Bank), Trustee

Dated as of March 24, 2021

SUPPLEMENTAL TO SENIOR INDENTURE
DATED AS OF NOVEMBER 1, 2004




    



THIS ELEVENTH SUPPLEMENTAL SENIOR INDENTURE dated as of March 24, 2021 (the “Eleventh Supplemental Senior Indenture”) between MORGAN STANLEY, a Delaware corporation (the “Issuer”), and THE BANK OF NEW YORK MELLON (as successor to JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank)), as trustee (the “Trustee”),
W I T N E S S E T H :
WHEREAS, the Issuer and the Trustee are parties to that certain Senior Indenture dated as of November 1, 2004 (the “Indenture”);
WHEREAS, the Issuer established and on March 9, 2017 issued its Global Medium-Term Notes, Series I, Floating Rate Senior Notes Due 2027 (the “Notes”);
WHEREAS, Section 8.02 of the Indenture provides that, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of all series affected by such supplemental indenture (voting as one class), the Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may enter into an indenture or indentures supplemental to the Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of each such series or of the Coupons appertaining to such Securities, subject to the conditions set forth therein; provided, that no such supplemental indenture shall, among other things, reduce the rate or extend the time of payment of interest on any Security without the consent of the Holders of each Security so affected;
WHEREAS, the Issuer desires to modify certain provisions of the Notes relating to how interest on the Notes is calculated, accrued and paid;
WHEREAS, all the consents necessary to enter into this Eleventh Supplemental Senior Indenture have been received;
WHEREAS, the entry into this Eleventh Supplemental Senior Indenture by the parties hereto is in all respects authorized by the provisions of the Indenture; and
WHEREAS, all things necessary to make this Eleventh Supplemental Senior Indenture a valid indenture and agreement in accordance with its terms have been done.
NOW, THEREFORE, for and in consideration of the premises and the purchases of the Notes by the Holders thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Notes as follows:
Article 1
Section 1.01.Amendment of the Notes. The terms of the Notes are hereby amended by the insertion of a new section entitled “Effect of Benchmark Transition Event” to read in its entirety as follows:
2
    


“Effect of Benchmark Transition Event    

The following provisions apply to this Note notwithstanding the terms set forth elsewhere in this Note:
Benchmark Replacement. If the Issuer or its designee determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to this Note in respect of such determination on such date and all determinations on all subsequent dates.
Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, the Issuer or its designee will have the right to make Benchmark Replacement Conforming Changes from time to time.
Decisions and Determinations. Any determination, decision or election that may be made by the Issuer or its designee pursuant to this section entitled “Effect of Benchmark Transition Event,” including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection:
will be conclusive and binding absent manifest error;
will be made in the Issuer’s or its designee’s sole discretion; and
notwithstanding anything to the contrary in the documentation relating to this Note, shall become effective without consent from the holder of this Note or any other party.
Certain Defined Terms. As used herein:
“Benchmark” means, initially, three-month U.S. dollar LIBOR; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to three-month U.S. dollar LIBOR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.
“Benchmark Replacement” means the Interpolated Benchmark with respect to the then-current Benchmark, plus the Benchmark Replacement Adjustment for such Benchmark; provided that if the Issuer or its designee cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date, then “Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Issuer or its designee as of the Benchmark Replacement Date:
(1)    the sum of: (a) Term SOFR and (b) the Benchmark Replacement Adjustment;
(2)    the sum of: (a) Compounded SOFR and (b) the Benchmark Replacement Adjustment;
(3)    the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;
(4)    the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment;
(5)    the sum of: (a) the alternate rate of interest that has been selected by the Issuer or its designee as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment.
“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Issuer or its designee as of the Benchmark Replacement Date:
(1)    the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
(2)    if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;
(3)    the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Issuer or its designee giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating rate notes at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “interest period,” timing and frequency of determining rates and making payments of interest, and other administrative matters) that the Issuer or its designee decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Issuer or its designee decides that adoption of any portion of such market practice is not administratively feasible or if the Issuer or its designee determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Issuer or its designee determines is reasonably necessary).
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(1)    in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
(2)    in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1)    a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
(2)    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
(3)    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.
“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate being established by the Issuer or its designee in accordance with:
(1)    the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
(2)    if, and to the extent that, the Issuer or its designee determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by the Issuer or its designee giving due consideration to any industry-accepted market practice for U.S. dollar-denominated floating rate notes at such time.
“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current Benchmark.
“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“Interpolated Benchmark” with respect to the Benchmark means the rate determined for the Corresponding Tenor by interpolating on a linear basis between: (1) the Benchmark for the longest period (for which the Benchmark is available) that is shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which the Benchmark is available) that is longer than the Corresponding Tenor.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.
“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
“Reference Time” with respect to any determination of the Benchmark means (1) if the Benchmark is three-month U.S. dollar LIBOR, 11:00 a.m., London time, on the relevant interest determination date, and (2) if the Benchmark is not three-month U.S. dollar LIBOR, the time determined by the Issuer or its designee in accordance with the Benchmark Replacement Conforming Changes.
“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.
“Term SOFR” means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.”

