10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission File Number 1-11758

(Exact Name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 1585 Broadway
New York, NY 10036 (Address of principal executive
offices, including zip code) 36-3145972
(I.R.S. Employer Identification No.) (212) 761-4000
(Registrant’s telephone number,
including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  x	Accelerated Filer  ¨
Non-Accelerated Filer  ¨	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of April 30, 2012, there were 1,977,775,881 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended March 31, 2012

Table of Contents		Page
Part I—Financial Information
Item 1.	Financial Statements (unaudited)		1
	Condensed Consolidated Statements of Financial Condition—March 31, 2012 and December 31, 2011		1
	Condensed Consolidated Statements of Income—Three Months Ended March 31, 2012 and 2011		3
	Condensed Consolidated Statements of Comprehensive Income—Three Months Ended March 31, 2012 and 2011		4
	Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2012 and 2011		5
	Condensed Consolidated Statements of Changes in Total Equity—Three Months Ended March 31, 2012 and 2011		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		8
	Report of Independent Registered Public Accounting Firm		79
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		80
	Introduction		80
	Executive Summary		81
	Business Segments		90
	Other Matters		104
	Critical Accounting Policies		105
	Liquidity and Capital Resources		110
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		124
Item 4.	Controls and Procedures		139
Financial Data Supplement (Unaudited)			140
Part II—Other Information
Item 1.	Legal Proceedings		143
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		146
Item 6.	Exhibits		146

i

AVAILABLE INFORMATION

Morgan Stanley files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the public reference room. The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Morgan Stanley) file electronically with the SEC. Morgan Stanley’s electronic SEC filings are available to the public at the SEC’s internet site, www.sec.gov.

Morgan Stanley’s internet site is www.morganstanley.com. You can access Morgan Stanley’s Investor Relations webpage at www.morganstanley.com/about/ir. Morgan Stanley makes available free of charge, on or through its Investor Relations webpage, its proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Morgan Stanley also makes available, through its Investor Relations webpage, via a link to the SEC’s internet site, statements of beneficial ownership of Morgan Stanley’s equity securities filed by its directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.

Morgan Stanley has a Corporate Governance webpage. You can access information about Morgan Stanley’s corporate governance at www.morganstanley.com/about/company/governance. Morgan Stanley posts the following on its Corporate Governance webpage:

• Amended and Restated Certificate of Incorporation;

• Amended and Restated Bylaws;

• Charters for its Audit Committee; Internal Audit Subcommittee; Compensation, Management Development and Succession Committee; Nominating and Governance Committee; and Risk Committee;

• Corporate Governance Policies;

• Policy Regarding Communication with the Board of Directors;

• Policy Regarding Director Candidates Recommended by Shareholders;

• Policy Regarding Corporate Political Contributions;

• Policy Regarding Shareholder Rights Plan;

• Code of Ethics and Business Conduct;

• Code of Conduct; and

• Integrity Hotline information.

Morgan Stanley’s Code of Ethics and Business Conduct applies to all directors, officers and employees, including its Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. Morgan Stanley will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC (“NYSE”) on its internet site. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036 (212-761-4000). The information on Morgan Stanley’s internet site is not incorporated by reference into this report.

ii

Part I—Financial Information.

Item 1. Financial Statements.

MORGAN STANLEY

Condensed Consolidated Statements of Financial Condition

(dollars in millions, except share data)

(unaudited)

	March 31, 2012		December 31, 2011
Assets
Cash and due from banks ($534 and $511 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities generally not available to the Company)	$	10,133	$	13,165
Interest bearing deposits with banks		28,592		34,147
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements		30,152		29,454
Financial instruments owned, at fair value (approximately $144,873 and $140,749 were pledged to various parties at March 31, 2012 and December 31, 2011, respectively):
U.S. government and agency securities		59,690		63,449
Other sovereign government obligations		32,235		29,059
Corporate and other debt ($3,442 and $3,007 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)		69,518		68,923
Corporate equities		59,063		47,966
Derivative and other contracts		40,016		48,064
Investments ($1,797 and $1,666 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)		8,329		8,195
Physical commodities		9,573		9,697
Total financial instruments owned, at fair value		278,424		275,353
Securities available for sale, at fair value		32,528		30,495
Securities received as collateral, at fair value		17,728		11,651
Federal funds sold and securities purchased under agreements to resell (includes $318 and $112 at fair value at March 31, 2012 and December 31, 2011, respectively)		136,451		130,155
Securities borrowed		141,610		127,074
Receivables:
Customers		38,962		33,977
Brokers, dealers and clearing organizations		5,718		5,248
Fees, interest and other		10,263		9,444
Loans (net of allowances of $26 and $17 at March 31, 2012 and December 31, 2011, respectively)		16,729		15,369
Other investments		4,688		4,832
Premises, equipment and software costs (net of accumulated depreciation of $5,079 and $4,852 at March 31, 2012 and December 31, 2011, respectively) ($231 and $234 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)		6,410		6,457
Goodwill		6,700		6,686
Intangible assets (net of accumulated amortization of $994 and $910 at March 31, 2012 and December 31, 2011, respectively) (includes $99 and $133 at fair value at March 31, 2012 and December 31, 2011, respectively)		4,170		4,285
Other assets ($343 and $446 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)		11,772		12,106
Total assets	$	781,030	$	749,898

See Notes to Condensed Consolidated Financial Statements.

1

MORGAN STANLEY

Condensed Consolidated Statements of Financial Condition—(Continued)

(dollars in millions, except share data)

(unaudited)

	March 31, 2012			December 31, 2011
Liabilities and Equity
Deposits (includes $1,980 and $2,101 at fair value at March 31, 2012 and December 31, 2011, respectively)	$	66,441		$	65,662
Commercial paper and other short-term borrowings (includes $1,321 and $1,339 at fair value at March 31, 2012 and December 31, 2011, respectively)		2,017			2,843
Financial instruments sold, not yet purchased, at fair value:
U.S. government and agency securities		25,589			19,630
Other sovereign government obligations		26,354			17,141
Corporate and other debt		8,547			8,410
Corporate equities		27,725			24,497
Derivative and other contracts		42,765			46,453
Physical commodities		—			16
Total financial instruments sold, not yet purchased, at fair value		130,980			116,147
Obligation to return securities received as collateral, at fair value		23,366			15,394
Securities sold under agreements to repurchase (includes $347 and $348 at fair value at March 31, 2012 and December 31, 2011, respectively)		107,330			104,800
Securities loaned		34,431			30,462
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)		21,435			20,719
Payables:
Customers		119,045			117,241
Brokers, dealers and clearing organizations		12,143			4,082
Interest and dividends		2,712			2,292
Other liabilities and accrued expenses ($117 and $121 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)		13,815			15,944
Long-term borrowings (includes $43,224 and $39,663 at fair value at March 31, 2012 and December 31, 2011, respectively)		176,723			184,234
		710,438			679,820
Commitments and contingent liabilities (see Note 11)
Equity
Morgan Stanley shareholders’ equity:
Preferred stock		1,508			1,508
Common stock, $0.01 par value;
Shares authorized: 3,500,000,000 at March 31, 2012 and December 31, 2011;
Shares issued: 2,038,893,979 at March 31, 2012 and 1,989,377,171 at December 31, 2011;
Shares outstanding: 1,978,337,922 at March 31, 2012 and 1,926,986,130 at December 31, 2011		20			20
Paid-in capital		22,930			22,836
Retained earnings		40,118			40,341
Employee stock trust		3,252			3,166
Accumulated other comprehensive loss		(60	)		(157	)
Common stock held in treasury, at cost, $0.01 par value; 60,556,057 shares at March 31, 2012 and 62,391,041 shares at December 31, 2011		(2,192	)		(2,499	)
Common stock issued to employee trust		(3,252	)		(3,166	)
Total Morgan Stanley shareholders’ equity		62,324			62,049
Noncontrolling interests		8,268			8,029
Total equity		70,592			70,078
Total liabilities and equity	$	781,030		$	749,898

See Notes to Condensed Consolidated Financial Statements.

2

MORGAN STANLEY

Condensed Consolidated Statements of Income

(dollars in millions, except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2012			2011
Revenues:
Investment banking	$	1,063		$	1,214
Principal transactions:
Trading		2,407			2,977
Investments		85			329
Commissions and fees		1,177			1,439
Asset management, distribution and administration fees		2,152			2,083
Other		110			(474	)
Total non-interest revenues		6,994			7,568
Interest income		1,542			1,859
Interest expense		1,601			1,853
Net interest		(59	)		6
Net revenues		6,935			7,574
Non-interest expenses:
Compensation and benefits		4,431			4,285
Occupancy and equipment		392			397
Brokerage, clearing and exchange fees		403			401
Information processing and communications		459			440
Marketing and business development		146			142
Professional services		412			403
Other		489			605
Total non-interest expenses		6,732			6,673
Income from continuing operations before income taxes		203			901
Provision for (benefit from) income taxes		54			(244	)
Income from continuing operations		149			1,145
Discontinued operations:
Gain (loss) from discontinued operations		27			(28	)
Provision for (benefit from) income taxes		42			(13	)
Net gain (loss) from discontinued operations		(15	)		(15	)
Net income	$	134		$	1,130
Net income applicable to noncontrolling interests		228			162
Net income (loss) applicable to Morgan Stanley	$	(94	)	$	968
Earnings (loss) applicable to Morgan Stanley common shareholders	$	(119	)	$	736
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations	$	(78	)	$	984
Net gain (loss) from discontinued operations		(16	)		(16	)
Net income (loss) applicable to Morgan Stanley	$	(94	)	$	968
Earnings (loss) per basic common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.52
Net gain (loss) from discontinued operations		(0.01	)		(0.01	)
Earnings (loss) per basic common share	$	(0.06	)	$	0.51
Earnings (loss) per diluted common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.51
Net gain (loss) from discontinued operations		(0.01	)		(0.01	)
Earnings (loss) per diluted common share	$	(0.06	)	$	0.50
Average common shares outstanding:
Basic		1,876,961,836			1,456,015,979
Diluted		1,876,961,836			1,472,307,592

See Notes to Condensed Consolidated Financial Statements.

3

MORGAN STANLEY

Condensed Consolidated Statements of Comprehensive Income

(dollars in millions)

(unaudited)

	Three Months Ended March 31,
	2012			2011
Net income	$	134		$	1,130
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(1)	$	20		$	37
Amortization of cash flow hedges(2)		2			1
Net unrealized gain (loss) on Securities available for sale(3)		(19	)		(36	)
Pension, postretirement and other related adjustments(4)		2			5
Total other comprehensive income	$	5		$	7
Comprehensive income	$	139		$	1,137
Net income applicable to noncontrolling interests		228			162
Other comprehensive income (loss) applicable to noncontrolling interests		(92	)		(34	)
Comprehensive income applicable to Morgan Stanley	$	3		$	1,009

(1) Amounts are net of provision for (benefit from) income taxes of $4 million and $(68) million for the quarters ended March 31, 2012 and 2011, respectively.

(2) Amounts are net of provision for income taxes of $1 million and $2 million for the quarters ended March 31, 2012 and 2011, respectively.

