Morgan Stanley 2015 Annual Report Download - page 30

Item 3. Legal Proceedings.
In addition to the matters described below, in the normal course of business, the Company has been named, from time to
time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection
with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include
claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some
cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and
informal) by governmental and self-regulatory agencies regarding the Company’s business, and involving, among other
matters, sales and trading activities, financial products or offerings sponsored, underwritten or sold by the Company, and
accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties,
injunctions or other relief.
The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available
information indicates that it is probable a liability had been incurred at the date of the consolidated financial statements and
the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to
income. The Company’s future legal expenses may fluctuate from period to period, given the current environment regarding
government investigations and private litigation affecting global financial services firms, including the Company.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even
possible, or to estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings
or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for
proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government
entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be
resolved, including through potentially lengthy discovery and determination of important factual matters, determination of
issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal
questions relevant to the proceedings or investigations in question, before a loss or additional loss or range of loss or
additional loss can be reasonably estimated for a proceeding or investigation. Subject to the foregoing, the Company
believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and
investigations will not have a material adverse effect on the consolidated financial condition of the Company, although the
outcome of such proceedings or investigations could be material to the Company’s operating results and cash flows for a
particular period depending on, among other things, the level of the Company’s revenues or income for such period.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and
self-regulatory agencies has increased materially in the financial services industry. As a result, the Company expects that it
may become the subject of increased claims for damages and other relief and, while the Company has identified below
certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that
additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be
material.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters. The Company has received subpoenas and requests for information from certain
federal and state regulatory and governmental entities, including among others various members of the RMBS Working
Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and
several state Attorney General’s Offices, concerning the origination, financing, purchase, securitization and servicing of
subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities
(“RMBS”), collateralized debt obligations (“CDOs”), structured investment vehicles (“SIVs”) and credit default swaps
backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include,
but are not limited to, investigations related to the Company’s due diligence on the loans that it purchased for securitization,
the Company’s communications with ratings agencies, the Company’s disclosures to investors, and the Company’s handling
of servicing and foreclosure related issues.
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