Section 1.02. Exchange of the Notes. The Trustee is authorized to exchange the original certificate dated March 9, 2017 evidencing the Notes for the duly executed and authenticated certificate evidencing the amended terms of the Notes. Upon such exchange, the Trustee shall promptly cancel and dispose of such original Notes in accordance with Section 2.10 of the Indenture. Failure to exchange such original Notes for such amended Notes in accordance with this Section will not impair the validity of or otherwise affect the Notes, as amended.
3
    


Article 2
Miscellaneous Provisions
Section 1.01.Further Assurances. The Issuer will, upon request by the Trustee, execute and deliver such further instruments and do such further acts as may reasonably be necessary or proper to carry out more effectively the purposes of this Eleventh Supplemental Senior Indenture.
Section 1.02.Other Terms of Indenture. Except insofar as herein otherwise expressly provided, all provisions, terms and conditions of the Indenture are in all respects ratified and confirmed and shall remain in full force and effect.
Section 1.03.Terms Defined. All terms defined elsewhere in the Indenture shall have the same meanings when used herein.
Section 1.04.Governing Law. This Eleventh Supplemental Senior Indenture shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State, except as may otherwise be required by mandatory provisions of law.
Section 1.05.Counterparts. This Eleventh Supplemental Senior Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective as delivery of a manually executed counterpart of this Eleventh Supplemental Senior Indenture. Each of the Issuer and the Trustee represents that it has undertaken commercially reasonable steps to verify the identity of each individual person executing any such counterparts via electronic signature on behalf of such party and has and will maintain sufficient records of the same.
Section 1.06.Responsibility of the Trustee. The recitals contained herein shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Eleventh Supplemental Senior Indenture.


4
    



IN WITNESS WHEREOF, the parties hereto have caused this Eleventh Supplemental Senior Indenture to be duly executed as of March 24, 2021.
MORGAN STANLEY
By:/s/ Kevin Sheehan
Name:    Kevin Sheehan
Title:    Assistant Treasurer

THE BANK OF NEW YORK MELLON,
as TRUSTEE
By:/s/ Francine Kincaid
Name:    Francine Kincaid
Title:    Vice President

5
    

EXHIBIT 10.4

EXHIBIT A

AMENDMENT
TO THE
MORGAN STANLEY 401(k) PLAN

Morgan Stanley Services Group Inc. (the “Company”) hereby amends the Morgan Stanley 401(k) Plan, effective as of January 1, 2022, unless otherwise stated, as follows:

1.Section 5(a)(i), Pre-Tax Contributions, of the Plan is amended to add the following language to the end thereof as follows:

“Effective January 1, 2022, each reference to 30% in the foregoing is replaced with 50%.”

2.Section 5(a)(ii), After-Tax Contributions, of the Plan is amended to add the following after the first sentence thereof:

After-Tax Contributions. Notwithstanding the forgoing, effective as of January 1, 2022, a Participant who is a Highly Compensated Employee may make After-Tax Contributions to the Plan for any year equal to any whole percentage, as determined on an annual basis by the Company, of such Participant’s Earnings (for 2022, equal to any whole percentage from 1% to 8%) regardless of whether the Participant is making any Pre-Tax Contributions.”

