Morgan Stanley 2010 Annual Report Download - page 25

individual employees, limitations on the Company engaging in various asset management activities for specified
periods of time or specified types of clients, the revocation of registrations, other censures and significant fines.
As a result of the passage of the Dodd-Frank Act, the Company’s asset management activities will be subject to
certain additional laws and regulations, including, but not limited to, additional reporting and recordkeeping
requirements, restrictions on sponsoring or investing in, or maintaining certain other relationships with, hedge
funds and private equity funds under the Volcker Rule (subject to certain limited exceptions) and certain rules
and regulations regarding trading activities, including trading in derivatives markets. Many of these new
requirements may increase the expenses associated with the Company’s asset management activities and/or
reduce the investment returns the Company is able to generate for its asset management clients. Many important
elements of the Dodd-Frank Act will not be known until rulemaking is finalized and certain final regulations are
adopted. See also “—Activities Restrictions under the Volcker Rule” and “—Derivatives Regulation” above.
The Company’s Asset Management business is also regulated outside the U.S. For example, the FSA regulates
the Company’s business in the U.K.; the Financial Services Agency regulates the Company’s business in Japan;
the Securities and Exchange Board of India regulates the Company’s business in India; and the Monetary
Authority of Singapore regulates the Company’s business in Singapore.
Anti-Money Laundering.
The Company’s Anti-Money Laundering (“AML”) program is coordinated on an enterprise-wide basis. In the
U.S., for example, the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (the “BSA/USA
PATRIOT Act”), imposes significant obligations on financial institutions to detect and deter money laundering
and terrorist financing activity, including requiring banks, bank holding company subsidiaries, broker-dealers,
futures commission merchants, and mutual funds to verify the identity of customers that maintain accounts. The
BSA/USA PATRIOT Act also mandates that financial institutions have policies, procedures and internal
processes in place to monitor and report suspicious activity to appropriate law enforcement or regulatory
authorities. A financial institution subject to the BSA/USA PATRIOT Act also must designate a BSA/AML
compliance officer, provide employees with training on money laundering prevention, and undergo an annual,
independent audit to assess the effectiveness of its AML program. Outside the U.S., applicable laws, rules and
regulations similarly require designated types of financial institutions to implement AML programs. The
Company has implemented policies, procedures and internal controls that are designed to comply with all
applicable AML laws and regulations. The Company has also implemented policies, procedures, and internal
controls that are designed to comply with the regulations and economic sanctions programs administered by the
U.S. Treasury’s Office of Foreign Assets Control (“OFAC”), which enforces economic and trade sanctions
against targeted foreign countries, entities and individuals based on external threats to the U.S. foreign policy,
national security, or economy, by other governments, or by global or regional multilateral organizations.
Anti-Corruption.
The Company is subject to the Foreign Corrupt Practices Act (“FCPA”), which prohibits offering, promising,
giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government
official in order to influence official action or otherwise gain an unfair business advantage, such as to obtain or
retain business. The Company is also subject to applicable anti-corruption laws in the jurisdictions in which it
operates. The Company has implemented policies, procedures, and internal controls that are designed to comply
with the FCPA and other applicable anti-corruption laws, rules, and regulations in the jurisdictions in which it
operates.
Protection of Client Information.
Many aspects of the Company’s business are subject to legal requirements concerning the use and protection of
certain customer information, including those adopted pursuant to the Gramm-Leach-Bliley Act and the Fair and
Accurate Credit Transactions Act of 2003 in the U.S., the European Union (“EU”) Data Protection Directive in
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