Morgan Stanley 2009 Annual Report Download - page 33

amended, related to the Company’s sale of auction rate securities (“ARS”) over the period from June 20, 2007 to
the present. Among other things, the complaints alleged that, over the relevant period, Morgan Stanley’s public
filings and statements were materially false and misleading in that they failed to disclose the illiquid nature of its
ARS inventories and that Morgan Stanley’s practices in the sale of ARS exposed it to significant liability for
settlements and judgments. The complaints also alleged that during the relevant period certain defendants sold
Morgan Stanley’s stock while in possession of material non-public information. The complaints sought, among
other things, unspecified compensatory damages, restitution from the defendants with respect to compensation,
benefits and profits obtained, and the institution of certain reforms to Morgan Stanley’s internal control
functions. On November 24, 2008, the SDNY ordered the consolidation of the two actions. On February 2, 2009,
plaintiffs filed a consolidated amended complaint, styled as In re Morgan Stanley & Co. Inc. Auction Rate
Securities Derivative Litigation. On June 23, 2009, the SDNY granted defendants’ motion to dismiss the
consolidated complaint for failure by plaintiffs to make a pre-litigation demand on the Company’s Board of
Directors. In addition, the SDNY set a schedule for plaintiffs to make such a demand, for the Board of Directors
to respond thereto, and for further proceedings before the SDNY, which may include a motion for leave to file an
amended complaint.
Executive Compensation-Related Matter.
A shareholder derivative lawsuit was filed in the Supreme Court of the State of New York, County of New York,
on February 11, 2010 asserting claims for waste, breach of the duty of loyalty and unjust enrichment related to
the Company’s executive compensation for the fiscal years ended November 30, 2006 and 2007 and the calendar
year ended December 31, 2009. The complaint, which is styled Security and Fire Professionals of America
Retirement Fund, et al. v. John J. Mack, et. al., names as defendants the Company’s Board of Directors and
certain present and former officers and directors. Morgan Stanley, on whose behalf the lawsuit is purportedly
being brought, is named as a nominal defendant. The complaint alleges, among other things, that the total amount
of the executive compensation paid for these years was disproportionately large in relation to the Company’s
performance. The complaint seeks, among other relief, unspecified compensatory damages, restitution and
disgorgement of compensation, benefits and profits, and institution of certain corporate governance reforms.
China Matter.
As disclosed in February 2009, the Company uncovered actions initiated by an employee based in China in an
overseas real estate subsidiary that appear to have violated the Foreign Corrupt Practices Act. The Company
terminated the employee, reported the activity to appropriate authorities and is cooperating with investigations by
the United States Department of Justice and the SEC.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the fourth quarter of the year ended
December 31, 2009.
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