3.Section 5(a) of the Plan is further amended to add a new subsection (iv) as follows:

Maximum Deferral Percentage. Effective January 1, 2022, a Participant’s Pre-Tax, After-Tax and Catch-Up Contributions to the Plan for any year may not exceed 90% of the Participant’s Earnings for such year in the aggregate.”

4.Section 5(k)(ii) of the Plan is amended to replace the second sentence with the following:

“Effective January 1, 2022, a Participant, spousal Beneficiary or alternate payee may make an unlimited number of In-Plan Roth Rollovers per Plan Year.”

5.Section 6(a), Matching Contributions, of the Plan is amended to add the following language at the end thereof:

“Effective January 1, 2021, the Matching Contribution described herein for an eligible Participant who has Earnings of less than or equal to $275,000 for the Plan Year and who is not eligible for a Fixed Contribution as described in subsection (c) below, and who is not an Advisory Director or Senior Advisor (or equivalent title), or a Saxon employee of Morgan Stanley’s U.S. Residential Mortgage Business, as determined by the Plan Administrator, shall be increased to up to 5% of Earnings, subject to the other limitations of this subsection (a) at the discretion of the Company.”

6.Section 11(a)(i) of the Plan is amended to add the following at the end thereof:

“Effective as of January 1, 2022, a Participant may make unlimited partial distributions per calendar year.”


7.Section 11(d) of the Plan is amended to add the following at the end thereof.

Effective as of January 1, 2022, with respect to the death of a Participant on or after January 1, 2022, his or her Eligible Designated Beneficiaries, as defined below, shall be eligible to defer full distribution of their Accounts beyond the five years after the Participant’s death as required in this section (d), and instead, elect to receive minimum required distributions in a



series of payments as set forth in Code Section 401(a)(9) and as provided under Section 13(a) of the Plan, using the appropriate Life Expectancy Factor. Non-eligible Designated Beneficiaries, as described below, shall be eligible to defer full distribution of their Account to no later than December 31st of the calendar year which contains the tenth anniversary of the Participant’s death. For purposes of this section (d) a “Designated Beneficiary” is any person designated by the Participant in accordance with Section 11(e). An “Eligible Designated Beneficiary” is, as of the date of Participant’s death, a Designated Beneficiary who is the Participant’s spouse, child under the age of 18, disabled and chronically ill beneficiary or any other person whose age is within ten years of the Participant’s age. A “Non-eligible Designated Beneficiary” is a Designated Beneficiary who, as of the date of the Participant’s death, is Participant’s child who is 18 years of age or older, non-spouse beneficiary who isn’t disabled or chronically ill or non-spouse beneficiary who is not within ten years of the participant’s age.

8.Section 12(b)(ii) of the Plan is amended to add the following at the end thereof:

“Effective as of January 1, 2022, a Participant may make unlimited withdrawals (other than hardship withdrawals described in Section 12(f)) per calendar year.”

9.Section 12(b) of the Plan is amended to add a new subsection (vi) to read as follows:

“Effective as of January 1, 2022, a Participant who has attained age 65 at the time of application and who is actively employed by Morgan Stanley is eligible for a withdrawal from his or her Eaton Vance Money Purchase Plan Account. For purposes of this subsection (vi), the “Eaton Vance Money Purchase Plan Account” shall mean a Participant’s account created under the Plan with amounts attributable to money pension plan contributions under the Eaton Vance Profit Sharing and Savings Plan in connection with such plan’s merger into the Plan.”

10.Section 12(b) of the Plan is amended to add the following new subsection vii at the end thereof:

“Effective January 1, 2022, amounts in a Participant’s Accounts attributable to non-Roth Rollovers and Roth Rollover shall be available for a withdrawal under the Plan in accordance with the terms of the Plan.”

11.Section 13(a)(ii)(3) is amended as follows:

“Notwithstanding the foregoing, an MS Participant described herein and for whom the entire value of his or her Accounts are otherwise required to be distributed by April 1, 2022, may defer such distribution and instead receive minimum required distributions in a series of payments as set forth in Code Section 401(a)(9)(A)(ii).”

