Morgan Stanley 2014 Annual Report Download - page 33

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. Global market and economic conditions have been particularly
disrupted and volatile in the last several years and may be in the future. 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, 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. In today’s environment of rapid and
possibly transformational regulatory change, we also view regulatory change as a component of legal, regulatory
and compliance risk. For more information on how we monitor and manage legal, regulatory and compliance
risk, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Legal and
Compliance Risk” in Part II, Item 7A.
The financial services industry is subject to extensive regulation, which is undergoing major changes that 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.
In response to the financial crisis, legislators and regulators, both in the U.S. and worldwide, have adopted,
continue to propose and are in the process of adopting, finalizing and implementing a wide range of financial
market reforms that are resulting in major changes to the way our global operations are regulated and conducted.
In particular, as a result of these reforms, we are, or will become, subject to (among other things) significantly
revised and expanded regulation and supervision, more intensive scrutiny of our businesses and any plans for
expansion of those businesses, new activities limitations, a systemic risk regime that imposes heightened capital
and liquidity requirements and other enhanced prudential standards, new resolution regimes and resolution
planning requirements, new restrictions on activities and investments imposed by the Volcker Rule, and
comprehensive new derivatives regulation. While certain portions of these reforms are effective, others are still
subject to final rulemaking or transition periods. Many of the changes required by these reforms 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 being proposed by foreign policymakers
and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and, if adopted,
may adversely affect us. While there continues to be uncertainty about the full impact of these changes, we do
know that the Company is and will continue to be subject to a more complex regulatory framework, and will
incur costs to comply with new requirements as well as to monitor for compliance in the future.
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