(3) Amounts are net of (benefit from) income taxes of $(13) million and $(24) million for the quarters ended March 31, 2012 and 2011, respectively.

(4) Amounts are net of provision for (benefit from) income taxes of $2 million and $(4) million for the quarters ended March 31, 2012 and 2011, respectively.

See Notes to Condensed Consolidated Financial Statements.

4

MORGAN STANLEY

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

(unaudited)

	Three Months Ended March 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	134		$	1,130
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Deferred income taxes
Loss on equity method investees		32			660
Compensation payable in common stock and options		372			340
Depreciation and amortization		375			379
Gain on sale of securities available for sale		(1	)		(12	)
(Gain) loss on retirement of long-term debt		(14	)		23
Impairment charges and other-than-temporary impairment charges		12			3
Changes in assets and liabilities:
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements		(698	)		(2,752	)
Financial instruments owned, net of financial instruments sold, not yet purchased		14,176			7,568
Securities borrowed		(14,536	)		(4,207	)
Securities loaned		3,969			6,990
Receivables, loans and other assets		(6,784	)		(7,417	)
Payables and other liabilities		11,115			1,350
Federal funds sold and securities purchased under agreements to resell		(6,296	)		(14,670	)
Securities sold under agreements to repurchase		5,575			9,293
Net cash provided by (used for) operating activities		7,431			(1,322	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from (payments for):
Premises, equipment and software costs		(212	)		(409	)
Purchases of securities available for sale		(3,487	)		(3,357	)
Sales, maturities and redemptions of securities available for sale		1,003			6,311
Net cash provided by (used for) investing activities		(2,696	)		2,545
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments for):
Commercial paper and other short-term borrowings		(826	)		46
Distributions related to noncontrolling interests		(7	)		(7	)
Derivatives financing activities		(169	)		89
Other secured financings		(1,674	)		2,312
Deposits		779			(317	)
Net proceeds from:
Excess tax benefits associated with stock-based awards		34			29
Issuance of long-term borrowings		5,320			14,285
Payments for:
Long-term borrowings		(16,043	)		(13,046	)
Repurchases of common stock for employee tax withholding		(183	)		(273	)
Cash dividends		(112	)		(302	)
Net cash provided by (used for) financing activities		(12,881	)		2,816
Effect of exchange rate changes on cash and cash equivalents		93			644
Effect of cash and cash equivalents related to variable interest entities		(534	)		310
Net increase in cash and cash equivalents		(8,587	)		4,993
Cash and cash equivalents, at beginning of period		47,312			47,615
Cash and cash equivalents, at end of period	$	38,725		$	52,608
Cash and cash equivalents include:
Cash and due from banks	$	10,133		$	8,120
Interest bearing deposits with banks		28,592			44,488
Cash and cash equivalents, at end of period	$	38,725		$	52,608

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash payments for interest were $1,169 million and $1,697 million for the quarters ended March 31, 2012 and 2011, respectively.

Cash payments for income taxes were $145 million and $250 million for the quarters ended March 31, 2012 and 2011, respectively.

See Notes to Condensed Consolidated Financial Statements.

5

MORGAN STANLEY

Condensed Consolidated Statements of Changes in Total Equity

Three Months Ended March 31, 2012

(dollars in millions)

(unaudited)

	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings			Employee Stock Trust		Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury at Cost			Common Stock Issued to Employee Trust			Non- controlling Interests			Total Equity
BALANCE AT DECEMBER 31, 2011	$	1,508	$	20	$	22,836	$	40,341		$	3,166	$	(157	)	$	(2,499	)	$	(3,166	)	$	8,029		$	70,078
Net income		—		—		—		(94	)		—		—			—			—			228			134
Dividends		—		—		—		(129	)		—		—			—			—			—			(129	)
Shares issued under employee plans and related tax effects		—		—		94		—			86		—			490			(86	)		—			584
Repurchases of common stock		—		—		—		—			—		—			(183	)		—			—			(183	)
Net change in cash flow hedges		—		—		—		—			—		2			—			—			—			2
Pension, postretirement and other related adjustments		—		—		—		—			—		2			—			—			—			2
Foreign currency translation adjustments		—		—		—		—			—		112			—			—			(92	)		20
Change in net unrealized gains on securities available for sale		—		—		—		—			—		(19	)		—			—			—			(19	)
Other increases in noncontrolling interests		—		—		—		—			—		—			—			—			103			103
BALANCE AT MARCH 31, 2012	$	1,508	$	20	$	22,930	$	40,118		$	3,252	$	(60	)	$	(2,192	)	$	(3,252	)	$	8,268		$	70,592

See Notes to Condensed Consolidated Financial Statements.

6

MORGAN STANLEY

Condensed Consolidated Statements of Changes in Total Equity—(Continued)

Three Months Ended March 31, 2011

(dollars in millions)

(unaudited)

	Preferred Stock		Common Stock		Paid-in Capital			Retained Earnings			Employee Stock Trust		Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury at Cost			Common Stock Issued to Employee Trust			Non- controlling Interests			Total Equity
BALANCE AT DECEMBER 31, 2010	$	9,597	$	16	$	13,521		$	38,603		$	3,465	$	(467	)	$	(4,059	)	$	(3,465	)	$	8,196		$	65,407
Net income		—		—		—			968			—		—			—			—			162			1,130
Dividends		—		—		—			(302	)		—		—			—			—			—			(302	)
Shares issued under employee plans and related tax effects		—		—		(1,336	)		—			3		—			1,877			(3	)		—			541
Repurchases of common stock		—		—		—			—			—		—			(273	)		—			—			(273	)
Net change in cash flow hedges		—		—		—			—			—		1			—			—			—			1
Pension, postretirement and other related adjustments		—		—		—			—			—		5			—			—			—			5
Foreign currency translation adjustments		—		—		—			—			—		71			—			—			(34	)		37
Change in net unrealized losses on securities available for sale		—		—		—			—			—		(36	)		—			—			—			(36	)
Other decreases in noncontrolling interests		—		—		—			—			—		—			—			—			(2	)		(2	)
BALANCE AT MARCH 31, 2011	$	9,597	$	16	$	12,185		$	39,269		$	3,468	$	(426	)	$	(2,455	)	$	(3,468	)	$	8,322		$	66,508

See Notes to Condensed Consolidated Financial Statements.

7

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Introduction and Basis of Presentation.

The Company.    Morgan Stanley, a financial holding company, is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Global Wealth Management Group and Asset Management. Unless the context otherwise requires, the terms “Morgan Stanley” and the “Company” mean Morgan Stanley and its consolidated subsidiaries.

A summary of the activities of each of the Company’s business segments is as follows:

Institutional Securities provides capital raising; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; corporate lending; sales, trading, financing and market-making activities in equity and fixed income securities and related products, including foreign exchange and commodities; and investment activities.

Global Wealth Management Group, which includes the Company’s 51% interest in Morgan Stanley Smith Barney Holdings LLC (“MSSB”), provides brokerage and investment advisory services to individual investors and small-to-medium sized businesses and institutions covering various investment alternatives; financial and wealth planning services; annuity and other insurance products; credit and other lending products; cash management services; retirement services; and trust and fiduciary services and engages in fixed income principal trading, which primarily facilitates clients’ trading or investments in such securities.

Asset Management provides a broad array of investment strategies that span the risk/return spectrum across geographies, asset classes and public and private markets to a diverse group of clients across the institutional and intermediary channels as well as high net worth clients (see “Discontinued Operations—Retail Asset Management Business” herein).

Discontinued Operations.

Saxon.    On October 24, 2011, the Company announced that it had reached an agreement to sell Saxon, a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation. During the first quarter of 2012, the transaction was restructured as a sale of Saxon’s assets, the first phase of which was completed in the second quarter of 2012. The remaining operations of Saxon are expected to be wound down within the year. The Company expects to incur incremental wind-down costs in future periods. The results of Saxon are reported as discontinued operations within the Institutional Securities business segment for all periods presented.

Quilter.    On April 2, 2012, the Company closed the sale of Quilter Holdings Ltd. (“Quilter”), its retail wealth management business in the United Kingdom (“U.K.”). The Company has classified Quilter as held for sale within the Global Wealth Management Group business segment and the results of its operations are presented as discontinued operations for all periods presented.

Prior period amounts have been recast for discontinued operations. See Note 20 for additional information on discontinued operations.

Basis of Financial Information.    The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”), which require the Company to make estimates and assumptions regarding the valuations of certain financial instruments, the valuation of goodwill and intangible assets, compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the condensed consolidated financial statements and related disclosures. The Company believes that the estimates utilized in the preparation of the condensed consolidated financial statements are prudent and reasonable. Actual results could differ materially from these estimates.

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Intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Consolidation.    The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and other entities in which the Company has a controlling financial interest, including certain variable interest entities (“VIE”) (see Note 6). For condensed consolidated subsidiaries that are less than wholly owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as Net income (loss) applicable to noncontrolling interests in the condensed consolidated statements of income, and the portion of the shareholders’ equity of such subsidiaries is presented as Noncontrolling interests in the condensed consolidated statements of financial condition and condensed consolidated statements of changes in total equity.

For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without additional support and (2) the equity holders bear the economic residual risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Company consolidates those entities it controls either through a majority voting interest or otherwise. For VIEs (i.e., entities that do not meet these criteria), the Company consolidates those entities where the Company has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE, except for certain VIEs that are money market funds, investment companies or are entities qualifying for accounting purposes as investment companies. Generally, the Company consolidates those entities when it absorbs a majority of the expected losses or a majority of the expected residual returns, or both, of the entities.

For investments in entities in which the Company does not have a controlling financial interest but has significant influence over operating and financial decisions, the Company generally applies the equity method of accounting with net gains and losses recorded within Other revenues. Where the Company has elected to measure certain eligible investments at fair value in accordance with the fair value option, net gains and losses are recorded within Principal transactions—Investments (see Note 3).

Equity and partnership interests held by entities qualifying for accounting purposes as investment companies are carried at fair value.

The Company’s significant regulated U.S. and international subsidiaries include Morgan Stanley & Co. LLC (“MS&Co.”), Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. International plc (“MSIP”), Morgan Stanley MUFG Securities, Co., Ltd. (“MSMS”), Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association.

Income Statement Presentation.    The Company, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. In connection with the delivery of the various products and services to clients, the Company manages its revenues and related expenses in the aggregate. As such, when assessing the performance of its businesses, primarily in its Institutional Securities business segment, the Company considers its principal trading, investment banking, commissions and fees and interest income, along with the associated interest expense, as one integrated activity.

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2. Significant Accounting Policies.

For a detailed discussion about the Company’s significant accounting policies, see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

During the quarter ended March 31, 2012, other than the following, no other updates were made to the Company’s significant accounting policies.

Financial Instruments and Fair Value—Valuation Process.

