SecProbe.io

June 22, 2012

Via E -mail
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, 2011
Filed February 27, 2012
Form 10 -Q for Quarterly Period Ended March 31, 2012
Filed May 7, 2012
File No. 001 -11758

Dear Ms. Porat:

We have reviewed your filing s and have the following comments.  In some of our
comments, we may ask you to provide us with 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.   Where we have requested changes in future filings, please include a draft of your
proposed disclosures that clearly identifies new or revised disclosures.   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 s and the information you provide in
response to these comments, including the draft of your proposed disclosures, we may have
additional comments.

Form 10 -K for Fiscal Year Ended December 31, 2012

Item 1A.  Risk Factors

We are subject to operational risk that could adversely affect our bu sinesses, page 24

1. We note that you are subject to operational risk, including potential vulnerability to
“unauthorized access, mishandling or misuse, computer viruses or malware, cyber attacks
and other events that could have a security impact on [your co mputer] systems.”
Furthermore, we note reports that the prevalence of cyber attacks  have increased  in your

Ruth Porat
Morgan Stanley
June 22, 2012
Page 2

 industry .  If you have experienced any of these or other cyber incidents in the past,
beginning with your next Form 10 -Q, please state that fact in order to provide the proper
context for your risk factor disclosure.  Please refer to the Division of Corporation
Finance’s Disclosure Guidance Topic No. 2 at
http://www.sec.gov/divisions/corpfin/guidance/cfguidance -topic2.htm for additional
information.

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Stock Performance Graph, page 43

2. It appears that your presentation of the S&P 500 Stock Index  and the S&P 500 Financials
Index  does not assume the reinvestment of dividends (cumulative total shareholder
return) as required by Item 201(e) of Regulation S -K.  Please confirm that future
performance graphs will present cumulative total shareholder return for the indices.

Item 7.   Management’s Discussion and Analysis  of Financial Condition and Results of
Operations

Net Revenues , page 57

3. You disclose that you record gains and losses related to investments associated with
certain employee deferred compensation plans in Principal Transactions – Trading and
Principal Transactions – Investments.  Please revise your disclosure  in Management’s
Discussion and Analysis  or the Notes as appropriate to address the following:

 Quantify the amount of compensation tied to the performance of investments held in
your principal transaction portfolio ;

 More clearly describe the relationships between how com pensation is calculated and
the gains/losses absorbed on the referenced investments ;

 To the extent that the compensation expense and investment gain/losses offset, clarify
whether this is always the case, and if not, describe the circumstances where
compe nsation and gains/losses would not offset; and

 Discuss the extent to which the employee does not bear the full gain/loss of the
referenced investment portfolio due to guarantees that you provide in the
compensation arrangement.

Ruth Porat
Morgan Stanley
June 22, 2012
Page 3

 Critical Accounting Pol icies, page 79

Goodwill and Intangible Assets, page 80

4. Please revise your disclosure in future filings to state, if true, that each of your reporting
units has a fair value that is substantially in excess of carrying value.  If that is not true,
please revise your disclosure in future filings to include the following disclosures for
each reporting unit that is at risk of failing step one of your goodwill impairment test :

 The percentage by which fair value exceeded carrying value as of the date of the mo st
recent test .

 A discussion of the methods and key assumptions used in your impairment analysis
and how the key assumptions were determined .

 A discussion of the degree of uncertainty associated with the key assumptions, and
how those assumptions wer e determined. The discussion regarding uncertainty should
provide specifics to the extent possible (e.g., the valuation model assumes recovery
from a business downturn within a defined period of time) .

 Description of specific, potential events and/or ch anges in circumstances that could
reasonably be expected to negatively affect the key assumptions  and outcome .

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Risk Management, page 100

5. Please expand your discussion to explain the interactions among the various committees
and groups responsible for monitoring risk and clarify how information relating to risks is
communicated up to senior management and the Board of Directors.  For example, we
note that with respect to market risk, t he business units and trading desks ensure that the
risks are measured monitored and made transparent to senior management.  Additionally,
we note that the Market Risk Department is responsible escalating risk concentrations to
senior management.  How is t his information conveyed to the Board of Directors?

