SecProbe.io

May 6, 2011
   Ruth Porat 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 December 31, 2010  Filed February 28, 2011
File No. 001-11758
 Dear Ms. Porat:
 We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us w ith information so we may better understand
your disclosure.
 Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and
circumstances or do not believe an amendment is appropriate, please tell us why in your
response.

After reviewing any amendment to your filing and the information you provide in
response to these comments, we ma y have additional comments.
            Form 10-K for Fiscal Year Ended December 31, 2010

General

1. We have not completed our review of the Pa rt III information that is incorporated
into your Form 10-K by reference to your  definitive proxy statement.  We may
have additional comments afte r reviewing that information.

Ruth Porat
Morgan Stanley May 6, 2011 Page 2  Item 1.  Business

 Institutional Securities

 Commodities, page 4

2. We note your disclosure about your different commodities activities on pages 4, 18 and 28.  Please respond to the following:

a. We note that you invest and make ma rkets in the spot, forward, physical
derivatives and futures markets in several commodities, including metals, agricultural products, crude oil, oil products, natural gas, electric power, emission credits, coal, freight, liquefied  natural gas and related products.
Please describe in more detail the activ ities that go into making a market in
these commodities and describe the t ypes of revenue streams earned as a
result of these activities.  Additionally, tell us whether other parties also make markets in the same commodities that you do.

b. Tell us how you obtained your ownership in  TransMontaigne, Inc. and tell us
whether this is an area where you are considering further investments.

c. Tell us how and where the results of your ownership in TransMontaigne are reflected in your consolidated financ ial statements, including the amounts
involved.

d. Describe the relationship between your market making activities in various commodities and your ownership in TransMontaigne.
 Financial Holding Company

 Scope of Permitted Activities, page 9

3. We note your disclosure that you have re quested and obtained an extension to
conform a limited set of activities and make certain divestments in order to
comply with the BHC Act.  Please tell us and revise your future filings to discuss
the specific activities you plan to conform to the requirements of the BHC Act and those which you intend to divest, and identify the respective timeframes for
doing so.
 Activities Restrictions under the Volcker Rule, page 10

4. We note your disclosure regarding the Volc ker Rule here as well as elsewhere in
your filing, including its limitations on vari ous aspects of your business.  Please
revise your future filings to  address the following:

a. Clearly disclose how you define “proprie tary trading” for these purposes.

Ruth Porat
Morgan Stanley May 6, 2011 Page 3

b. Identify the trading desks and other rela ted business units that participate in
activities you believe meet the definiti on of proprietary trading.  Identify
where these activities ar e located in terms of your segment breakdowns.
Quantify the gross revenues and operating margin from each of these units.  Clearly identify the extent to which such  activities or business units have been
terminated or disposed of as well as the steps you plan to ta ke to terminate or
dispose of the rest of  these components.
 c. Revise your future filings to clearly id entify aspects of your business that are
similar to but excluded from your defini tion of “proprietary trading” for these
purposes.  Clearly disclose how you differentiate such activities.  Tell us the extent to which you believe it is possibl e that such activit ies will be scoped
into the final regulatory defin ition of proprietary trading.

Item 1A.  Risk Factors, page 23

5. Please provide us with draft disclosure to be included in future filings that describes any risks that may result from the restrictions imposed on proprietary
trading by the Dodd-Frank Act, including a quantification of revenues generated
from your proprietary trading business.  If you do not believe this risk is likely to
have a material effect on your operations, please explain the ba sis for your belief.

6. We note that your exposure to the M onolines at December 31, 2010 included $1.5
billion in insured municipal bond securi ties and $326 million of mortgage and
asset backed securities enhanced by financial guarantees.  Additionally, we note your disclosure that your hedging program continues to become more costly and
difficult to effect and that significant addi tional losses could be incurred as market
conditions evolve.  Please provi de risk factor disclosure in  future filings or tell us
why you believe risk factor di sclosure is not appropriate.

7. Many of your risk factor discussions are too vague to be meaningful to investors.  For example:

• “Our borrowing costs and access to the debt capital markets depend
significantly on our cr edit ratings;”
• “Holding large and concentrated positions may expose us to losses;”
• “We have incurred, and may continue to incur, significant losses in the real
estate sector;” and
• “The financial services industry is su bject to extensive regulation which is
undergoing major changes that will impact our business.”