12.Section 13(a)(iii)(2) is amended as follows:

“Notwithstanding the foregoing, effective January 1, 2022, a IIG Participant described herein and for whom the entire value of his or her Accounts are otherwise required to be distributed by April 1, 2022, shall defer distribution of the entire value of his or her Accounts under the Plan and instead receive minimum required distributions in a series of payments as set forth in Code Section 401(a)(9)(A)(ii).”

13.Appendix B, Morgan Stanley Participating Companies is amended by inserting new entries at the end thereof as follows:

“E*TRADE Financial Holdings, LLC,                January 1, 2022
E*TRADE Bank,
E*TRADE Savings Bank,
E*TRADE Securities LLC,
E*TRADE Financial Corporate Services, Inc.,                




Eaton Vance Management,                    January 1, 2022
Eaton Vance Distributors, Inc.,
Eaton Vance WaterOak Advisors,
Calvert Research and Management,
Atlanta Capital Management Company LLC,
NextShares Solutions LLC
Parametric Portfolio Associates LLC.                        

Hyas Group LLC                        January 1, 2022”


14.Appendix B, Morgan Stanley Participating Companies is further amended by inserting the following at the end thereof:

E*TRADE. Any individual who became an Eligible Employee in connection with the merger of E*TRADE Financial Corporation, Morgan Stanley, and Moon-Eagle Merger Sub, Inc. pursuant to the Agreement and Plan of Merger dated February 20, 2020, and who was, immediately prior to becoming an Eligible Employee, an employee of E*TRADE Financial Holdings, LLC or it’s eligible predecessor, successor, subsidiaries or affiliates, including E*TRADE Bank, E*TRADE Savings Bank, E*TRADE Securities LLC, E*TRADE Financial Corporate Services, Inc. (collectively, “E*TRADE”), shall (i) become eligible to commence participation in the Plan effective January 1, 2022, and (ii) the term “Period of Service” shall include such individual’s service with E*TRADE for purposes of determining the vested percentage of such Eligible Employee’s Plan Benefit pursuant to Section 10 of the Plan. An Hour of Service as defined in Section 4(b) of the Plan shall include each hour for which a former employee of E*TRADE was paid, or entitled to payment, for the performance of services for E*TRADE.

The E*TRADE 401(k) Plan shall be merged with and into the Plan effective at the end of December 31, 2021. The contributions, benefits and other rights of Participants in the E*TRADE 401(k) Plan with respect to the period prior to such merger are determined under the terms of the E*TRADE 401(k) Plan as in effect prior to its merger with the Plan. Any person who was covered under the E*TRADE 401(k) Plan prior to its merger with the Plan and who was entitled to benefits under the provisions of the E*TRADE 401(k) Plan as in effect prior to its merger with the Plan shall continue to be entitled to the same amount of accrued benefits without change under the Plan, and such benefits under the provisions of the E*TRADE 401(k) Plan shall vest in accordance with the provisions of the E*TRADE 401(k) Plan in effect immediately prior to such merger; provided, however, that effective on December 31, 2021, for benefits with annuity starting dates beginning on or after December 31, 2021, the forms of distribution (including for these purposes, the time, manner and medium of distribution) available with respect to such accrued benefits shall be the forms of distribution available under the otherwise applicable provisions of the Plan (plus any other forms of distribution that were available under the E*TRADE 401(k) Plan immediately prior to December 31, 2021 and that may not be eliminated under Code section 411(d)(6)).