The Valuation Review Group (“VRG”) within the Financial Control Group (“FCG”) is responsible for the Company’s fair value valuation policies, processes and procedures. VRG is independent of the business units and reports to the Chief Financial Officer (“CFO”), who has final authority over the valuation of the Company’s financial instruments. VRG implements valuation control processes to validate the fair value of the Company’s financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

The Company’s control processes include:

Model Review.    VRG, in conjunction with the Market Risk Department (“MRD”) and, where appropriate, the Credit Risk Management Department, both of which report to the Chief Risk Officer, independently review the valuation model’s theoretical soundness, the appropriateness of the valuation methodology and calibration techniques developed by the business units using observable inputs. Where inputs are not observable, VRG reviews the appropriateness of the proposed valuation methodology to ensure it is consistent with how a market participant would arrive at the unobservable input. The valuation methodologies utilized in the absence of observable inputs may include extrapolation techniques and the use of comparable observable inputs. As part of the review, VRG develops a methodology to independently verify the fair value generated by the business unit’s valuation model. Before trades are executed using new valuation models, those models are required to be independently reviewed. All of the Company’s valuation models are subject to an independent annual review.

Independent Price Verification.    The business units are responsible for determining the fair value of financial instruments using approved valuation models and valuation methodologies. Generally on a monthly basis, VRG independently validates the fair values of financial instruments determined using valuation models by determining the appropriateness of the inputs used by the business units and testing compliance with the documented valuation methodologies approved in the model review process described above.

VRG uses recently executed transactions, other observable market data such as exchange data, broker/dealer quotes, third-party pricing vendors and aggregation services for validating the fair values of financial instruments generated using valuation models. VRG assesses the external sources and their valuation methodologies to determine if the external providers meet the minimum standards expected of a third-party pricing source. Pricing data provided by approved external sources is evaluated using a number of approaches; for example, by corroborating the external sources’ prices to executed trades, analyzing the methodology and assumptions used by the external source to generate a price and/or by evaluating how active the third-party pricing source (or originating sources used by the third-party pricing source) is in the market. Based on this analysis, VRG generates a ranking of the observable market data to ensure that the highest-ranked market data source is used to validate the business unit’s fair value of financial instruments.

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For financial instruments categorized within Level 3 of the fair value hierarchy, VRG reviews the business unit’s valuation techniques to ensure these are consistent with market participant assumptions.

The results of this independent price verification and any adjustments made by VRG to the fair value generated by the business units are presented to management of the three business segments (i.e., Institutional Securities, Global Wealth Management Group and Asset Management), the CFO and the Chief Risk Officer on a regular basis.

Review of New Level 3 Transactions.    VRG reviews the model and valuation methodology used to price all new material Level 3 transactions and both FCG and MRD management must approve the fair value of the trade that is initially recognized.

Securities Available for Sale – Other-than-temporary Impairment.

For available for sale (“AFS”) debt securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. When determining if a credit loss exists, the Company considers all relevant information including the length of time and the extent to which the fair value has been less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors; the historical and implied volatility of the fair value of the security; the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; failure of the issuer of the security to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency and recoveries or additional declines in fair value after the balance sheet date. When estimating the present value of expected cash flows, information shall include the remaining payment terms of the security, prepayment speeds, financial condition of the issuer(s), expected defaults and the value of any underlying collateral.

For AFS equity securities, the Company considers various factors including the intent and ability to hold the equity security for a period of time sufficient to allow for any anticipated recovery in market value in evaluating whether an other-than-temporary impairment (“OTTI”) exists. If the equity security is considered other-than-temporarily impaired, the security will be written down to fair value, with the full difference between fair value and cost recognized in earnings.

Accounting Developments.

Reconsideration of Effective Control for Repurchase Agreements.

In April 2011, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance that modifies the criteria that must be satisfied for a transfer of financial assets to be accounted for as a sale. If the transferor maintains effective control over the transferred assets, the transaction is to be accounted for as a financing. This guidance eliminates from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. This guidance is effective for transfers occurring on and after January 1, 2012. The adoption of this accounting guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.

In May 2011, the FASB issued an accounting update that clarifies existing fair value measurement guidance and changes certain principles or requirements for measuring fair value or disclosing information about fair value

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measurements. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurement in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The guidance became effective for the Company beginning on January 1, 2012. See Note 3 for additional disclosures as required by this accounting guidance.

Goodwill Impairment Test.

In September 2011, the FASB issued accounting guidance that simplifies how entities test goodwill for impairment. This guidance allows entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity no longer would be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This guidance became effective for the Company beginning on January 1, 2012. The adoption of this accounting guidance did not have a material impact on the Company’s condensed consolidated financial statements.

3. Fair Value Disclosures.

Fair Value Measurements.

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis follows.

Financial Instruments Owned and Financial Instruments Sold, Not Yet Purchased.

U.S. Government and Agency Securities.

• U.S. Treasury Securities.    U.S. Treasury securities are valued using quoted market prices. Valuation adjustments are not applied. Accordingly, U.S. Treasury securities are generally categorized in Level 1 of the fair value hierarchy.

• U.S. Agency Securities.    U.S. agency securities are composed of three main categories consisting of agency-issued debt, agency mortgage pass-through pool securities and collateralized mortgage obligations. Non-callable agency-issued debt securities are generally valued using quoted market prices. Callable agency-issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of agency mortgage pass-through pool securities is model-driven based on spreads of the comparable To-be-announced (“TBA”) security. Collateralized mortgage obligations are valued using quoted market prices and trade data adjusted by subsequent changes in related indices for identical or comparable securities. Actively traded non-callable agency-issued debt securities are generally categorized in Level 1 of the fair value hierarchy. Callable agency-issued debt securities, agency mortgage pass-through pool securities and collateralized mortgage obligations are generally categorized in Level 2 of the fair value hierarchy.

Other Sovereign Government Obligations.

• Foreign sovereign government obligations are valued using quoted prices in active markets when available. To the extent quoted prices are not available, fair value is determined based on a valuation model that has as inputs interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the bond in terms of issuer, maturity and seniority. These bonds are generally categorized in Level 1 or Level 2 of the fair value hierarchy.

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Corporate and Other Debt.

• State and Municipal Securities.    The fair value of state and municipal securities is determined using recently executed transactions, market price quotations and pricing models that factor in, where applicable, interest rates, bond or credit default swap spreads and volatility. These bonds are generally categorized in Level 2 of the fair value hierarchy.

• Residential Mortgage-Backed Securities (“RMBS”), Commercial Mortgage-Backed Securities (“CMBS”) and other Asset-Backed Securities (“ABS”).    RMBS, CMBS and other ABS may be valued based on price or spread data obtained from observed transactions or independent external parties such as vendors or brokers. When position-specific external price data are not observable, the fair value determination may require benchmarking to similar instruments and/or analyzing expected credit losses, default and recovery rates. In evaluating the fair value of each security, the Company considers security collateral-specific attributes, including payment priority, credit enhancement levels, type of collateral, delinquency rates and loss severity. In addition, for RMBS borrowers, Fair Isaac Corporation (“FICO”) scores and the level of documentation for the loan are also considered. Market standard models, such as Intex, Trepp or others, may be deployed to model the specific collateral composition and cash flow structure of each transaction. Key inputs to these models are market spreads, forecasted credit losses, default and prepayment rates for each asset category. Valuation levels of RMBS and CMBS indices are also used as an additional data point for benchmarking purposes or to price outright index positions.

RMBS, CMBS and other ABS are generally categorized in Level 2 of the fair value hierarchy. If external prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity related to property type differences, cash flows, performance and other inputs, then RMBS, CMBS and other ABS are categorized in Level 3 of the fair value hierarchy.

• Corporate Bonds.    The fair value of corporate bonds is determined using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads obtained from independent external parties such as vendors and brokers adjusted for any basis difference between cash and derivative instruments. The spread data used are for the same maturity as the bond. If the spread data do not reference the issuer, then data that reference a comparable issuer are used. When position-specific external price data are not observable, fair value is determined based on either benchmarking to similar instruments or cash flow models with yield curves, bond or single name credit default swap spreads and recovery rates as significant inputs. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where prices, spreads or any of the other aforementioned key inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

• Collateralized Debt Obligations (“CDO”).    The Company holds cash CDOs that typically reference a tranche of an underlying synthetic portfolio of single name credit default swaps collateralized by corporate bonds (“credit-linked notes”) or cash portfolio of asset-backed securities (“asset-backed CDOs”). Credit correlation, a primary input used to determine the fair value of credit-linked notes, is usually unobservable and derived using a benchmarking technique. The other credit-linked note model inputs such as credit spreads, including collateral spreads, and interest rates are typically observable. Asset-backed CDOs are valued based on an evaluation of the market and model input parameters sourced from similar positions as indicated by primary and secondary market activity. Each asset-backed CDO position is evaluated independently taking into consideration available comparable market levels, underlying collateral performance and pricing, deal structures, as well as liquidity. Cash CDOs are categorized in Level 2 of the fair value hierarchy when either the credit correlation input is insignificant or comparable market transactions are observable. In instances where the credit correlation input is deemed to be significant or comparable market transactions are unobservable, cash CDOs are categorized in Level 3 of the fair value hierarchy.

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• Corporate Loans and Lending Commitments.    The fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, and market observable credit default swap spread levels obtained from independent external parties such as vendors and brokers adjusted for any basis difference between cash and derivative instruments, along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable. The fair value of contingent corporate lending commitments is determined by using executed transactions on comparable loans and the anticipated market price based on pricing indications from syndicate banks and customers. The valuation of loans and lending commitments also takes into account fee income that is considered an attribute of the contract. Corporate loans and lending commitments are categorized in Level 2 of the fair value hierarchy except in instances where prices or significant spread inputs are unobservable, in which case they are categorized in Level 3 of the fair value hierarchy. Corporate loans and lending commitments are presented within Loans and lending commitments in the fair value hierarchy table.

• Mortgage Loans.    Mortgage loans are valued using observable prices based on transactional data or third party pricing for identical or comparable instruments, when available. Where position-specific external prices are not observable, the Company estimates fair value based on benchmarking to prices and rates observed in the primary market for similar loan or borrower types or based on the present value of expected future cash flows using its best estimates of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved or a methodology that utilizes the capital structure and credit spreads of recent comparable securitization transactions. Mortgage loans valued based on observable market data for identical or comparable instruments are categorized in Level 2 of the fair value hierarchy. Where observable prices are not available, due to the subjectivity involved in the comparability assessment related to mortgage loan vintage, geographical concentration, prepayment speed and projected loss assumptions, mortgage loans are categorized in Level 3 of the fair value hierarchy. Mortgage loans are presented within Loans and lending commitments in the fair value hierarchy table.

• Auction Rate Securities (“ARS”).    The Company primarily holds investments in Student Loan Auction Rate Securities (“SLARS”) and Municipal Auction Rate Securities (“MARS”) with interest rates that are reset through periodic auctions. SLARS are ABS backed by pools of student loans. MARS are municipal bonds often wrapped by municipal bond insurance. ARS were historically traded and valued as floating rate notes, priced at par due to the auction mechanism. Beginning in fiscal 2008, uncertainties in the credit markets have resulted in auctions failing for certain types of ARS. Once the auctions failed, ARS could no longer be valued using observations of auction market prices. Accordingly, the fair value of ARS is determined using independent external market data where available and an internally developed methodology to discount for the lack of liquidity and non-performance risk.

