SEC Comment Letter for MORGAN STANLEY (MS, MS-PA, MS-PE, MS-PF, MS-PI, MS-PK, MS-PL, MS-PO, MS-PP, MS-PQ) (CIK 0000895421) (MS) — Feb 13, 2008
MORGAN STANLEY (MS, MS-PA, MS-PE, MS-PF, MS-PI, MS-PK, MS-PL, MS-PO, MS-PP, MS-PQ) (CIK 0000895421)
Date: Feb. 13, 2008 · CIK: 0000895421 · Accession: 0000000000-08-008074
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-11758
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE February 13, 2008 Room 7010 David H. Sidwell Executive Vice President and Chief Financial Officer Morgan Stanley 1585 Broadway New York, NY 10036
Re: Morgan Stanley Form 10-K for Fiscal Year Ended November 30, 2006 Form 10-Q for the Fiscal Quarter Ended February 28, 2007 File No. 001-11758
Dear Mr. Sidwell:
We have reviewed your response letter da ted February 1, 2007 and appreciate the additional detailed information you have provided. In our initial review of the above referenced documents, we noted disclosures that you originate, trade, make markets and take proprietary positions in, and act as principal of, mortgage related and real estate loan produc ts. However it was unclear to us from the above referenced documents the exposure you had to the subprime market. The purpose of our August 30, 2007 letter was to get cl arification about yo ur exposure to any subprime loans or trading positions, including a comprehensive analysis of your portfolio and exposure, a discussion and analysis of any impairment charges recorded or potential impairments and your risk ma nagement philosophies. Your response dated November 27, 2007 clar ified your risk management policy and control structure which described in greater detail the process of originating loans and your most common disposition strategies. You discussed your investment strategy with regards to CDOs and the risk management process of evaluating those instruments and using statistical techniques to review the mark et risk exposures related to your portfolios. Your response further quantified your whole loan portfolio and your trading positions in subprime related securities. All of the above informa tion that you provided in your November 27, 2007 response provided a more detailed understanding of your exposure to the subprime sector than had been disc losed in your Form 10-K for 2006.
David H. Sidwell Morgan Stanley February 13, 2008 Page 2 In November 2007, you recorded $9.4 billion of write downs related to US subprime and other mortgage related exposures. We noted in your Form 10-Q for August 31, 2007 that you disclosure briefly discussed that the US economy was experiencing signs of slowing during the third quarter 2007, primarily reflec ting difficult conditions in the residential real estate and credit markets and that c oncerns about the impact of subprime loans caused the broader credit markets to deteriorate over th e quarter. It appears that you could have better addressed the possibility that the subprime lending business may have a material adverse impact on your financial condition, results of operations and liquidity. We note that your Form 10-K for 2007 includes enhanced discussion of the US subprime market and your related activities and exposur es. In future filings, we urge you to carefully consider the adequacy and transparency of your disc losures with regards to your involvement with any trading positions, investments, derivatives, available for sale securities, investment in, and by, subsidiaries and any and all exposures to off-balance sheet entities and unrelated entities and the impact any of these positions may have on your companies, financial position, results of operations and liquidit y. In particular we urge you to consider detailed and quantified information about specific risks in concentrated and material areas, especially when there exists the obvious perception that a particular exposure is overval ued, or alternatively, entering into a period of particular market uncertainty. Overly general risk di scussions and dense narrative cannot replace specific, well presented, quantified data that is proportional to the perceived possibility of adverse loss in a particular area. Based on the above, and with due recognition of the above consid erations regarding future disclosures, we have no fu rther comment at this time.
Sincerely, John Hartz Senior Assistant Chief Accountant
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
February 13, 2008 Room 7010 David H. Sidwell Executive Vice President and Chief Financial Officer Morgan Stanley 1585 Broadway New York, NY 10036
Re: Morgan Stanley
Form 10-K for Fiscal Year Ended November 30, 2006
Form 10-Q for the Fiscal Quarter Ended February 28, 2007
File No. 001-11758
Dear Mr. Sidwell:
We have reviewed your response letter da ted February 1, 2007 and appreciate the
additional detailed information you have provided.
In our initial review of the above referenced documents, we noted disclosures that you
originate, trade, make markets and take proprietary positions in, and act as principal of, mortgage related and real estate loan produc ts. However it was unclear to us from the
above referenced documents the exposure you had to the subprime market. The purpose
of our August 30, 2007 letter was to get cl arification about yo ur exposure to any
subprime loans or trading positions, including a comprehensive analysis of your portfolio and exposure, a discussion and analysis of any impairment charges recorded or potential
impairments and your risk ma nagement philosophies.
Your response dated November 27, 2007 clar ified your risk management policy and
control structure which described in greater detail the process of originating loans and
your most common disposition strategies. You discussed your investment strategy with regards to CDOs and the risk management process of evaluating those instruments and using statistical techniques to review the mark et risk exposures related to your portfolios.
Your response further quantified your whole loan portfolio and your trading positions in
subprime related securities. All of the above informa tion that you provided in your
November 27, 2007 response provided a more detailed understanding of your exposure to the subprime sector than had been disc losed in your Form 10-K for 2006.
David H. Sidwell
Morgan Stanley February 13, 2008 Page 2 In November 2007, you recorded $9.4 billion of write downs related to US subprime and
other mortgage related exposures. We noted in your Form 10-Q for August 31, 2007 that
you disclosure briefly discussed that the US economy was experiencing signs of slowing
during the third quarter 2007, primarily reflec ting difficult conditions in the residential
real estate and credit markets and that c oncerns about the impact of subprime loans
caused the broader credit markets to deteriorate over th e quarter. It appears that you
could have better addressed the possibility that the subprime lending business may have a
material adverse impact on your financial condition, results of operations and liquidity. We note that your Form 10-K for 2007 includes enhanced discussion of the US subprime
market and your related activities and exposur es. In future filings, we urge you to
carefully consider the adequacy and transparency of your disc losures with regards to your
involvement with any
trading positions, investments, derivatives, available for sale
securities, investment in, and by, subsidiaries and any and all exposures to off-balance
sheet entities and unrelated entities and the impact any of these positions may have on
your companies, financial position, results of operations and liquidit y. In particular we
urge you to consider detailed and quantified information about specific risks in concentrated and material areas, especially when there exists the obvious perception that
a particular exposure is overval ued, or alternatively, entering into a period of particular
market uncertainty. Overly general risk di scussions and dense narrative cannot replace
specific, well presented, quantified data that is proportional to the perceived possibility of
adverse loss in a particular area. Based on the above, and with due recognition of the above consid erations regarding
future disclosures, we have no fu rther comment at this time.
Sincerely, John Hartz Senior Assistant Chief Accountant