Eaton Vance. Any individual who became an Eligible Employee in connection with the Merger of Morgan Stanley, Mirror Merger Sub 1, Inc., Mirror Merger Sub 2, LLC and Eaton Vance Corp. dated October 7, 2020, and who was immediately prior to becoming an Eligible Employee, an Employee of Eaton Vance Management or its eligible predecessor, successor, subsidiaries or affiliates, including Eaton Vance Distributors, Inc., Eaton Vance WaterOak Advisors, Calvert Research and Management, Atlanta Capital Management Company LLC, NextShares Solutions LLC, and Parametric Portfolio Associates LLC (collectively, “Eaton Vance”), shall (i) become eligible to commence participation in the Plan effective January 1, 2022, and (ii) the term “Period of Service” shall include such individual’s service with Eaton Vance for purposes of determining the vested percentage of such Eligible Employee’s Plan Benefit pursuant to Section 10 of the Plan. An Hour of Service as defined in Section 4(b) of the Plan shall



include each hour for which a former employee of Eaton Vance was paid, or entitled to payment, for the performance of services for Eaton Vance.

Effective at the end of December 31, 2021, the Eaton Vance Profit Sharing and Savings Plan shall be merged with and into the Morgan Stanley 401(k) Plan. Prior to such merger on December 31, 2021, the contributions, benefits, and other rights of Members who were participants in the Eaton Vance Profit Sharing and Savings Plan were determined under the terms of the Eaton Vance Profit Sharing and Savings Plan as in effect immediately prior to its merger into the Morgan Stanley 401(k) Plan. Any person who was covered under the Eaton Vance Profit Sharing and Savings Plan prior to its merger into Morgan Stanley 401(k) Plan as in effect prior to its merger into the Morgan Stanley 401(k) Plan on December 31, 2021 and who was entitled to benefits under the provisions of the Eaton Vance Profit Sharing and Savings Plan as in effect on December 31, 2021 shall continue to be entitled to the same amount of benefits without change under the Morgan Stanley 401(k) Plan; provided, however, that any amounts from the Eaton Vance Profit Sharing and Savings Plan attributable to money purchase plan contributions as previously merged into the Eaton Vance Profit Sharing and Savings Plan that are merged with and into the Morgan Stanley 401(k) Plan will not be eligible for any in-service withdrawal (except as provided in Section 13 of the Morgan Stanley 401(k) Plan), hardship withdrawal or loan under the Morgan Stanley 401(k) Plan and such other restrictions as may be required by law shall apply to such amounts.

Furthermore, a participant in the Eaton Vance Profit Sharing and Savings Plan prior to its merger into the Morgan Stanley 401(k) Plan as of December 31, 2021 will be entitled to receive his accrued benefits under the Eaton Vance Profit Sharing and Savings Plan as of December 31, 2021 pursuant to any benefit payment option available under the Eaton Vance Profit Sharing and Savings Plan prior to its merger into the Morgan Stanley 401(k) Plan as of December 31, 2021, subject to any spousal consent requirements as may be required under the Eaton Vance Profit Sharing and Savings Plan and under the Code; provided, however, that in the case of a participant in the Eaton Vance Profit Sharing and Savings Plan the only joint and survivor annuity options available will be a joint and 50% survivor annuity, joint and 75% survivor annuity, and a joint and 100% survivor annuity.

Effective for annuity starting dates on or after January 1, 2022, the benefit forms available under the Morgan Stanley 401(k) Plan to any persons who were participants in the Eaton Vance Profit Sharing and Savings Plan as of December 31, 2021 shall be limited to the benefit forms that are available under the Morgan Stanley 401(k) Plan and shall not include benefit forms that were formerly available under the Eaton Vance Profit Sharing and Savings Plan, except for any such benefit forms as may be required to be provided by law.

Hyas Group, LLC. Any individual who became an Eligible Employee in connection with the acquisition of Hyas Group, LLC pursuant to the Unit Purchase Agreement dated effective as of the 30th day of June, 2021 among The Members of Hyas Group, LLC and Hyas Group and Morgan Stanley Domestic Holdings, Inc., and who was, immediately prior to becoming an Eligible Employee, an employee of Hyas Group, LLC (“Hyas”), shall (i) become eligible to commence participation in the Plan effective January 1, 2022, and (ii) the term “Period of Service” shall include such individual’s service with Hyas for purposes of determining the vested percentage of such Eligible Employee’s Plan Benefit pursuant to Section 10 of the Plan. An Hour of Service as defined in Section 4(b) of the Plan shall include each hour for which a former employee of Hyas was paid, or entitled to payment, for the performance of services for Hyas.