Inputs that impact the valuation of SLARS are independent external market data, the underlying collateral types, level of seniority in the capital structure, amount of leverage in each structure, credit rating and liquidity considerations. Inputs that impact the valuation of MARS are independent external market data when available, the maximum rate, quality of underlying issuers/insurers and evidence of issuer calls. ARS are generally categorized in Level 2 of the fair value hierarchy as the valuation technique relies on observable external data. SLARS and MARS are presented within Asset-backed securities and State and municipal securities, respectively, in the fair value hierarchy table.

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Corporate Equities.

• Exchange-Traded Equity Securities.    Exchange-traded equity securities are generally valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in Level 1 of the fair value hierarchy; otherwise, they are categorized in Level 2 or Level 3 of the fair value hierarchy.

• Unlisted Equity Securities.    Unlisted equity securities are valued based on an assessment of each underlying security, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable company transactions, trading multiples and changes in market outlook, among other factors. These securities are generally categorized in Level 3 of the fair value hierarchy.

• Fund Units.    Listed fund units are generally marked to the exchange-traded price or net asset value (“NAV”) and are categorized in Level 1 of the fair value hierarchy if actively traded on an exchange or in Level 2 of the fair value hierarchy if trading is not active. Unlisted fund units are generally marked to NAV and categorized as Level 2; however, positions which are not redeemable at the measurement date or in the near future are categorized in Level 3 of the fair value hierarchy.

Derivative and Other Contracts.

• Listed Derivative Contracts.    Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Listed derivatives that are not actively traded are valued using the same approaches as those applied to over-the-counter (“OTC”) derivatives; they are generally categorized in Level 2 of the fair value hierarchy.

• OTC Derivative Contracts.    OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices or commodity prices.

Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be either observed or modeled using a series of techniques and model inputs from comparable benchmarks, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, and simulation models or a combination thereof. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgment, and the pricing inputs are observed from actively quoted markets, as is the case for generic interest rate swaps, certain option contracts and certain credit default swaps. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. A substantial majority of OTC derivative products valued by the Company using pricing models fall into this category and are categorized in Level 2 of the fair value hierarchy.

Other derivative products, including complex products that have become illiquid, require more judgment in the implementation of the valuation technique applied due to the complexity of the valuation assumptions and the reduced observability of inputs. This includes certain types of interest rate derivatives with both volatility and correlation exposure and credit derivatives including credit default swaps on certain mortgage-backed or asset-backed securities, basket credit default swaps and CDO-squared positions (a CDO-squared position is a special purpose vehicle that issues interests, or tranches, that are backed by tranches issued by other CDOs) where direct trading activity or quotes are unobservable. These instruments involve significant unobservable inputs and are categorized in Level 3 of the fair value hierarchy.

Derivative interests in credit default swaps on certain mortgage-backed or asset-backed securities, for which observability of external price data is limited, are valued based on an evaluation of the market and

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model input parameters sourced from similar positions as indicated by primary and secondary market activity. Each position is evaluated independently taking into consideration available comparable market levels as well as cash-synthetic basis, or the underlying collateral performance and pricing, behavior of the tranche under various cumulative loss and prepayment scenarios, deal structures (e.g., non-amortizing reference obligations, call features, etc.) and liquidity. While these factors may be supported by historical and actual external observations, the determination of their value as it relates to specific positions nevertheless requires significant judgment.

For basket credit default swaps and CDO-squared positions, the correlation input between reference credits is unobservable for each specific swap or position and is benchmarked to standardized proxy baskets for which correlation data are available. The other model inputs such as credit spread, interest rates and recovery rates are observable. In instances where the correlation input is deemed to be significant, these instruments are categorized in Level 3 of the fair value hierarchy; otherwise, these instruments are categorized in Level 2 of the fair value hierarchy.

The Company trades various derivative structures with commodity underlyings. Depending on the type of structure, the model inputs generally include interest rate yield curves, commodity underlier price curves, implied volatility of the underlying commodities and, in some cases, the implied correlation between these inputs. The fair value of these products is determined using executed trades and broker and consensus data to provide values for the aforementioned inputs. Where these inputs are unobservable, relationships to observable commodities and data points, based on historic and/or implied observations, are employed as a technique to estimate the model input values. Commodity derivatives are generally categorized in Level 2 of the fair value hierarchy; in instances where significant inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

For further information on derivative instruments and hedging activities, see Note 10.

Investments.

• The Company’s investments include direct investments in equity securities as well as investments in private equity funds, real estate funds and hedge funds, which include investments made in connection with certain employee deferred compensation plans. Direct investments are presented in the fair value hierarchy table as Principal investments and Other. Initially, the transaction price is generally considered by the Company as the exit price and is the Company’s best estimate of fair value.

After initial recognition, in determining the fair value of non-exchange-traded internally and externally managed funds, the Company generally considers the NAV of the fund provided by the fund manager to be the best estimate of fair value. For non-exchange-traded investments either held directly or held within internally managed funds, fair value after initial recognition is based on an assessment of each underlying investment, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable company transactions, trading multiples and changes in market outlook, among other factors. Exchange-traded direct equity investments are generally valued based on quoted prices from the exchange.

Exchange-traded direct equity investments that are actively traded are categorized in Level 1 of the fair value hierarchy. Non-exchange-traded direct equity investments and investments in private equity and real estate funds are generally categorized in Level 3 of the fair value hierarchy. Investments in hedge funds that are redeemable at the measurement date or in the near future are categorized in Level 2 of the fair value hierarchy; otherwise, they are categorized in Level 3 of the fair value hierarchy.

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Physical Commodities.

• The Company trades various physical commodities, including crude oil and refined products, natural gas, base and precious metals and agricultural products. Fair value for physical commodities is determined using observable inputs, including broker quotations and published indices. Physical commodities are categorized in Level 2 of the fair value hierarchy; in instances where significant inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

Securities Available for Sale.

• Securities available for sale are composed of U.S. government and agency securities (e.g., U.S. Treasury securities, agency-issued debt, agency mortgage pass-through securities and collateralized mortgage obligations), Federal Family Education Loan Program (“FFELP”) student loan asset-backed securities, auto loan asset-backed securities, corporate bonds and equity securities. Actively traded U.S. Treasury securities, non-callable agency-issued debt securities and equity securities are generally categorized in Level 1 of the fair value hierarchy. Callable agency-issued debt securities, agency mortgage pass-through securities, collateralized mortgage obligations and FFELP student loan asset-backed securities, auto loan asset-backed securities and corporate bonds are generally categorized in Level 2 of the fair value hierarchy. For further information on securities available for sale, see Note 4.

Deposits.

• Time Deposits.    The fair value of certificates of deposit is determined using third-party quotations. These deposits are generally categorized in Level 2 of the fair value hierarchy.

Commercial Paper and Other Short-term Borrowings/Long-term Borrowings.

• Structured Notes.    The Company issues structured notes that have coupon or repayment terms linked to the performance of fixed income or equity securities, indices, currencies or commodities. Fair value of structured notes is determined using valuation models for the derivative and debt portions of the notes. These models incorporate observable inputs referencing identical or comparable securities, including prices that the notes are linked to, interest rate yield curves, option volatility and currency, commodity or equity prices. Independent, external and traded prices for the notes are also considered. The impact of the Company’s own credit spreads is also included based on the Company’s observed secondary bond market spreads. Most structured notes are categorized in Level 2 of the fair value hierarchy.

Securities Purchased under Agreements to Resell, and Securities Sold under Agreements to Repurchase.

• The fair value of a reverse repurchase agreement or repurchase agreement is computed using a standard cash flow discounting methodology. The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks, interest rate yield curves and option volatilities. In instances where the unobservable inputs are deemed significant, reverse repurchase agreements and repurchase agreements are categorized in Level 3 of the fair value hierarchy; otherwise, they are categorized in Level 2 of the fair value hierarchy.

The following fair value hierarchy tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2012.

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Counterparty and Cash Collateral Netting			Balance at March 31, 2012
	(dollars in millions)
Assets at Fair Value
Financial instruments owned:
U.S. government and agency securities:
U.S. Treasury securities	$	35,781		$	—		$	—		$	—		$	35,781
U.S. agency securities		1,804			22,082			23			—			23,909
Total U.S. government and agency securities		37,585			22,082			23			—			59,690
Other sovereign government obligations		29,069			3,158			8			—			32,235
Corporate and other debt:
State and municipal securities		—			2,676			3			—			2,679
Residential mortgage-backed securities		—			1,548			43			—			1,591
Commercial mortgage-backed securities		—			1,829			127			—			1,956
Asset-backed securities		—			1,076			3			—			1,079
Corporate bonds		—			25,115			899			—			26,014
Collateralized debt obligations		—			957			1,165			—			2,122
Loans and lending commitments		—			14,940			8,597			—			23,537
Other debt		—			10,483			57			—			10,540
Total corporate and other debt		—			58,624			10,894			—			69,518
Corporate equities(1)		56,582			1,927			554			—			59,063
Derivative and other contracts:
Interest rate contracts		914			786,488			4,117			—			791,519
Credit contracts		—			90,206			9,790			—			99,996
Foreign exchange contracts		1			47,378			720			—			48,099
Equity contracts		991			44,359			1,188			—			46,538
Commodity contracts		7,325			30,287			2,504			—			40,116
Other		—			61			—			—			61
Netting(2)		(8,687	)		(895,017	)		(7,896	)		(74,713	)		(986,313	)
Total derivative and other contracts		544			103,762			10,423			(74,713	)		40,016
Investments:
Private equity funds		—			—			1,994			—			1,994
Real estate funds		—			6			1,338			—			1,344
Hedge funds		—			318			623			—			941
Principal investments		98			—			3,194			—			3,292
Other		157			74			527			—			758
Total investments		255			398			7,676			—			8,329
Physical commodities		—			9,573			—			—			9,573
Total financial instruments owned		124,035			199,524			29,578			(74,713	)		278,424
Securities available for sale		13,822			18,706			—			—			32,528
Securities received as collateral		17,542			186			—			—			17,728
Federal funds sold and securities purchased under agreements to resell		—			318			—			—			318
Intangible assets(3)		—			—			99			—			99
Total assets measured at fair value	$	155,399		$	218,734		$	29,677		$	(74,713	)	$	329,097
Liabilities at Fair Value
Deposits	$	—		$	1,980		$	—		$	—		$	1,980
Commercial paper and other short-term borrowings		—			1,306			15			—			1,321
Financial instruments sold, not yet purchased:
U.S. government and agency securities:
U.S. Treasury securities		23,544			—			—			—			23,544
U.S. agency securities		1,727			318			—			—			2,045
Total U.S. government and agency securities		25,271			318			—			—			25,589
Other sovereign government obligations		24,979			1,374			1			—			26,354
Corporate and other debt:
State and municipal securities		—			4			—			—			4

18

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Counterparty and Cash Collateral Netting			Balance at March 31, 2012
	(dollars in millions)
Residential mortgage-backed securities		—			2			61			—			63
Commercial mortgage-backed securities		—			9			—			—			9
Corporate bonds		—			6,888			193			—			7,081
Collateralized debt obligations		—			17			—			—			17
Unfunded lending commitments		—			931			60			—			991
Other debt		—			349			33			—			382
Total corporate and other debt		—			8,200			347			—			8,547
Corporate equities(1)		26,271			1,452			2			—			27,725
Derivative and other contracts:
Interest rate contracts		1,053			757,445			4,095			—			762,593
Credit contracts		—			88,357			5,409			—			93,766
Foreign exchange contracts		2			50,275			654			—			50,931
Equity contracts		1,226			47,293			2,630			—			51,149
Commodity contracts		8,177			30,628			1,701			—			40,506
Other		—			49			23			—			72
Netting(2)		(8,687	)		(895,017	)		(7,896	)		(44,652	)		(956,252	)
Total derivative and other contracts		1,771			79,030			6,616			(44,652	)		42,765
Total financial instruments sold, not yet purchased		78,292			90,374			6,966			(44,652	)		130,980
Obligation to return securities received as collateral		23,167			199			—			—			23,366
Securities sold under agreements to repurchase		—			161			186			—			347
Other secured financings		—			12,487			594			—			13,081
Long-term borrowings		2			41,079			2,143			—			43,224
Total liabilities measured at fair value	$	101,461		$	147,586		$	9,904		$	(44,652	)	$	214,299

(1) The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2) For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3) Amount represents mortgage servicing rights (“MSR”) accounted for at fair value. See Note 6 for further information on MSRs.