Please provide draft disclosure to be incl uded in future filings expanding your risk
factors discussions to identify any specifi c situations that make you particularly
vulnerable to the identified risks, incl uding regulatory changes.  Additionally,

Ruth Porat
Morgan Stanley May 6, 2011 Page 4
provide a more specific discussion of th e potential consequences.  For example,
with respect to the risk discussion relating to your dependence on credit ratings, discuss the negative ratings outlook and the specific consequences in the event of
a one-notch and two-notch downgrade.
 Acquisition and Joint Venture Risk

 We may be unable to fully capture  the expected value…, page 31

8. Please provide us with draft disclosure to be included in future filings that more fully describes the risks associated with your joint ventures w ith Mitsubishi UFJ
Financial Group, Inc., includi ng a description of the ow nership arrangements and
quantification of any prior losses resulting from the joint ventures.
 Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of
Operations
 Significant Items

 Monoline Insurers, page 52

9. Please tell us and enhance your disclosure in future filings to quantify and discuss your total remaining expos ure related to MBIA.
 Business Segments, page 54

10. We note your various discussions of Principal transactions Trading and
Investment revenues within each of your segments between pages 56 and 72.  Please respond to the following and expand your disclosures in future filings to
address the following:    a. Tell us and expand your disclosures to pr ovide further discussion of the types
of instruments that generate the principa l transactions revenue by type of risk
and how those instruments affect the financial statement line items.  For
example, discuss how interest rate deri vatives generate principal transactions
revenue (changes in fair value which a ffect X line item, and fee charged to
customer, which affects Y line item, etc).

b. Describe the significant drivers of the principal transactions revenue.  For
example, discuss how much of the revenue  is driven by transaction fees versus
changes in fair value of the instruments.

c. Tell us in more detail how principal transactions revenue is generated by
customer demand, the steps you take to f ill the order, and how the associated
revenue line items are affected.  For exam ple, if a customer requests a foreign
exchange swap, discuss the types of fees charged for the transaction, and

Ruth Porat
Morgan Stanley May 6, 2011 Page 5
whether the principal transactions re venues you would recognize is the other
side of the swap transaction that the customer requested.

d. Revise your future filings to tie your disclosures elsewhere of gains and losses on derivative contracts to your principa l transactions reve nue line items.
 Liquidity and Capital Resources, page 81

11. We note from your disclosure in footnote 22 to your financial statements that as
of December 31, 2010 approximately $5.1 bill ion of earnings has been designated
as being permanently held outside of the United States.  Please revise your MD&A to discuss the impact this designation has on your available liquidity.
 Global Liquidity Reserve, page 85

12. We note your disclosure that “the vast ma jority” of the assets held in the Global
Liquidity Reserve can be monetized on a next -day basis.  In future filings, please
revise your liquidity discussion to disclose  the total amount that can be monetized
on a next-day basis as of December 31, 2010.
 Item 7A. Quantitative and Qualita tive Disclosures about Market Risk

 Risk Management

 Credit Risk

 Institutional Securities Activities

 Credit Exposure – Corporate Lending

 “Event-Driven” Loans and Lending Commit ments at December 31, 2010 and December
31, 2009, page 109

13. Please provide us with more information regarding your “Event-Driven” lending.  In your response, please provide us with additional info rmation as to the purpose
of your event driven loans, the credit quality of the borrowers, the typical terms of
the loans, charge-off experien ce, and the amount of loans in non-accrual status as
of the balance sheet date.  Additionally, explain to us why the loan balance is
primarily reduced through “distributions” rather than repayments based on your
rollforward on page 109.

Credit Exposure – Derivatives, page 109

14. Your OTC Derivative Product tables on pages 110-112 present interest rate and
currency swaps, interest rate options, cr edit derivatives and other fixed income
securities contracts on a singl e line item.  In future f ilings, please revise your

Ruth Porat
Morgan Stanley May 6, 2011 Page 6
tables on pages 110-112 to separately report your interest rate swaps and options, your currency swaps, and your credit derivatives.

15. In future filings, please revise Note 2 to your table at the top of page 113 to
quantify the impact of your hedges of Monoline derivative co unterparty exposure
that is excluded from this table.