VaR Methodology, Assumptions and Limitations, page 104

6. We note your disclosure that your V alue-at-Risk (VaR)  model evolves over time in
response to changes in the composition of trading portfolios and t o improvements in
modeling techniques and systems capabilities .  We further note that you are committed to
continuous review and enhancement of VaR methodologies and assumptions in order to
capture evolving risks associated with changes in market structure  and dynamics.   Please
respond to the following and expand your disclosure in future filings as appropriate:

Ruth Porat
Morgan Stanley
June 22, 2012
Page 4

 Tell us the number of different VaR models that are used to determine your total
trading VaR , and discuss the drivers regarding  the need to use mu ltiple different
models .

 Tell us how all of the different VaR models used are aggregated to arrive at your total
trading VaR as well as the individual market risk categories disclosed.   For example,
clarify whether you simply aggregate the outputs from t he different models or
whether adjustments are made, and if so, how  the adjustments are determined .

 Clarify whether your stress VaR (S -VaR) scenarios use all of the base VaR models
with more stressed assumptions or if you use different models than your un stressed
VaR scenarios .  To the extent that different models are used to capture that risk,
please tell us the drivers as to why.

 Tell us whether the VaR models used for regulatory capital purposes are the same as
the VaR models used for your market risk disclosures.   To the extent that certain of
the models used for both purposes differ, please tell us the drivers behind those
differences.

 Discuss the process and validation procedures in place prior to implementing
significant model and assumption change s.  For example, discuss the approval
process required, back -testing procedures performed, and periods of parallel mod el
runs before implementation.

 To the extent that all or some of your VaR models used for your market risk
disclosures are different than  those used to calculate regulatory capital, please tell us
whether the model review process and model oversight processes are the same for
both.   As part of your response, please clarify when approval is required from any of
your regulators regarding VaR model changes.

 Given that your VaR models are evolving over time, tell us how you consider when
disclosure is required under Item 305(a)(1)(iii)(4) of Regulation S -K regarding
model, assumptions and parameter changes.

Country Risk Exposure, page 118

7. You disclose that indirect country risk exposures are captured and monitored through
regular stress testing and counterparty, market and systemic vulnerability analysis ,  You
also disclose  that you reduce country risk exposure through the effect of risk mitig ants,
such as netting agreements with counterparties that permit offset ting of  receivables and
payables with such counterparties, obtaining collateral from counterparties, and hedging.
For purposes of providing greater transparency, p lease revise your disclosure in future
filings to more clearly identify and discuss specific examples of such indirect country risk
exposure and discuss the extent of indirect sovereign credit risk exposures that you have
identified , providing quantificati on where possible .

Ruth Porat
Morgan Stanley
June 22, 2012
Page 5

8. We note as per footnote (2) to your tabular disclosure on pages 119 and 120 that your net
counterparty exposure takes into consideration legally enforceable master netting
agreements and collateral.  Please revise your disclosure in fut ure filings to separately
quantify the impact that master netting agreements and posted collateral have on your net
counterparty exposure.

9. We note your disclosure that your hedges within your tabular disclosures on pages 119
and 120 represent CDS hedges o n net counterparty exposure and funded lending, and that
the amounts disclosed are based on the CDS notional amount assuming zero recovery
adjusted for any fair value receivable or payable.  Please clarify and consider revising
your disclosure in future fi lings to more clearly discuss how you calculate this amount,
what you believe that it represents, and why you believe this presentation is useful to you
and investors.  Specifically, address how the amount reported differs from fair value and
notional amou nts, and consider separately quantifying fair value and notional amounts in
a footnote to your tabular disclosure .  Additionally, please revise your disclosure in future
filings to discuss the nature of payout or trigger events under these purchased credit
protection contracts and how those features may limit the effectiveness of such contracts
in mitigating losses.

Notes to Consolidated Financial Statement, page 133

7.    Variable Interest Entities and Securitization Activities, page 178

10. On page 181, we  note that your tabular disclosure of certain non -consolidated VIEs in
which you had variable interests include s all VIEs in which you have determined that
your maximum exposure to loss is greater than specific thresholds or meets certain other
criteria.   Please revise your disclosure to clarify the thresholds and other criteria that you
utilize in developing this disclosure.

