Morgan Stanley

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Posted by motoman 03/16/2009 @ 11:11

Tags : morgan stanley, banking, finance, investment brokerage

News headlines
Breakingviews.com Morgan Stanley Seeks Successor - New York Times
The last time a former management consultant from the brokerage world, Phil Purcell, ran Morgan Stanley, the experience ended in tears for the Wall Street firm's employees and shareholders. Yet Morgan Stanley's board may be considering the same...
MUFG: To Lift Morgan Stanley Stock Acquisition To $705M - Wall Street Journal
TO) said Wednesday that it will lift its purchase of Morgan Stanley (MS) common stock to $705 million from $600 million, ensuring the US firm's position as an equity-method affiliate. Noting that its stake will likely be over 20% once the transaction...
Morgan Stanley fined $2.1 million by UK regulator - MarketWatch
By Simon Kennedy, MarketWatch LONDON (MarketWatch) -- Britain's financial regulator on Wednesday said it has fined Morgan Stanley 1.4 million pounds ($2.1 million) for failing to prevent one of its traders from deliberately over-valuing assets....
King's Plan May Exceed 150 Billion Pounds, Morgan Stanley Says - Bloomberg
The bank may have to ask the Treasury to expand the asset purchase program after predicting this week that inflation will stay below its 2 percent target even if it prints the currently planned 125 billion pounds, Lauren Mutkin, Morgan Stanley's head...
Morgan Stanley broker advised troubled ISTA trust - Indianapolis Business Journal
Morgan Stanley's David Karandos was a key adviser for the ISTA Insurance Trust, which state officials say loaded up on risky investments and now faces a $68 million deficit. Sources confirmed Karandos' involvement. Messages left at his office this...
Bet Dollar to Fall Against Canadian Dollar, Morgan Stanley Says - Bloomberg
By Daniel Tilles May 15 (Bloomberg) -- Investors should bet the dollar will drop against the Canadian dollar amid an improvement in the global economy, according to Morgan Stanley. The “Canadian dollar should be an outperformer, given an improving...
Rand May Erase 2009 Gain as Inflows Dry Up, Morgan Stanley Says - Bloomberg
The gap reached 7.4 percent of gross domestic product last year, and will narrow to “about 6 percent” of GDP this year, Morgan Stanley predicts. “The current account deficit remains a major risk to the currency,” Kafe wrote. Last year the rand slumped...
Morgan Stanley forecasts 2009 China GDP growth of 7% to 8% - China Knowledge Online
May 15, 2009 (China Knowledge) - Morgan Stanley raised its forecast for China's 2009 Gross Domestic Production (GDP) growth to between 7% and 8%, higher than the previous 5.5%, sources reported, citing Morgan Stanley Asia Chairman Stephen Roach as...
digitalglobe IPO price $19, above range-source - Reuters
digitalglobe, which is based in Colorado and supplies images to Google Maps and Microsoft's Virtual Earth, sold 14.7 million shares, according to the source, raising $279.3 million in a deal led by underwriters Morgan Stanley (MS.N) and JP Morgan (JPM....
Morgan Stanley bank upgrade helps financials - Investor's Business Daily
By Greg morcroftposted 01:20 PM ET NEW YORK (marketwatch) -- US financial stocks stepped firmly into the green on Thursday as the banking sector caught a lift from a pair of industry upgrades by Morgan Stanley. Morgan's large-cap and mid-cap bank...

Morgan Stanley

Morgan Stanley's office on Times Square

Morgan Stanley (NYSE: MS) is a global financial services provider headquartered in New York City, New York, United States. It serves a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 33 countries around the world with 600 offices, with an approximate employee workforce of 45,000. The company reports US$779 billion as assets under its management.

The corporation, formed by J.P. Morgan & Co. employees Henry S. Morgan (grandson of J.P. Morgan), Harold Stanley and others, came into existence on September 16, 1935. In its first year the company operated with a 24% market share (US$1.1 billion) in public offerings and private placements. The main areas of business for the firm today are Global Wealth Management, Institutional Securities and Investment Management.