The Hyas Group 401(k) Profit Sharing Plan shall be merged with and into the Plan effective at the end of December 31, 2021. The contributions, benefits and other rights of Participants in the Hyas Group 401(k) Profit Sharing Plan with respect to the period prior to such merger are determined under the terms of the Hyas Group 401(k) Profit Sharing Plan as in effect prior to its merger with the Plan. Any person who was covered under the Hyas Group 401(k) Profit Sharing Plan prior to its merger with the Plan and who was



entitled to benefits under the provisions of the Hyas 401(k) Plan as in effect prior to its merger with the Plan shall continue to be entitled to the same amount of accrued benefits without change under the Plan, and such benefits under the provisions of the Hyas Group 401(k) Profit Sharing Plan shall vest in accordance with the provisions of the Hyas Group 401(k) Profit Sharing Plan in effect immediately prior to such merger or, if sooner, in accordance with the provisions of this Plan; provided, however, that effective on December 31, 2021, for benefits with annuity starting dates beginning on or after December 31, 2021, the forms of distribution (including for these purposes, the time, manner and medium of distribution) available with respect to such accrued benefits shall be the forms of distribution available under the otherwise applicable provisions of the Plan (plus any other forms of distribution that were available under the Hyas Group 401(k) Profit Sharing Plan immediately prior to December 31, 2021 and that may not be eliminated under Code section 411(d)(6)).”



* * * * * * * * *


    IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf as of this __1__ day of _December , 2021.

MORGAN STANLEY SERVICES GROUP INC.


By:    /s/ Mandell Crawley__________

Title:    Chief Human Resources Officer


EXHIBIT 21

Subsidiaries of Morgan Stanley*
As of December 31, 2021

* Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of certain other subsidiaries of Morgan Stanley are omitted because, considered in the aggregate as a single subsidiary, they would not constitute a “significant subsidiary” as that term is defined in Rule 1-02(w) of Regulation S-X under the Securities Exchange Act of 1934.

CompanyJurisdiction of Incorporation or Formation
Morgan Stanley
   Morgan Stanley Capital Management, LLC
      Morgan Stanley Domestic Holdings, Inc.
         Morgan Stanley & Co. LLC
         Morgan Stanley Bank, N.A.
         Morgan Stanley Capital Group Inc.
         Morgan Stanley Capital Services LLC
         Morgan Stanley Investment Management Inc.
         Morgan Stanley Private Bank, National Association
         Morgan Stanley Services Group Inc.
         Morgan Stanley Smith Barney LLC
   Morgan Stanley Finance LLC
   Morgan Stanley Holdings LLC
   Morgan Stanley International Holdings Inc.
      Morgan Stanley Asia Holdings Limited
   Morgan Stanley Japan Holdings Co., Ltd.
   Morgan Stanley MUFG Securities Co., Ltd.
      Morgan Stanley International Limited
   Morgan Stanley Europe Holding SE
   Morgan Stanley Europe SE
   Morgan Stanley Bank AG
         Morgan Stanley Investments (UK)
   Morgan Stanley & Co. International plc
   Morgan Stanley Investment Management Limited
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
Cayman Islands
Japan
Japan
United Kingdom
Germany
Germany
Germany
United Kingdom
United Kingdom
United Kingdom



EXHIBIT 22
Guarantor and Subsidiary Issuer of Registered Guaranteed Securities
SecuritiesGuarantor
Morgan Stanley Finance LLC (“MSFL”) issues, from time to time, its Series A senior debt securities under the MSFL Senior Debt Indenture dated February 16, 2016 that are each fully and unconditionally guaranteed by Morgan Stanley. Of those issuances, the Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 are currently listed on the New York Stock Exchange.
Morgan Stanley






EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements (as amended) of our reports dated February 24, 2022, relating to the financial statements of Morgan Stanley and subsidiaries (the “Firm”), and the effectiveness of the Firm’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Morgan Stanley for the year ended December 31, 2021:
Filed on Form S-3:
Registration Statement No. 333-250103
Registration Statement No. 333-250103-01
Registration Statement No. 333-253728
Filed on Form S-8:
Registration Statement No. 33-63024
Registration Statement No. 33-63026
Registration Statement No. 33-78038
Registration Statement No. 33-79516
Registration Statement No. 33-82240
Registration Statement No. 33-82242
Registration Statement No. 33-82244
Registration Statement No. 333-04212
Registration Statement No. 333-28141
Registration Statement No. 333-28263
Registration Statement No. 333-62869
Registration Statement No. 333-78081
Registration Statement No. 333-95303
Registration Statement No. 333-55972
Registration Statement No. 333-85148
Filed on Form S-8:
Registration Statement No. 333-85150
Registration Statement No. 333-108223
Registration Statement No. 333-142874
Registration Statement No. 333-146954
Registration Statement No. 333-159503
Registration Statement No. 333-159504
Registration Statement No. 333-159505
Registration Statement No. 333-168278
Registration Statement No. 333-172634
Registration Statement No. 333-177454
Registration Statement No. 333-183595
Registration Statement No. 333-188649
Registration Statement No. 333-192448
Registration Statement No. 333-204504
Registration Statement No. 333-211723
Registration Statement No. 333-218377
Registration Statement No. 333-231913
Registration Statement No. 333-256493





 
/s/ Deloitte & Touche LLP
New York, New York
February 24, 2022


EXHIBIT 23.2

ms-20211231_g13.jpg
599 Lexington Avenue
New York, NY 10022-6069
+1.212.848.4000

        February 24, 2022

Morgan Stanley
– and –
Morgan Stanley Finance LLC     
1585 Broadway
New York, NY 10036


Morgan Stanley
Morgan Stanley Finance LLC
Registration Statement on Form S-3 (Registration Statement No. 333-250103)
Ladies and Gentlemen:

We have acted as tax counsel to Morgan Stanley (the “Company”) and Morgan Stanley Finance LLC (“MSFL”) in connection with the issuance from time to time of (i) the Company’s debt securities, units, warrants, purchase contracts, preferred stock and common stock and (ii) MSFL’s debt securities, units, warrants and purchase contracts (collectively, the “Program Securities”) pursuant to a shelf registration statement on Form S-3 (Registration Statement No. 333-250103, the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”) on November 16, 2020. We did not advise the Company or MSFL in connection with the preparation and filing of the Registration Statement, including the preparation and filing of a form of prospectus, dated November 16, 2020 (the “Prospectus”), for the purpose of registering the issuance of Program Securities under the Securities Act of 1933, as amended (the “Securities Act”).
We hereby consent to references to Shearman & Sterling LLP, solely in our capacity as tax counsel to the Company and MSFL, or any opinion of ours delivered in that capacity, in a pricing supplement or prospectus supplement forming part of the Prospectus prepared and filed by the Company or MSFL with the SEC relating to the offer and sale of any Program Securities. The issuance of such consent does not concede that we are “Experts” for purposes of the Securities Act.
Very truly yours,

/s/ Shearman & Sterling LLP
    

EXHIBIT 31.1
Certification
I, James P. Gorman, certify that: 
1.I have reviewed this annual report on Form 10-K of Morgan Stanley;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 24, 2022
/s/ JAMES P. GORMAN
James P. Gorman
Chairman of the Board and Chief Executive Officer



EXHIBIT 31.2
Certification
I, Sharon Yeshaya, certify that:
1.I have reviewed this annual report on Form 10-K of Morgan Stanley;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 24, 2022
/s/ SHARON YESHAYA
Sharon Yeshaya
Executive Vice President and Chief Financial Officer



EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Morgan Stanley (the “Firm”) on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James P. Gorman, Chairman of the Board and Chief Executive Officer of the Firm, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Firm.

 
/s/ JAMES P. GORMAN
James P. Gorman
Chairman of the Board and
Chief Executive Officer
Dated: February 24, 2022


EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Morgan Stanley (the “Firm”) on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sharon Yeshaya, Executive Vice President and Chief Financial Officer of the Firm, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Firm.

 
/s/ SHARON YESHAYA
Sharon Yeshaya
Executive Vice President and
Chief Financial Officer
Dated: February 24, 2022