Transfers Between Level 1 and Level 2 During the Quarter Ended March 31, 2012.

For assets and liabilities that were transferred between Level 1 and Level 2 during the period, fair values are ascribed as if the assets or liabilities had been transferred as of the beginning of the period.

Financial instruments owned—Derivative and other contracts and Financial instruments sold, not yet purchased—Derivative and other contracts.    During the quarter ended March 31, 2012, the Company reclassified approximately $1.1 billion of derivative assets and approximately $1.2 billion of derivative liabilities from Level 2 to Level 1 as these listed derivatives became actively traded and were valued based on quoted prices from the exchange. Also during the quarter ended March 31, 2012, the Company reclassified approximately $0.3 billion of derivative assets and approximately $0.4 billion of derivative liabilities from Level 1 to Level 2 as transactions in these contracts did not occur with sufficient frequency and volume to constitute an active market.

19

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2011.

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Counterparty and Cash Collateral Netting			Balance at December 31, 2011
	(dollars in millions)
Assets at Fair Value
Financial instruments owned:
U.S. government and agency securities:
U.S. Treasury securities	$	38,769		$	1		$	—		$	—		$	38,770
U.S. agency securities		4,332			20,339			8			—			24,679
Total U.S. government and agency securities		43,101			20,340			8			—			63,449
Other sovereign government obligations		22,650			6,290			119			—			29,059
Corporate and other debt:
State and municipal securities		—			2,261			—			—			2,261
Residential mortgage-backed securities		—			1,304			494			—			1,798
Commercial mortgage-backed securities		—			1,686			134			—			1,820
Asset-backed securities		—			937			31			—			968
Corporate bonds		—			25,873			675			—			26,548
Collateralized debt obligations		—			1,711			980			—			2,691
Loans and lending commitments		—			14,854			9,590			—			24,444
Other debt		—			8,265			128			—			8,393
Total corporate and other debt		—			56,891			12,032			—			68,923
Corporate equities(1)		45,173			2,376			417			—			47,966
Derivative and other contracts:
Interest rate contracts		1,493			906,082			5,301			—			912,876
Credit contracts		—			123,689			15,102			—			138,791
Foreign exchange contracts		—			61,770			573			—			62,343
Equity contracts		929			44,558			800			—			46,287
Commodity contracts		6,356			31,246			2,176			—			39,778
Other		—			292			306			—			598
Netting(2)		(7,596	)		(1,045,912	)		(11,837	)		(87,264	)		(1,152,609	)
Total derivative and other contracts		1,182			121,725			12,421			(87,264	)		48,064
Investments:
Private equity funds		—			7			1,936			—			1,943
Real estate funds		—			5			1,213			—			1,218
Hedge funds		—			473			696			—			1,169
Principal investments		161			104			2,937			—			3,202
Other		141			21			501			—			663
Total investments		302			610			7,283			—			8,195
Physical commodities		—			9,651			46			—			9,697
Total financial instruments owned		112,408			217,883			32,326			(87,264	)		275,353
Securities available for sale		13,437			17,058			—			—			30,495
Securities received as collateral		11,530			121			—			—			11,651
Federal funds sold and securities purchased under agreements to resell		—			112			—			—			112
Intangible assets(3)		—			—			133			—			133
Total assets measured at fair value	$	137,375		$	235,174		$	32,459		$	(87,264	)	$	317,744
Liabilities at Fair Value
Deposits	$	—		$	2,101		$	—		$	—		$	2,101
Commercial paper and other short-term borrowings		—			1,337			2			—			1,339
Financial instruments sold, not yet purchased:
U.S. government and agency securities:
U.S. Treasury securities		17,776			—			—			—			17,776
U.S. agency securities		1,748			106			—			—			1,854
Total U.S. government and agency securities		19,524			106			—			—			19,630
Other sovereign government obligations		14,981			2,152			8			—			17,141

20

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Counterparty and Cash Collateral Netting			Balance at December 31, 2011
	(dollars in millions)
Corporate and other debt:
State and municipal securities		—			3			—			—			3
Residential mortgage-backed securities		—			—			355			—			355
Commercial mortgage-backed securities		—			14			—			—			14
Corporate bonds		—			6,217			219			—			6,436
Collateralized debt obligations		—			3			—			—			3
Unfunded lending commitments		—			1,284			85			—			1,369
Other debt		—			157			73			—			230
Total corporate and other debt		—			7,678			732			—			8,410
Corporate equities(1)		24,347			149			1			—			24,497
Derivative and other contracts:
Interest rate contracts		1,680			873,466			4,881			—			880,027
Credit contracts		—			121,438			9,288			—			130,726
Foreign exchange contracts		—			64,218			530			—			64,748
Equity contracts		877			45,375			2,034			—			48,286
Commodity contracts		7,144			31,248			1,606			—			39,998
Other		—			879			1,396			—			2,275
Netting(2)		(7,596	)		(1,045,912	)		(11,837	)		(54,262	)		(1,119,607	)
Total derivative and other contracts		2,105			90,712			7,898			(54,262	)		46,453
Physical commodities		—			16			—			—			16
Total financial instruments sold, not yet purchased		60,957			100,813			8,639			(54,262	)		116,147
Obligation to return securities received as collateral		15,267			127			—			—			15,394
Securities sold under agreements to repurchase		—			8			340			—			348
Other secured financings		—			14,024			570			—			14,594
Long-term borrowings		10			38,050			1,603			—			39,663
Total liabilities measured at fair value	$	76,234		$	156,460		$	11,154		$	(54,262	)	$	189,586

(1) The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2) For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3) Amount represents MSRs accounted for at fair value. See Note 6 for further information on MSRs.

Transfers Between Level 1 and Level 2 During Quarter Ended March 31, 2011.

Financial instruments owned—Derivative and other contracts and Financial instruments sold, not yet purchased—Derivative and other contracts.    During the quarter ended March 31, 2011, the Company reclassified approximately $0.6 billion of derivative assets and approximately $0.8 billion of derivative liabilities from Level 2 to Level 1 as these listed derivatives became actively traded and were valued based on quoted prices from the exchange.

Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis.

The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters ended March 31, 2012 and 2011, respectively. Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities within the Level 3 category presented in the tables below do not reflect the related realized and unrealized gains (losses) on hedging instruments that have been classified by the Company within the Level 1 and/or Level 2 categories.

21

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Additionally, both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains (losses) during the period for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value during the period that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

For assets and liabilities that were transferred into Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred into Level 3 at the beginning of the period; similarly, for assets and liabilities that were transferred out of Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred out at the beginning of the period.

22

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2012.

	Beginning Balance at December 31, 2011			Total Realized and Unrealized Gains (Losses)(1)			Purchases			Sales			Issuances			Settlements			Net Transfers			Ending Balance at March 31, 2012			Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2012(2)
	(dollars in millions)
Assets at Fair Value
Financial instruments owned:
U.S. agency securities	$	8		$	—		$	42		$	(26	)	$	—		$	—		$	(1	)	$	23		$	—
Other sovereign government obligations		119			(1	)		8			(118	)		—			—			—			8			—
Corporate and other debt:
State and municipal securities		—			—			—			—			—			—			3			3			—
Residential mortgage-backed securities		494			(21	)		6			(245	)		—			—			(191	)		43			(18	)
Commercial mortgage-backed securities		134			23			5			(21	)		—			(1	)		(13	)		127			16
Asset-backed securities		31			1			—			(28	)		—			—			(1	)		3			1
Corporate bonds		675			45			426			(225	)		—			—			(22	)		899			39
Collateralized debt obligations		980			123			296			(161	)		—			—			(73	)		1,165			82
Loans and lending commitments		9,590			(20	)		496			(1,018	)		—			(421	)		(30	)		8,597			(35	)
Other debt		128			2			27			(123	)		—			—			23			57			—
Total corporate and other debt		12,032			153			1,256			(1,821	)		—			(422	)		(304	)		10,894			85
Corporate equities		417			(45	)		901			(758	)		—			—			39			554			(9	)
Net derivative and other contracts(3):
Interest rate contracts		420			170			6			—			(5	)		(139	)		(430	)		22			179
Credit contracts		5,814			(1,381	)		63			—			(10	)		(47	)		(58	)		4,381			(1,786	)
Foreign exchange contracts		43			(99	)		—			—			—			162			(40	)		66			(83	)
Equity contracts		(1,234	)		(99	)		199			(58	)		(50	)		(250	)		50			(1,442	)		(161	)
Commodity contracts		570			199			4			—			(4	)		37			(3	)		803			101
Other		(1,090	)		58			—			—			—			269			740			(23	)		56
Total net derivative and other contracts		4,523			(1,152	)		272			(58	)		(69	)		32			259			3,807			(1,694	)
Investments:
Private equity funds		1,936			(7	)		101			(36	)		—			—			—			1,994			1
Real estate funds		1,213			52			87			(14	)		—			—			—			1,338			5
Hedge funds		696			25			22			(33	)		—			—			(87	)		623			23
Principal investments		2,937			38			180			(65	)		—			—			104			3,194			57
Other		501			(33	)		34			(3	)		—			—			28			527			(41	)
Total investments		7,283			75			424			(151	)		—			—			45			7,676			45
Physical commodities		46			—			—			—			—			(46	)		—			—			—
Intangible assets		133			(34	)		—			—			—			—			—			99			(34	)
Liabilities at Fair Value
Commercial paper and other short-term borrowings	$	2		$	—		$	—		$	—		$	13		$	—		$	—		$	15		$	—
Financial instruments sold, not yet purchased:
Other sovereign government obligations		8			—			(7	)		—			—			—			—			1			—
Corporate and other debt:
Residential mortgage-backed securities		355			—			(294	)		—			—			—			—			61			(61	)
Corporate bonds		219			(59	)		(186	)		126			—			—			(25	)		193			(74	)
Unfunded lending commitments		85			25			—			—			—			—			—			60			25
Other debt		73			1			—			—			—			(55	)		16			33			3
Total corporate and other debt		732			(33	)		(480	)		126			—			(55	)		(9	)		347			(107	)
Corporate equities		1			(2	)		(2	)		10			—			—			(9	)		2			—
Securities sold under agreements to repurchase		340			1			—			—			—			—			(153	)		186			3
Other secured financings		570			(44	)		—			—			12			(32	)		—			594			(44	)
Long-term borrowings		1,603			(173	)		—			—			262			(78	)		183			2,143			(171	)

23

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1) Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $75 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2) Amounts represent unrealized gains (losses) for the quarter ended March 31, 2012 related to assets and liabilities still outstanding at March 31, 2012.