The company found itself in the midst of a management crisis in the late 1990s that saw it lose a lot of talent and competence and ultimately saw the firing of its then CEO Philip Purcell in 2005.

On September 21, 2008, it was reported that the Federal Reserve allowed Morgan Stanley to change its status from investment bank to bank holding company. On September 29, 2008, it was announced that Mitsubishi UFJ Financial Group, Japan's largest bank, will take a stake of $9 billion in Morgan Stanley equity. In the midst of the October 2008 stock market crash, concerns over the completion of the Mitsubishi deal caused a dramatic fall in Morgan Stanley's stock price to levels last seen in 1994. The stock grew considerably after Mitsubishi UFJ closed the deal to buy 21% of Morgan Stanley on October 14, 2008.

Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to customers, including corporations, governments, financial institutions and individuals. The company operates in three business segments: Institutional Securities, Global Wealth Management Group, and Asset Management.

Morgan Stanley can trace its roots in the history of J.P. Morgan & Co. Following the Glass-Steagall Act, it became no longer possible for a corporation to have investment banking and retail banking businesses under a single holding entity. J.P. Morgan & Co. chose the retail banking business over the investment banking business. As a result, some of the employees of J.P. Morgan & Co., most notably Henry S. Morgan and Harold Stanley, left J.P. Morgan & Co. and joined some others from the Drexel partners to form Morgan Stanley. The firm formally opened the doors for business on September 16, 1935, at Floor 19, 2 Wall Street, New York City. Within its first year, it achieved 24% market share (US$1.1 billion) among public offerings. The firm was involved with the distribution of 1938 US$100 million of debentures for the United States Steel Corporation as the lead underwriter. The firm also obtained the distinction of being the lead syndicate in the 1939 U.S. rail financing. The firm went through a major reorganization in 1941 to allow for more activity in its securities business.

The firm was led by Perry Hall, the last founder to lead Morgan Stanley, from 1951–1961. During this period the firm co-managed the famous World Bank's US$50 million triple-A-rated bonds offering of 1952. The firm, in this period, also came up with the General Motor's US$300 million debt issue, US$231 million IBM stock offering, the US$250 million AT&T's debt offering.

In 1962, Morgan Stanley credits itself with having created the first viable computer model for financial analysis, thereby starting a new trend in the field of financial analysis. In 1967 it established the Morgan & Cie, International in Paris in attempt to enter the European securities market. It acquired Brooks, Harvey & Co., Inc. in 1967 and established a presence in the real estate business. By 1971 the firm had established its Mergers & Acquisitions business along with Sales & Trading. The sales and trading business is believed to be the brainchild of Bob Baldwin. In 1970 Morgan Stanley opened a representative office in Tokyo and formally entered the Japanese markets. In 1975 Morgan Stanley established Morgan Stanley International Inc. in London. The private wealth management department was added into the firm's business units by 1977 when Morgan Stanley established Morgan Stanley Realty Inc. In the same year Morgan Stanley merged with Shuman, Agnew & Co. Morgan Stanley lead the Apple common stock IPO on December 12, 1980. The firm entered the Prime Brokerage business in 1984. In 1986, Morgan Stanley Group, Inc., was publicly listed on the New York Stock Exchange. By 1990 Morgan Stanley had its regional offices in Frankfurt, Hong Kong, Luxembourg, Melbourne, Milan, Sydney and Zürich and had regional headquarters in London and Tokyo.

In 1996, Morgan Stanley acquired Van Kampen American Capital. On February 5, 1997, the company merged with Dean Witter Reynolds, and Discover & Co. the spun-off financial services business of Sears Roebuck. The merged company was briefly known as "Morgan Stanley Dean Witter Discover & Co." until 1998 when it was known as "Morgan Stanley Dean Witter & Co." until late 2001. To foster brand recognition and marketing the Dean Witter name was dropped and the firm became "Morgan Stanley". Morgan Stanley acquired AB Asesores of Spain and entered India in a joint venture with JM Financials in 1999.