16. Please revise your future filings to quantif y and more clearly discuss the impact of
your participation in novating certain credit default swap contracts with external counterparties to a central clearinghouse.

17. We note various disclosures throughout  your filing regarding your significant
exposure to various types of credit deri vatives. To the extent material and
applicable, please revise your future fili ngs to address the following regarding
your credit derivatives:

a. For the notional and fair value amount of your credit derivatives as of the
balance sheet dates presented, please  quantify the extent to which the
positions held in your credit derivatives  portfolio represent a purchase of
credit default protection versus a sale of credit default protection, as well as
the types of instrument used (e.g., tota l rate of return swap, credit default
swap, derivatives on credit linked notes, derivative interests in mortgage-
related collateralized debt  offerings, certain types of ABS credit default
swaps, basket credit default swaps, CDO-squared positions, or other credit
derivatives). Link and if nece ssary reconcile this data to your existing tables in
this section as well as y our financial statement foot notes.  Within these two
categories of protection sold and purch ased, please separately quantify the
extent to which the derivative activ ity was for the following purposes:

i. Provide default risk protection to  offset credit exposure to your
holdings of the related reference enti ty’s debt in your loan portfolio,
investment portfolio, or loan  commitments outstanding;
ii. Create new credit exposure fo r your own trading purposes;
iii. Reflect credit exposures taken for th e benefit of your clients; and
iv. Provide an offset to credit exposure taken for the benefit of clients.

b. Separately quantify the gross realized gains and losses from your credit derivative
activity.

c. More clearly discuss the settlement triggers that are typical to the swap contracts in your credit derivatives portfolio. To the extent that the nature of the triggers
varies within your portfolio, discuss that fact accordingly.

d. Discuss your overall strategies employed in your credit derivatives portfolio as well as any changes in those strategies during the periods presented.

Ruth Porat
Morgan Stanley May 6, 2011 Page 7
e. Discuss any trends experienced within the portfolio both in terms of positions
held and realized gains and losses. Specifically disclose the reasons for the
significant increases in the notional amounts as well as the reasons for the
changes in the fair values of the swaps. Discuss any expected changes to those trends.

Item 8.  Financial Statements and Supplementary Data
 Notes to Consolidated Financial Statements

 1.  Introduction and Basis of Presentation

 Basis of Financial Information, page 128

18. You disclose that at December 31, 2 010, you netted securities received as
collateral in connection with securitie s lending arrangements aggregating $4.6
billion with identical securities, prim arily Corporate equ ities, in Financial
instruments sold, not yet purchase d.  At December 31, 2009, you did not net
securities received as collateral with  Financial instruments sold, not yet
purchased, as amounts did not materially  affect the Company’s consolidated
statement of financial condition.  Plea se tell us how your practice meets the
criteria in ASC 210-20-45.  Additionally, please tell us why you changed your practice in 2010, including whether and if  so, how your current practice of netting
is preferable.
 2.  Summary of Significant Accounting Policies

 Allowance for Loan Losses, page 138

19. You disclose payments received on nonaccrual loans held for investment are applied to principal if there is doubt regarding the ultimate collectability; if
collection of the principal is  not doubtful, interest inco me is recognized on a cash
basis.  Please tell us and more clearly disclose in your future filings under what circumstances a loan is on nonaccrual stat us but is not doubtful of collection.
Also, please tell us and more clearly di sclose in your future filings why you
differentiate between the nonaccrual lo ans that are doubtful of collection by
applying cash payments only to principa l and the nonaccrual loans that are not
doubtful of collection by applying payments to both income and principal.
 4. Fair Value Disclosures

 Collateralized Interest Rate Derivative Contracts, page 148

20. We note your disclosure here as well as on page 48 regarding your change in valuation methodology to use the overnight indexed swap curve as an input to
value substantially a ll of your collateralized interest  rate derivative contracts.

Ruth Porat
Morgan Stanley May 6, 2011 Page 8
You indicate the result of this change was a pre-tax gain of approximately $176 million.  Please address the following:

a. Tell us how you determined that your new methodology was preferable in more accurately valuing these contracts.

b. Tell us why you changed this methodology for “substantially” but not all of
your collateralized interest ra te derivative contr