12.  Derivative Instruments and Hedging Activities, page 198

11. You disclose in footnote (1) to your tabular disclosures on pages 201 and 202 that
notional amounts include net notionals related to long and short futures contracts , and
that t he variation margin on these futures contracts is excluded from the se table s.  Please
revise your disclosure in future filings to clarify whether you r futures contracts in these
tables are presented on a gross fair value basis.  Also, address whether you have netted
daily margin posted against the fair values such that the fair value amounts disclosed are
on a net rather than gross fair value basis.  T o the extent the amounts are net, tell us how
you considered the guidance in ASC 815 -10-50-4B and 820 -10-50-3.

Ruth Porat
Morgan Stanley
June 22, 2012
Page 6

 22.  Income Taxes, page 244

12. It appears that your effective tax rate has experienced significant volatility in recent  years
due to Non -U.S. earnings.  Please clarify  and revise your disclosure to address the
following:

 The extent to which  the Non -U.S. earnings line item within your tax rate
reconciliation includes the impact on your effective tax rate due to changes in enacted
foreign tax rates, changes in your determination that certain unremitted foreign
earnings are reinvested indefinitely, and/or changes in the amount of foreign earnings
derived from jurisdictions with tax rates different than your U.S. statutory tax rate .

 Given that 46.7% of income from continuing operations  in 2011 is related to Non -
U.S. earnings (per your tabular disclosure on page 246), please tell us how you
considered separately disclosing current and deferred tax provisions for foreign
jurisdicti ons by country  (e.g., tax provisions for your major foreign tax jurisdictions
that are disclosed on page 248 including Hong Kong, Japan, and the United
Kingdom).

 Finally, you disclose on page 108 of your Form 10 -Q for the Quarterly Period Ended
March 31 , 2012 that t he income of certain foreign subsidiaries earned outside of the
United States has previously been excluded from taxation in the U.S. as a result of a
provision of U.S. tax law that defers the imposition of tax on certain active financial
servi ces income until such income is repatriated to the United States as a div idend
and that t his provision  expired for taxable years beginning on or after January  1,
2012 .  You also state that i f this provision is extended again with respect to such
income ear ned during 2012, the impact could decrease your 2012 annual effective tax
rate and have a favorable impact on your n et income .  Please revise your disclosure in
future filings to quantify the impact that the expiration of this tax provision had on
your eff ective tax rate for the first quarter of 2012.

Financial Data Supplement

Short -term Borrowings, page 266

13. We note your disclosure on page 63 that net interest expense  within the Institutional
Securities segment  increase d to $1.085 billion in 2011 from $2 33 m illion in 2 010
primarily due to higher interest expenses that resulted from increased interest rates
associated with your long term borrowings and stock lending transactions.  We also note
your weighted average interest rates of long term borrowings in creased from 3.8% to 4%
per your disclosure on page 195.  However, you disclose that  you are unable to provide
weighted average interest rates f or securities sold u nder repurchase agreements and
securities loaned as you consider such interest expense as an  integrated activity with
other revenue sources for each of your separate businesses .  We believe this information
is useful as it provides transparency into the interest rate and cost of borrowing increases

Ruth Porat
Morgan Stanley
June 22, 2012
Page 7

 on your short -term collateralized borrowings in a historically low interest rate
environment.  Please revise your disclosure in future filings to provide the weighted
average interest rates fo r securities sold u nder repurchase agreements and s ecurities
loaned as required by Item VII(3) of Industry Guide  3 for Bank Holding Companies , or
tell us why such information is not available .  Please note that you may provide an
approximate  weighted average interest rate on your average balances outstanding during
the years presented.

Definitive Proxy Statement on  Schedule 14A

Certain Transactions, page 19

14. Please tell us whether the extensions of credit to your directors, officers and members of
their immediate families were made on substantially the same terms and conditions as
those prevailing at the time for comparable transactions with other persons not related to
the lender .  If so, please confirm that you will use the language contained in Instruction
4(iii)(B) to Item 404 of Regulation S -K in future filings.

Compensation Discussion and Analysis, page 26

15. We note your disclosure on