In 2001, Morgan Stanley lost thirteen employees in the September 11, 2001 attacks. In 2005 it moved 2,300 of its employees back to lower Manhattan, at that time the largest such move .

In 2004, Morgan Stanley co-managed the Google IPO which is the largest internet IPO in U.S. history. In the same year Morgan Stanley acquired the Canary Wharf Group. On December 19, 2006, after reporting 4th quarter earnings, Morgan Stanley announced the spin-off of its Discover Card unit. In order to cope up with the write-downs during the Subprime mortgage crisis, Morgan Stanley announced on December 19, 2007 that it would receive a US$5 billion capital infusion from the China Investment Corporation in exchange for securities that would be convertible to 9.9% of its shares in 2010.

In August 2008, Morgan Stanley was contracted by the United States Treasury to advise the government on potential rescue strategies for Fannie Mae and Freddie Mac .

On September 17, 2008, the British evening-news analysis program Newsnight reported that Morgan Stanley was facing difficulties after a 42% slide in its share price. CEO John Mack wrote in a memo to staff "we're in the midst of a market controlled by fear and rumours and short-sellers are driving our stock down." The company was said to explore merger possibilities with CITIC, Wachovia, HSBC, Banco Santander and Nomura.

On September 22, 2008, the last two bulge bracket investment banks in the US, Morgan Stanley and Goldman Sachs, both announced that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street. The Federal Reserve's approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.

Morgan Stanley splits its businesses into three core business units. These follow below.

Institutional Securities has been the most profitable business segment for Morgan Stanley in recent times. This business segment provides institutions with services such as capital raising and financial advisory services including advice on mergers and acquisitions, restructurings, real estate and project finance, corporate lending etc. The segment also encompasses the Equities and the Fixed Income divisions of the firm.

Global Wealth Management Group provides brokerage and investment advisory services. As of 2008 Q1 this segment has reported an annual increase of 12 percent in the pre-tax income. This segment provides financial and wealth planning services to its clients who are mainly high net worth individuals and hedge funds.

Asset Management provides global asset management products and services in equity, fixed income, alternative investments and private equity to institutional and retail clients through third-party retail distribution channels, intermediaries and Morgan Stanley's institutional distribution channel. Morgan Stanley's asset management activities are principally conducted under the Morgan Stanley and Van Kampen brands. It provides asset management products and services to institutional investors worldwide, including pension plans, corporations, private funds, non-profit organizations, foundations, endowments, governmental agencies, insurance companies and banks. As of 2008 Q1 the segment posted a pre-tax loss of US$161 million.

In 2003, Morgan Stanley agreed to pay billions of dollars in order to settle its portion of various legal actions and investigations brought by Eliott Spitzer, the Attorney General of New York, the National Association of Securities Dealers (Now FINRA), the United States Securities and Exchange Commission, (SEC) and a number of state securities regulators, relating to fraud that was allegedly perpetrated upon retail investors by a dozen of the largest investment banking securities brokerage firms.

On July 12, 2004, Morgan Stanley settled a sex discrimination suit brought by the Equal Employment Opportunity Commission for $54 million.

On January 12, 2005, The New York Stock Exchange imposed a $19 million fine on Morgan Stanley for alleged regulatory and supervisory lapses.

On May 16, 2005, a Florida jury found that Morgan Stanley did in fact fail to give adequate information to Ronald Perelman about Sunbeam thereby defrauding him and causing damages to him of $604 million. In addition, punitive damages were added for total damages of $1.450 billion. This verdict was directed by the judge as a sanction against Morgan Stanley after the firm's attorneys infuriated the court by failing and refusing to produce documents, and falsely telling the court that certain documents did not exist. On March 21, 2007, the ruling was overturned and Morgan Stanley was no longer required to pay the 1.57 billion dollar verdict. .

