Morgan Stanley 2010 Annual Report Download - page 178

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At December 31, 2010 and December 31, 2009, cash and securities deposited with clearing organizations or
segregated under federal and other regulations or requirements were as follows:
At
December 31,
2010
At
December 31,
2009
(dollars in millions)
Cash deposited with clearing organizations or segregated under federal
and other regulations or requirements .......................... $19,180 $23,712
Securities(1) ................................................ 18,935 11,296
Total .................................................. $38,115 $35,008
(1) Securities deposited with clearing organizations or segregated under federal and other regulations or requirements are sourced from
Federal funds sold and securities purchased under agreements to resell and Financial instruments owned in the consolidated statements of
financial condition.
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 Company is deemed to be the primary beneficiary, and
certain equity-linked notes and other secured borrowings. These liabilities are generally payable from the cash
flows of the related assets accounted for as Financial instruments owned (see Note 7).
7. Variable Interest Entities and Securitization Activities.
The Company is involved with various SPEs in the normal course of business. In most cases, these entities are
deemed to be VIEs.
The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial support from other parties. Entities that
previously met the criteria to be classified as QSPEs, that were not subject to consolidation prior to January 1,
2010, became subject to the consolidation requirements for VIEs on that date. Excluding entities subject to the
Deferral (as defined in Note 2), effective January 1, 2010, the primary beneficiary of a VIE is the party that both
(1) has the power to direct the activities of a VIE that most significantly affect the VIE’s economic performance
and (2) has an obligation to absorb losses or the right to receive benefits that in either case could potentially be
significant to the VIE. The Company consolidates entities of which it is the primary beneficiary.
The Company’s variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative
instruments and certain fees. The Company’s involvement with VIEs arises primarily from:
• Interests purchased in connection with market-making and retained interests held as a result of
securitization activities.
• Guarantees issued and residual interests retained in connection with municipal bond securitizations.
• Loans and investments made to VIEs that hold debt, equity, real estate or other assets.
• Derivatives entered into with VIEs.
• Structuring of credit-linked notes (“CLN”) or other asset-repackaged notes designed to meet the
investment objectives of clients.
• Other structured transactions designed to provide tax-efficient yields to the Company or its clients.
172