Morgan Stanley 2010 Annual Report Download - page 24

commission merchants and broker-dealers face their own comprehensive regulatory regimes administered by the
CFTC and SEC, respectively. The Dodd-Frank Act also requires adoption of rules regarding position limits, large
trader reporting regimes, CFTC whistleblower protection, compensation requirements and anti-fraud and anti-
manipulation requirements related to activities in Swaps.
The European Union is in the process of establishing its own set of OTC derivatives regulations, and has
published a proposal known as the European Market Infrastructure Regulation. Aspects of the regulation,
including the scope of derivatives covered, and mandatory clearing and reporting requirements, are likely to be
substantially similar to derivatives regulation under the Dodd-Frank Act. It is unclear at present how European
and U.S. derivatives regulation will interact.
Regulation of Certain Commodities Activities. The Company’s commodities activities are subject to extensive
and evolving energy, commodities, environmental, health and safety and other governmental laws and
regulations in the U.S. and abroad. Intensified scrutiny of certain energy markets by U.S. federal, state and local
authorities in the U.S. and abroad and by the public has resulted in increased regulatory and legal enforcement
and remedial proceedings involving energy companies, including those engaged in power generation and liquid
hydrocarbons trading. Terminal facilities and other assets relating to the Company’s commodities activities also
are subject to environmental laws both in the U.S. and abroad. In addition, pipeline, transport and terminal
operations are subject to state laws in connection with the cleanup of hazardous substances that may have been
released at properties currently or previously owned or operated by us or locations to which we have sent wastes
for disposal. See also “—Scope of Permitted Activities” above.
The Dodd-Frank Act provides the CFTC with additional authority to adopt position limits with respect to certain
futures or options on futures, and the CFTC has proposed to adopt such limits. New position limits may affect
trading strategies and affect the profitability of various businesses and transactions.
Non-U.S. Regulation. The Company’s businesses also are regulated extensively by non-U.S. regulators,
including governments, securities exchanges, commodity exchanges, self-regulatory organizations, central banks
and regulatory bodies, especially in those jurisdictions in which the Company maintains an office. Certain
Morgan Stanley subsidiaries are regulated as broker-dealers under the laws of the jurisdictions in which they
operate. Subsidiaries engaged in banking and trust activities outside the U.S. are regulated by various
government agencies in the particular jurisdiction where they are chartered, incorporated and/or conduct their
business activity. For instance, the U.K. Financial Services Authority (“FSA”) and several U.K. securities and
futures exchanges, including the London Stock Exchange and Euronext.liffe, regulate the Company’s activities in
the U.K.; the Deutsche Börse AG and the Bundesanstalt für Finanzdienstleistungsaufsicht (the Federal Financial
Supervisory Authority) regulate its activities in the Federal Republic of Germany; Eidgenössische
Finanzmarktaufsicht regulates its activities in Switzerland; the Financial Services Agency, the Bank of Japan, the
Japanese Securities Dealers Association and several Japanese securities and futures exchanges, including the
Tokyo Stock Exchange, the Osaka Securities Exchange and the Tokyo International Financial Futures Exchange,
regulate its activities in Japan; the Hong Kong Securities and Futures Commission and the Hong Kong
Exchanges and Clearing Limited regulate its operations in Hong Kong; and the Monetary Authority of Singapore
and the Singapore Exchange Limited regulate its business in Singapore.
Asset Management.
Many of the subsidiaries engaged in the Company’s asset management activities are registered as investment
advisers with the SEC and, in certain states, some employees or representatives of subsidiaries are registered as
investment adviser representatives. Many aspects of the Company’s asset management activities are 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 the Company from carrying on its asset management activities in the event that it fails to comply
with such laws and regulations. Sanctions that may be imposed for such failure include the suspension of
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