More recently, a class action lawsuit was filed in California by both current and former Morgan Stanley employees for unfair labor practices that were instituted to those employed through the financial advisor training program. A $40 million settlement was reportedly reached, with expected payout to those employed through the training program between specified dates.

On September 27, 2007, FINRA announced a $12.5 million settlement with Morgan Stanley to resolve charges that the firm's former affiliate, Morgan Stanley DW, Inc. (MSDW), failed on numerous occasions to provide e-mails to claimants in arbitration proceedings as well as to regulators - while representing that the destruction of the firm's email servers in the September 11, 2001 terrorist attacks on New York's World Trade Center resulted in the loss of all pre-9/11 e-mail. In fact, the firm had millions of pre-9/11 e-mails that had been restored to the firm's active e-mail system using back-up tapes that had been stored in another location. Customers who had lost their arbitration cases against Morgan Stanley DW Inc. because of their inability to obtain the emails to demonstrate Morgan Stanley's misconduct will each receive a token amount of money as a result of the settlement.

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Morgan Stanley Children's Hospital

Morgan Stanley Children's Hospital of New York is a pediatric hospital in New York City. It is a part of NewYork-Presbyterian Hospital and is affiliated with Columbia University College of Physicians & Surgeons. They are especially known for their expertise in pediatric heart surgery.

The hospital is named after Morgan Stanley in recognition of their sponsorship of the hospital.

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The Morgan Stanley Building

Street view at night

1585 Broadway is the headquarters of Morgan Stanley, on the west side of Broadway, north of Duffy Square in Midtown Manhattan.

Even before 1585 Broadway began to rise over Duffy Square, its developer, David S. Solomon, had signed law firm Proskauer Rose to a 20-year lease for 365,000 square feet (33,900 square meters). A notable achievement at any time, the deal was a milestone in a market where a growing number of new buildings were competing heavily for a shrinking number of tenants.

The original developer filed for bankruptcy the previous year leaving unfinished building construction, stalled leasing, and strained tenant relationships. After the bank group gained control of the asset through the bankruptcy process, Hines took over the on site property and construction management as well as the marketing, leasing and disposition activities.

In 1992, Hines was hired as asset manager and advisor to a consortium of banks which held the mortgage to 1585 Broadway, a 42-story, 1.3 million square-foot (121,000 square-meter) office tower located in New York City's Times Square.

The building is featured in the movie Down 2 Earth as the skyscraper from which a failing businessman jumps to his death.

Morgan Stanley bought the building for $176 million in August 1993 and moved in two years later. Currently, it uses the building as its world headquarters.

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Investment banking

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An Investment Bank is a financial institution that deals with raising capital, trading in securities and managing corporate mergers and acquisitions. Investment banks profit from companies and governments by raising money through issuing and selling securities in the capital markets (both equity, bond) and insuring bonds (selling credit default swaps), as well as providing advice on transactions such as mergers and acquisitions. To perform these services in the United States, an adviser must be a licensed broker-dealer, and is subject to SEC (FINRA) regulation see SEC. Until the late 1980s, the United States maintained a separation between investment banking and commercial banks. Other developed countries (including G7 countries) have not maintained this separation historically. A majority of investment banks offer strategic advisory services for mergers, acquisitions, divestiture or other financial services for clients, such as the trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.

Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".

Dealing with the pension funds, mutual funds, hedge funds, and the investing public who consumed the products and services of the sell-side in order to maximize their return on investment constitutes the "buy side". Many firms have buy and sell side components.

The last two major bulge bracket firms on Wall Street were Goldman Sachs and Morgan Stanley until both banks elected to convert to traditional banking institutions on September 22, 2008, as part of a response to the U.S. financial crisis. Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JP Morgan Chase, and UBS AG are "universal banks" rather than bulge-bracket investment banks, since they also accept deposits (though not all of them have U.S. branches).

