Morgan Stanley 2015 Annual Report Download - page 15

and regulatory bodies, especially in those jurisdictions in which the Company maintains an office. Non-U.S. policy makers
and regulators, including the European Commission and European Supervisory Authorities (among others the European
Banking Authority and the European Securities and Markets Authority), continue to propose and adopt numerous market
reforms, including those that may further impact the structure of banks, and formulate regulatory standards and measures that
will be of relevance and importance to the Company’s European operations. 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 Prudential Regulation Authority (“PRA”), the
Financial Conduct Authority (“FCA”) and several securities and futures exchanges in the United Kingdom (“U.K.”),
including the London Stock Exchange and ICE Futures Europe, regulate the Company’s activities in the U.K.; the
Bundesanstalt für Finanzdienstleistungsaufsicht (the Federal Financial Supervisory Authority) and the Deutsche Börse AG
regulate its activities in the Federal Republic of Germany; the Financial Services Agency, the Bank of Japan, the Japanese
Securities Dealers Association and several Japanese securities and futures exchanges, regulate its activities in Japan; the
Securities and Futures Commission of Hong Kong, the Hong Kong Monetary Authority 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.
Regulators in the U.K., E.U. and other major jurisdictions have also finalized or are in the process of proposing or finalizing
risk-based capital, leverage capital, liquidity, banking structural reforms and other regulatory standards applicable to certain
Morgan Stanley subsidiaries that operate in those jurisdictions. For example, MSIP is subject to regulation and supervision
by the PRA with respect to prudential matters. As a prudential regulator, the PRA seeks to promote the safety and soundness
of the firms that it regulates and to minimize the adverse effects that such firms may have on the stability of the U.K.
financial system. The PRA has broad legal authority to establish prudential and other standards to pursue these objectives,
including approvals of relevant regulatory models, as well as to bring public and non-public disciplinary actions against
regulated firms to address noncompliance with such standards. MSIP is also regulated and supervised by the FCA with
respect to business conduct matters. European Market Infrastructure Regulation introduces new requirements regarding the
central clearing and reporting of derivatives. In addition, the E.U. Bank Recovery and Resolution Directive (“BRRD”) has
established a recovery and resolution framework for E.U. credit institutions and investment firms, including MSIP. E.U.
Member States were required to apply provisions implementing the BRRD as of January 1, 2015, subject to certain
exemptions. New directives and regulations originally expected to apply from January 3, 2017 (currently with potential delay
of one year) will introduce various trading and market infrastructure reforms in the E.U., subject to restrictions
Investment Management.
Many of the subsidiaries engaged in the Company’s asset management activities are registered as investment advisers with
the SEC. 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 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. In order to facilitate its asset management business, the Company owns a registered U.S.
broker-dealer, Morgan Stanley Distribution, Inc., which acts as distributor to the Morgan Stanley mutual funds and as
placement agent to certain private investment funds managed by the Company’s Investment Management business segment.
In addition, certain affiliates of the Company are registered as commodity trading advisors and/or commodity pool operators,
or are operating under certain exemptions from such registration pursuant to CFTC rules and other guidance, and have
certain responsibilities with respect to each pool they advise. Violations of the rules of the CFTC, the NFA or the commodity
exchanges could result in remedial actions, including fines, registration restrictions or terminations, trading prohibitions or
revocations of commodity exchange memberships. See also “—Institutional Securities and Wealth Management—Broker-
Dealer and Investment Adviser Regulation” and “—Institutional Securities and Wealth Management—Regulation of Futures
Activities and Certain Commodities Activities” above.
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