(3) Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Financial instruments owned—Net derivative and other contracts.    The net loss in Net derivative and other contracts were primarily driven by tightening of credit spreads on underlying reference entities of basket credit default swaps.

24

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2011.

	Beginning Balance at December 31, 2010			Total Realized and Unrealized Gains (Losses)(1)			Purchases		Sales			Issuances			Settlements			Net Transfers			Ending Balance at March 31, 2011			Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2011(2)
	(dollars in millions)
Assets at Fair Value
Financial instruments owned:
U.S. agency securities	$	13		$	—		$	103	$	(52	)	$	—		$	—		$	(7	)	$	57		$	—
Other sovereign government obligations		73			—			59		—			—			—			(6	)		126			—
Corporate and other debt:
State and municipal securities		110			(1	)		4		(96	)		—			—			(13	)		4			—
Residential mortgage-backed securities		319			(58	)		198		(183	)		—			(1	)		86			361			(21	)
Commercial mortgage-backed securities		188			16			9		(30	)		—			—			(51	)		132			10
Asset-backed securities		13			—			12		(19	)		—			—			(6	)		—			—
Corporate bonds		1,368			33			255		(215	)		—			—			(75	)		1,366			55
Collateralized debt obligations		1,659			254			355		(595	)		—			(36	)		(44	)		1,593			93
Loans and lending commitments		11,666			386			1,023		(643	)		—			(1,024	)		(190	)		11,218			382
Other debt		193			(6	)		1		(22	)		—			—			(1	)		165			(16	)
Total corporate and other debt		15,516			624			1,857		(1,803	)		—			(1,061	)		(294	)		14,839			503
Corporate equities		484			(53	)		101		(98	)		—			—			68			502			(18	)
Net derivative and other contracts(3):
Interest rate contracts		424			169			1		—			(663	)		(114	)		125			(58	)		100
Credit contracts		6,594			(673	)		128		—			(152	)		71			111			6,079			(245	)
Foreign exchange rate contracts		46			(124	)		—		—			—			127			(3	)		46			(100	)
Equity contracts		(762	)		75			65		(12	)		(85	)		15			59			(645	)		75
Commodity contracts		188			(9	)		161		—			(132	)		85			37			330			(4	)
Other		(913	)		209			—		—			(5	)		205			(4	)		(508	)		203
Total net derivative and other contracts		5,577			(353	)		355		(12	)		(1,037	)		389			325			5,244			29
Investments:
Private equity funds		1,986			107			32		(190	)		—			—			71			2,006			95
Real estate funds		1,176			64			14		(3	)		—			—			—			1,251			102
Hedge funds		901			(9	)		135		(189	)		—			—			33			871			(9	)
Principal investments		3,131			66			202		(301	)		—			—			(41	)		3,057			(85	)
Other		560			8			1		(14	)		—			—			(157	)		398			3
Total investments		7,754			236			384		(697	)		—			—			(94	)		7,583			106
Securities received as collateral		1			—			—		(1	)		—			—			—			—			—
Intangible assets		157			(15	)		3		(1	)		—			—			—			144			(14	)

25

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Beginning Balance at December 31, 2010		Total Realized and Unrealized Gains (Losses)(1)			Purchases			Sales		Issuances		Settlements			Net Transfers			Ending Balance at March 31, 2011		Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2011(2)
	(dollars in millions)
Liabilities at Fair Value
Deposits	$	16	$	2		$	—		$	—	$	—	$	(14	)	$	—		$	—	$	—
Commercial paper and other short-term borrowings		2		—			—			—		4		(2	)		—			4		—
Financial instruments sold, not yet purchased:
Corporate and other debt:
Corporate bonds		44		1			(27	)		155		—		—			(21	)		150		8
Collateralized debt obligations		—		1			—			3		—		—			—			2		1
Unfunded lending commitments		263		92			—			—		—		—			—			171		92
Other debt		194		—			—			—		—		—			(14	)		180		—
Total corporate and other debt		501		94			(27	)		158		—		—			(35	)		503		101
Corporate equities		15		(1	)		(8	)		1		—		—			—			9		—
Obligation to return securities received as collateral		1		—			(1	)		—		—		—			—			—		—
Securities sold under agreements to repurchase		351		(2	)		—			—		—		(1	)		—			352		(2	)
Other secured financings		1,016		(12	)		—			—		—		(117	)		(306	)		605		(12	)
Long-term borrowings		1,316		(84	)		—			—		141		(180	)		13			1,374		(83	)

(1) Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $236 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2) Amounts represent unrealized gains (losses) for the quarter ended March 31, 2011 related to assets and liabilities still outstanding at March 31, 2011.

(3) Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Financial instruments owned—Corporate and other debt.    During the quarter ended March 31, 2011, the Company reclassified approximately $1.6 billion of certain Corporate and other debt, primarily corporate loans, from Level 3 to Level 2. The Company reclassified the corporate loans as external prices and/or spread inputs for these instruments became observable.

The Company also reclassified approximately $1.3 billion of certain Corporate and other debt from Level 2 to Level 3. The reclassifications were primarily related to certain corporate loans and were generally due to a reduction in market price quotations for these or comparable instruments, or a lack of available broker quotes, such that unobservable inputs had to be utilized for the fair value measurement of these instruments.

26

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Quantitative Information about and Sensitivity of Significant Unobservable Inputs used in Recurring Level 3 Fair Value Measurements at March 31, 2012

The disclosures below provide information on the valuation techniques, significant unobservable inputs and their ranges for each major category of assets and liabilities measured at fair value on a recurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm’s inventory. The disclosures below also include qualitative information on the sensitivity of the fair value measurements to changes in the significant unobservable inputs.

	Balance at March  31, 2012 (dollars in millions)			Valuation Technique(s)	Significant Unobservable Input(s) / Sensitivity of the Fair Value to Changes in the Unobservable Inputs	Range
Assets(1)
Financial instruments owned:
Corporate and other debt:
Commercial mortgage-backed securities	$	127		Comparable pricing(2)	Comparable bond price / (A)	0 to 85 points
Corporate bonds		899		Comparable pricing(2)	Comparable bond price / (A)	2 to 120 points
Collateralized debt obligations		1,165		Comparable pricing(2)	Comparable bond price / (A)	15 to 82 points
				Correlation model	Credit correlation / (B)	21% to 39%
Loans and lending commitments		8,597		Corporate loan model	Credit spread / (C)	26 to 1,109 basis points
				Comparable pricing(2)	Comparable bond or loan price / (A)	10 to 100 points
Other debt		57		Comparable pricing(2)	Comparable bond price / (A)	1 to 9 points
Corporate equities(3)		554		Net asset value	Discount to net asset value / (C)	0% to 31%
				Discounted cash flow	Implied weighted average cost of capital / (C)	9% to 40%
				Market approach	Earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiple / (A)	3 to 21 times
Net derivative and other contracts:
Interest rate contracts		22		Option model	Interest rate volatility concentration liquidity multiple / (C)(D)	0 to 12 times
					Interest rate volatility skew / (A)(D)	-1% to 81%
Credit contracts		4,381		Comparable pricing(2)	Cash synthetic basis / (C)	0 to 10 points
					Comparable bond price / (C)	5 to 97 points
				Correlation model	Credit correlation / (B)	9% to 82%
Foreign exchange contracts		66		Option model	Interest rate - Foreign exchange correlation / (A)	5% to 68%
Equity contracts		(1,442	)	Option model	At the money volatility / (C)(D)	8% to 26%
					Volatility skew / (C)(D)	-5% to 0%
					Equity - Equity correlation / (C)(D)	40% to 97%
					Equity - Foreign exchange correlation / (C)(D)	-45% to 35%
					Equity - Interest rate correlation / (C)(D)	8% to 65%
Commodity contracts		803		Option model	Forward power price / (C)(D)	$22 to $134 per Megawatt hour
					Commodity volatility / (A)(D)	13% to 113%
					Cross commodity correlation / (C)(D)	21% to 99%
Investments (3):
Principal investments		3,194		Discounted cash flow	Implied weighted average cost of capital / (C)(D)	10% to 19%
					Exit multiple / (A)(D)	5 to 10 times
				Discounted cash flow	Capitalization rate / (C)(D)	5% to 9%
					Equity discount rate / (C)(D)	16% to 35%
				Market approach	EBITDA multiple / (A)	3 to 24 times
Other		527		Discounted cash flow	Implied weighted average cost of capital / (C)(D)	9% to 14%
					Exit multiple / (A)(D)	4 to 10 times
				Market approach	EBITDA multiple / (A)	3 to 11 times

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Balance at March  31, 2012 (dollars in millions)		Valuation Technique(s)	Significant Unobservable Input(s) / Sensitivity of the Fair Value to Changes in the Unobservable Inputs	Range
Liabilities
Financial instruments sold, not yet purchased:
Corporate and other debt:
Residential mortgage-backed securities	$	61	Comparable pricing(2)	Comparable bond price / (A)	0 to 100 points
Corporate bonds		193	Comparable pricing(2)	Comparable bond price / (A)	6 to 121 points
Unfunded lending commitments		60	Corporate loan model	Credit spread / (C)	45 to 1,014 basis points
Securities sold under agreements to repurchase		186	Discounted cash flow	Funding spread / (A)	45 to 300 basis points
Other secured financings		594	Comparable pricing(2)	Comparable bond price / (A)	34 to 108 points
			Discounted cash flow	Funding spread / (A)	267 to 269 basis points
Long-term borrowings		2,143	Option model	At the money volatility / (A)(D)	10% to 15%
				Volatility skew / (A)(D)	-2% to 0%
				Equity - Equity correlation / (C)(D)	70% to 97%
				Equity - Foreign exchange correlation / (A)(D)	-70% to -40%

(1) Intangible assets consisting of MSRs of $84 million included in discontinued operations related to Saxon are excluded from the table. See Notes 1 and 20 for further information.

(2) Prices for the identical instrument are not available and significant subjectivity may be involved when fair value is determined using pricing data available for comparable instruments.

(3) Investments in funds measured using an unadjusted net asset value are excluded.

Sensitivity of the fair value to changes in the unobservable inputs:

(A) Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement.

(B) Significant changes in credit correlation may result in a significantly higher or lower fair value measurement. Increasing (decreasing) correlation drives a redistribution of risk within the capital structure such that junior tranches become less (more) risky and senior tranches become more (less) risky.

(C) Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement.

(D) There are no predictable relationships between the significant unobservable inputs.