On behalf of the bank and its clients, the primary function of the bank is buying and selling products. Banks undertake risk through proprietary trading, done by a special set of traders who do not interface with clients and through "principal risk", risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet. An investment bank is split into the so-called front office, middle office, and back office.

An investment bank can also be split into private and public functions with a Chinese wall which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information.

Global investment banking revenue increased for the fifth year running in 2007, to $84.3 billion. This was up 21% on the previous year and more than double the level in 2003. Despite a record year for fee income, many investment banks have experienced large losses related to their exposure to U.S. sub-prime securities investments.

The United States was the primary source of investment banking income in 2007, with 53% of the total, a proportion which has fallen somewhat during the past decade. Europe (with Middle East and Africa) generated 32% of the total, slightly up on its 30% share a decade ago. Asian countries generated the remaining 15%. Over the past decade, fee income from the US increased by 80%. This compares with a 217% increase in Europe and 250% increase in Asia during this period. The industry is heavily concentrated in a small number of major financial centres, including New York City, London and Tokyo.

Investment banking is one of the most global industries and is hence continuously challenged to respond to new developments and innovation in the global financial markets. Throughout the history of investment banking, it is only known that many have theorized that all investment banking products and services would be commoditized. New products with higher margins are constantly invented and manufactured by bankers in hopes of winning over clients and developing trading know-how in new markets. However, since these can usually not be patented or copyrighted, they are very often copied quickly by competing banks, pushing down trading margins.

For example, trading bonds and equities for customers is now a commodity business, but structuring and trading derivatives retains higher margins in good times - and the risk of large losses in difficult market conditions, such as the credit crunch that began in 2007. Each over-the-counter contract has to be uniquely structured and could involve complex pay-off and risk profiles. Listed option contracts are traded through major exchanges, such as the CBOE, and are almost as commoditized as general equity securities.

In addition, while many products have been commoditized, an increasing amount of profit within investment banks has come from proprietary trading, where size creates a positive network benefit (since the more trades an investment bank does, the more it knows about the market flow, allowing it to theoretically make better trades and pass on better guidance to clients).

The fastest growing segment of the investment banking industry are private investments into public companies (PIPEs, otherwise known as Regulation D or Regulation S). Such transactions are privately negotiated between companies and accredited investors. These PIPE transactions are non-rule 144A transactions. Large bulge bracket brokerage firms and smaller boutique firms compete in this sector. Special purpose acquisition companies (SPACs) or blank check corporations have been created from this industry.

In the U.S., the Glass-Steagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities which led to segregation of investment banks from commercial banks. Glass-Steagall was effectively repealed for many large financial institutions by the Gramm-Leach-Bliley Act in 1999.

Another development in recent years has been the vertical integration of debt securitization. Previously, investment banks had assisted lenders in raising more lending funds and having the ability to offer longer term fixed interest rates by converting the lenders' outstanding loans into bonds. For example, a mortgage lender would make a house loan, and then use the investment bank to sell bonds to fund the debt, the money from the sale of the bonds can be used to make new loans, while the lender accepts loan payments and passes the payments on to the bondholders. This process is called securitization. However, lenders have begun to securitize loans themselves, especially in the areas of mortgage loans. Because of this, and because of the fear that this will continue, many investment banks have focused on becoming lenders themselves, making loans with the goal of securitizing them. In fact, in the areas of commercial mortgages, many investment banks lend at loss leader interest rates in order to make money securitizing the loans, causing them to be a very popular financing option for commercial property investors and developers. Securitized house loans may have exacerbated the subprime mortgage crisis beginning in 2007, by making risky loans less apparent to investors.

Potential conflicts of interest may arise between different parts of a bank, creating the potential for financial movements that could be market manipulation. Authorities that regulate investment banking (the FSA in the United Kingdom and the SEC in the United States) require that banks impose a Chinese wall which prohibits communication between investment banking on one side and equity research and trading on the other.

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Source : Wikipedia