28

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Investments that Calculate Net Asset Value.

The Company’s Investments measured at fair value were $8,329 million and $8,195 million at March 31, 2012 and December 31, 2011, respectively. The following table presents information solely about the Company’s investments in private equity funds, real estate funds and hedge funds measured at fair value based on net asset value at March 31, 2012 and December 31, 2011, respectively.

	At March 31, 2012				At December 31, 2011
	Fair Value		Unfunded Commitment		Fair Value		Unfunded Commitment
	(dollars in millions)
Private equity funds	$	1,955	$	813	$	1,906	$	938
Real estate funds		1,310		288		1,188		448
Hedge funds(1):
Long-short equity hedge funds		511		—		545		5
Fixed income/credit-related hedge funds		23		—		124		—
Event-driven hedge funds		71		—		163		—
Multi-strategy hedge funds		336		2		335		—
Total	$	4,206	$	1,103	$	4,261	$	1,391

(1) Fixed income/credit-related hedge funds, event-driven hedge funds, and multi-strategy hedge funds are redeemable at least on a six-month period basis primarily with a notice period of 90 days or less. At March 31, 2012, approximately 36% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 34% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at March 31, 2012 is primarily greater than six months. At December 31, 2011, approximately 38% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 32% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at December 31, 2011 is primarily greater than six months.

Private Equity Funds.    Amount includes several private equity funds that pursue multiple strategies including leveraged buyouts, venture capital, infrastructure growth capital, distressed investments, and mezzanine capital. In addition, the funds may be structured with a focus on specific domestic or foreign geographic regions. These investments are generally not redeemable with the funds. Instead, the nature of the investments in this category is that distributions are received through the liquidation of the underlying assets of the fund. At March 31, 2012, it is estimated that 6% of the fair value of the funds will be liquidated in the next five years, another 33% of the fair value of the funds will be liquidated between five to 10 years and the remaining 61% of the fair value of the funds have a remaining life of greater than 10 years.

Real Estate Funds.    Amount includes several real estate funds that invest in real estate assets such as commercial office buildings, retail properties, multi-family residential properties, developments or hotels. In addition, the funds may be structured with a focus on specific geographic domestic or foreign regions. These investments are generally not redeemable with the funds. Distributions from each fund will be received as the underlying investments of the funds are liquidated. At March 31, 2012, it is estimated that 4% of the fair value of the funds will be liquidated within the next five years, another 40% of the fair value of the funds will be liquidated between five to 10 years and the remaining 56% of the fair value of the funds have a remaining life of greater than 10 years.

Hedge Funds.    Investments in hedge funds may be subject to initial period lock-up restrictions or gates. A hedge fund lock-up provision is a provision that provides that, during a certain initial period, an investor may not make a withdrawal from the fund. The purpose of a gate is to restrict the level of redemptions that an investor in a particular hedge fund can demand on any redemption date.

• Long-short Equity Hedge Funds.    Amount includes investments in hedge funds that invest, long or short, in equities. Equity value and growth hedge funds purchase stocks perceived to be undervalued and sell stocks perceived to be overvalued. Investments representing approximately 8% of the fair value of the

29

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

investments in this category cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions ranged from three years or less at March 31, 2012. Investments representing approximately 7% of the fair value of the investments in long-short equity hedge funds cannot be redeemed currently because an exit restriction has been imposed by the hedge fund manager. The restriction period for these investments subject to an exit restriction was primarily one year or less at March 31, 2012.

• Fixed Income/Credit-Related Hedge Funds.    Amount includes investments in hedge funds that employ long-short, distressed or relative value strategies in order to benefit from investments in undervalued or overvalued securities that are primarily debt or credit related. At March 31, 2012, investments representing approximately 17% of the fair value of the investments in fixed income/credit-related hedge funds cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions was primarily one year or less at March 31, 2012.

• Event-Driven Hedge Funds.    Amount includes investments in hedge funds that invest in event-driven situations such as mergers, hostile takeovers, reorganizations, or leveraged buyouts. This may involve the simultaneous purchase of stock in companies being acquired and the sale of stock in its acquirer, hoping to profit from the spread between the current market price and the ultimate purchase price of the target company. At March 31, 2012, there were no restrictions on redemptions.

• Multi-strategy Hedge Funds.    Amount includes investments in hedge funds that pursue multiple strategies to realize short- and long-term gains. Management of the hedge funds has the ability to overweight or underweight different strategies to best capitalize on current investment opportunities. At March 31, 2012, investments representing approximately 74% of the fair value of the investments in this category cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions was primarily two years or less at March 31, 2012.

Fair Value Option.

The Company elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models. The following tables present net gains (losses) due to changes in fair value for items measured at fair value pursuant to the fair value option election for the quarters ended March 31, 2012 and 2011, respectively.

	Principal Transactions- Trading			Interest Income (Expense)			Gains (Losses) Included  in Net Revenues
	(dollars in millions)
Three Months Ended March 31, 2012
Federal funds sold and securities purchased under agreements to resell	$	(4	)	$	1		$	(3	)
Deposits		10			(22	)		(12	)
Commercial paper and other short-term borrowings		(129	)		—			(129	)
Securities sold under agreements to repurchase		(2	)		(1	)		(3	)
Long-term borrowings		(2,951	)		(344	)		(3,295	)
Three Months Ended March 31, 2011
Deposits	$	13		$	(30	)	$	(17	)
Commercial paper and other short-term borrowings		(5	)		—			(5	)
Securities sold under agreements to repurchase		(2	)		—			(2	)
Long-term borrowings		(1,266	)		(290	)		(1,556	)

30

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition to the amounts in the above table, as discussed in Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K, all of the instruments within Financial instruments owned or Financial instruments sold, not yet purchased are measured at fair value, either through the election of the fair value option, or as required by other accounting guidance. The amounts in the above table are included within Net revenues and do not reflect gains or losses on related hedging instruments, if any.

The changes in overall fair value of the short-term and long-term borrowings (primarily structured notes) are attributable to changes in foreign currency exchange rates, interest rates, movements in the reference price or index for structured notes and (as presented in the table below) an adjustment to reflect the change in the Company’s credit spreads and other credit factors.

The following tables present information on the Company’s short-term and long-term borrowings (primarily structured notes), loans and unfunded lending commitments for which the fair value option was elected.

Gains (Losses) due to Changes in Instrument Specific Credit Risk.

	Three Months Ended March 31,
	2012			2011
	(dollars in millions)
Short-term and long-term borrowings(1)	$	(1,978	)	$	(189	)
Loans(2)		293			140
Unfunded lending commitments(3)		407			10

(1) The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company’s secondary bond market spreads.

(2) Instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates.

(3) Gains (losses) were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period end.

Net Difference between Contractual Principal Amount and Fair Value.

	Contractual Principal Amount Exceeds Fair Value
	At March 31, 2012		At December 31, 2011
	(dollars in billions)
Short-term and long-term borrowings(1)	$	1.2	$	2.5
Loans(2)		23.9		27.2
Loans 90 or more days past due and/or on non-accrual status(2)(3)		21.3		22.1

(1) These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index.

(2) The majority of this difference between principal and fair value amounts emanates from the Company’s distressed debt trading business, which purchases distressed debt at amounts well below par.

(3) The aggregate fair value of loans that were in non-accrual status, which includes all loans 90 or more days past due, was $1.5 billion and $2.0 billion at March 31, 2012 and December 31, 2011, respectively. The aggregate fair value of loans that were 90 or more days past due was $0.9 billion and $1.5 billion at March 31, 2012 and December 31, 2011, respectively.

The tables above exclude non-recourse debt from consolidated VIEs, liabilities related to failed sales of financial assets, pledged commodities and other liabilities that have specified assets attributable to them.

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis.

Certain assets were measured at fair value on a non-recurring basis and are not included in the tables above. These assets may include loans, equity method investments, premises and equipment, intangible assets and real estate investments.

The following tables present, by caption on the condensed consolidated statements of financial condition, the fair value hierarchy for those assets measured at fair value on a non-recurring basis for which the Company recognized a non-recurring fair value adjustment for the quarters ended March 31, 2012 and 2011, respectively.

Three Months Ended March 31, 2012.

			Fair Value Measurements Using:
	Carrying Value At March 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) for the Three Months Ended March 31, 2012(1)
	(dollars in millions)
Loans(2)	$	298	$	—	$	144	$	154	$	(6	)
Other investments(3)		47		—		—		47		(3	)
Premises, equipment and software costs(3)		3		—		—		3		(1	)
Intangible assets(4)		2		2		—		—		(2	)
Total	$	350	$	2	$	144	$	204	$	(12	)

(1) Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2) Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3) Losses recorded were determined primarily using discounted cash flow models.

(4) Losses were determined primarily using discounted cash flow models or a valuation technique incorporating an observable market index.

In addition to the losses included in the table above, there was a pre-tax gain of approximately $51 million (related to Other assets) included in discontinued operations in the quarter ended March 31, 2012 in connection with the planned disposition of Saxon (see Notes 1 and 20). This pre-tax gain was primarily due to the subsequent increase in fair value of Saxon, which had incurred impairment losses of $98 million in the quarter ended December 31, 2011. The fair value of Saxon was determined based on the revised purchase price agreed upon with the buyer.

There were no liabilities measured at fair value on a non-recurring basis during the quarter ended March 31, 2012.

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Three Months Ended March 31, 2011.

			Fair Value Measurements Using:
	Carrying Value At March 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) for the Three Months Ended March 31, 2011(1)
	(dollars in millions)
Loans(2)	$	559	$	—	$	46	$	513	$	16
Other investments(3)		77		—		—		77		(9	)
Intangible assets(4)		—		—		—		—		(3	)
Total	$	636	$	—	$	46	$	590	$	4

(1) Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2) Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3) Losses recorded were determined primarily using discounted cash flow models.

(4) Losses primarily related to investment management contracts, including contracts associated with FrontPoint, and were determined primarily using discounted cash flow models.

There were no liabilities measured at fair value on a non-recurring basis during the quarter ended March 31, 2011.

Financial Instruments Not Measured at Fair Value.

The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value in the condensed consolidated statements of financial condition. The table below excludes certain financial instruments such as equity method investments and all non-financial assets and liabilities such as the value of the long-term relationships with our deposit customers.

The carrying value of cash and cash equivalents, including Interest bearing deposits with banks, and other short-term financial instruments such as Federal funds sold and securities purchased under agreements to resell, Securities borrowed, Securities sold under agreements to repurchase, Securities loaned, certain receivables and payables arising in the ordinary course of business, certain Deposits, Commercial paper and other short-term borrowings and Other secured financings approximate fair value because of the relatively short period of time between their origination and expected maturity.

The fair value of sweep facilities whereby cash balances are swept into separate money market savings deposits and transaction accounts included within Deposits is determined from observable market data, where available. Otherwise, the fair value is determined using a standard cash flow discounting methodology.

For longer-dated Federal funds sold and securities purchased under agreements to resell, Securities borrowed, Securities sold under agreements to repurchase, Securities loaned and Other secured financings, fair value is determined using a standard cash flow discounting methodology. The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks and interest rate yield curves.

33

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For consumer and residential real estate loans where position-specific external price data is not observable, the fair value is based on the credit risks of the borrower using a probability of default and loss given default method, discounted at the estimated external cost of funding level. The fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, and market observable credit default swap spread levels along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable.

Quoted prices are used when available for long-term borrowings. Where quoted prices are not available, fair value is determined based on current interest rates and credit spreads for debt instruments with similar terms and maturity.

Financial Instruments Not Measured at Fair Value at March 31, 2012.

	At March 31, 2012				Fair Value Measurements using:
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(dollars in millions)
Financial Assets:
Cash and due from banks	$	10,133	$	10,133	$	10,133	$	—	$	—
Interest bearing deposits with banks		28,592		28,592		28,592		—		—
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements		30,152		30,152		30,152		—		—
Federal funds sold and securities purchased under agreements to resell		136,133		135,773		—		135,161		612
Securities borrowed		141,610		141,609		—		141,484		125
Receivables:(1)
Customers		38,962		38,962		—		38,962		—
Brokers, dealers and clearing organizations		5,718		5,718		—		5,718		—
Fees, interest and other		6,220		5,922		—		—		5,922
Loans(2)		16,729		16,791		—		1,923		14,868
Financial Liabilities:
Deposits	$	64,461	$	64,603	$	—	$	64,603	$	—
Commercial paper and other short-term borrowings		696		696		—		439		257
Securities sold under agreements to repurchase		106,983		107,041		—		99,539		7,502
Securities loaned		34,431		34,913		—		34,646		267
Other secured financings		8,354		8,383		—		6,527		1,856
Payables:(1)
Customers		119,045		119,045		—		119,045		—
Brokers, dealers and clearing organizations		12,143		12,143		—		12,143		—
Long-term borrowings		133,499		127,962		—		120,471		7,491

(1) Accrued interest, fees and dividend receivables and payables where carrying value approximates fair value have been excluded.

(2) Includes all loans measured at fair value on a non-recurring basis.

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Securities Available for Sale.

The following tables present information about the Company’s available for sale securities:

	At March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than- Temporary Impairment		Fair Value
	(dollars in millions)
Debt securities available for sale:
U.S. government and agency securities:
U.S. Treasury securities	$	13,680	$	129	$	1	$	—	$	13,808
U.S. agency securities		16,352		69		17		—		16,404
Total U.S. government and agency securities		30,032		198		18		—		30,212
Corporate and other debt:
Auto loan asset-backed securities		237		—		—		—		237
Corporate bonds		631		1		1		—		631
FFELP student loan asset-backed securities(1)		1,431		4		1		—		1,434
Total Corporate and other debt		2,299		5		2		—		2,302
Total debt securities available for sale		32,331		203		20		—		32,514
Equity securities available for sale		15		—		1		—		14
Total	$	32,346	$	203	$	21	$	—	$	32,528

(1) Amounts are backed by a guarantee from the U.S. Department of Education of at least 95% of the principal balance and interest on such loans.

	At December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than- Temporary Impairment		Fair Value
	(dollars in millions)
Debt securities available for sale:
U.S. government and agency securities:
U.S. Treasury securities	$	13,240	$	182	$	—	$	—	$	13,422
U.S. agency securities		16,083		54		20		—		16,117
Corporate and other debt(1)		944		—		3		—		941
Total debt securities available for sale		30,267		236		23		—		30,480
Equity securities available for sale		15		—		—		—		15
Total	$	30,282	$	236	$	23	$	—	$	30,495

(1) Amounts represent FFELP student loan asset-backed securities, in which the loans are backed by a guarantee from the U.S. Department of Education of at least 95% of the principal balance and interest on such loans.

35

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The tables below present the fair value of investments in securities available for sale that have been in an unrealized loss position:

	Less than 12 Months				12 Months or Longer				Total
At March 31, 2012	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(dollars in millions)
Debt securities available for sale:
U.S. government and agency securities:
U.S. Treasury securities	$	1,923	$	1	$	—	$	—	$	1,923	$	1
U.S. agency securities		3,973		12		1,292		5		5,265		17
Total U.S. government and agency securities		5,896		13		1,292		5		7,188		18
Corporate and other debt:
Corporate bonds		458		1		—		—		458		1
FFELP student loan asset-backed securities		450		1		—		—		450		1
Total Corporate and other debt		908		2		—		—		908		2
Total debt securities available for sale		6,804		15		1,292		5		8,096		20
Equity securities available for sale		14		1		—		—		14		1
Total	$	6,818	$	16	$	1,292	$	5	$	8,110	$	21

	Less than 12 Months				12 Months or Longer				Total
At December 31, 2011	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(dollars in millions)
Debt securities available for sale:
U.S. government and agency securities:
U.S. agency securities	$	6,250	$	15	$	1,492	$	5	$	7,742	$	20
Corporate and other debt		679		3		—		—		679		3
Total	$	6,929	$	18	$	1,492	$	5	$	8,421	$	23

Gross unrealized losses are recorded in Accumulated other comprehensive income.

For the debt securities available for sale, the Company does not intend to sell these securities or expect to be required to sell these securities prior to recovery of the amortized cost basis. In addition, the Company does not expect the U.S. government and agency securities to experience a credit loss given the explicit and implicit guarantee provided by the U.S. government. The Company believes that the debt securities with an unrealized loss in Accumulated other comprehensive income were not other-than-temporarily impaired at March 31, 2012 and December 31, 2011.

For the equity securities available for sale, the Company does not intend to sell these securities or expect to be required to sell these securities prior to the recovery of the amortized cost basis. The Company believes that the equity securities with an unrealized loss in Accumulated other comprehensive income were not other-than-temporarily impaired at March 31, 2012.

36

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the amortized cost and fair value of debt securities available for sale by contractual maturity dates at March 31, 2012.

March 31, 2012	Amortized Cost		Fair Value		Annualized Average Yield
	(dollars in millions)
U.S. government and agency securities:
U.S. Treasury securities:
Due within 1 year	$	2,298	$	2,319		1.4	%
After 1 year but through 5 years		10,214		10,314		0.9	%
After 5 years		1,168		1,175		1.4	%
Total		13,680		13,808
U.S. agency securities:
After 5 years		16,352		16,404
Total		16,352		16,404		1.2	%
Total U.S. government and agency securities		30,032		30,212		1.1	%
Corporate and other debt:
Auto loan asset-backed securities:
After 1 year but through 5 years		237		237		0.8	%
Total		237		237
Corporate bonds:
Due within 1 year		43		43		0.7	%
After 1 year but through 5 years		570		570		1.1	%
After 5 years		18		18		1.7	%
Total		631		631
FFELP student loan asset-backed securities:
After 5 years		1,431		1,434		1.2	%
Total		1,431		1,434
Total Corporate and other debt		2,299		2,302		1.1	%
Total debt securities available for sale	$	32,331	$	32,514		1.1	%

See Note 6 for additional information on securities issued by VIEs, including U.S. agency residential mortgage-backed securities, auto loan asset-backed securities and FFELP student loan asset-backed securities.

The following table presents information pertaining to sales of securities available for sale during the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31,
	2012		2011
	(dollars in millions)
Gross realized gains	$	1	$	12
Gross realized losses	$	1	$	—
Proceeds of sales of securities available for sale	$	—	$	6,121

Gross realized gains and losses are recognized in Other revenues in the condensed consolidated statements of income.

37

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Collateralized Transactions.

The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance the Company’s inventory positions. The Company’s policy is generally to take possession of Securities received as collateral, Securities purchased under agreements to resell and Securities borrowed. The Company manages credit exposure arising from reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations. The Company also monitors the fair value of the underlying securities as compared with the related receivable or payable, including accrued interest, and, as necessary, requests additional collateral to ensure such transactions are adequately collateralized. Where deemed appropriate, the Company’s agreements with third parties specify its rights to request additional collateral.

The Company also engages in securities financing transactions for customers through margin lending. Under these agreements and transactions, the Company either receives or provides collateral, including U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. Customer receivables generated from margin lending activity are collateralized by customer-owned securities held by the Company. The Company monitors required margin levels and established credit limits daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary. Margin loans are extended on a demand basis and are not committed facilities. Factors considered in the review of margin loans are the amount of the loan, the intended purpose, the degree of leverage being employed in the account, and overall evaluation of the portfolio to ensure proper diversification or, in the case of concentrated positions, appropriate liquidity of the underlying collateral or potential hedging strategies to reduce risk. Additionally, transactions relating to concentrated or restricted positions require a review of any legal impediments to liquidation of the underlying collateral. Underlying collateral for margin loans is reviewed with respect to the liquidity of the proposed collateral positions, valuation of securities, historic trading range, volatility analysis and an evaluation of industry concentrations. For these transactions, adherence to the Company’s collateral policies significantly limits the Company’s credit exposure in the event of customer default. The Company may request additional margin collateral from customers, if appropriate, and, if necessary, may sell securities that have not been paid for or purchase securities sold but not delivered from customers. At March 31, 2012 and December 31, 2011, there were approximately $19.4 billion and $16.2 billion, respectively, of customer margin loans outstanding.

Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Company is deemed to be the primary beneficiary, and certain equity-linked notes and other secured borrowings. These liabilities are generally payable from the cash flows of the related assets accounted for as Financial instruments owned (see Note 6).

38

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company pledges its financial instruments owned to collateralize repurchase agreements and other securities financings. Pledged financial instruments that can be sold or repledged by the secured party are identified as Financial instruments owned (pledged to various parties) in the consolidated statements of financial condition. The carrying value and classification of financial instruments owned by the Company that have been loaned or pledged to counterparties where those counterparties do not have the right to sell or repledge the collateral were as follows:

	At March 31, 2012		At December  31, 2011
	(dollars in millions)
Financial instruments owned:
U.S. government and agency securities	$	8,795	$	9,263
Other sovereign government obligations		4,128		4,047
Corporate and other debt		11,292		17,024
Corporate equities		28,719		21,664
Total	$	52,934	$	51,998

The Company receives collateral in the form of securities in connection with reverse repurchase agreements, securities borrowed and derivative transactions, and customer margin loans. In many cases, the Company is permitted to sell or repledge these securities held as collateral and use the securities to secure repurchase agreements, to enter into securities lending and derivative transactions or for delivery to counterparties to cover short positions. The Company additionally receives securities as collateral in connection with certain securities-for-securities transactions in which the Company is the lender. In instances where the Company is permitted to sell or repledge these securities, the Company reports the fair value of the collateral received and the related obligation to return the collateral in the consolidated statements of financial condition. At March 31, 2012 and December 31, 2011, the fair value of financial instruments received as collateral where the Company is permitted to sell or repledge the securities was $586 billion and $488 billion, respectively, and the fair value of the portion that had been sold or repledged was $420 billion and $335 billion, respectively.

At March 31, 2012 and December 31, 2011, cash and securities deposited with clearing organizations or segregated under federal and other regulations or requirements were as follows:

	At March 31, 2012		At December 31, 2011
	(dollars in millions)
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	$	30,152	$	29,454
Securities(1)		8,229		15,120
Total	$	38,381	$	44,574

(1) Securities deposited with clearing organizations or segregated under federal and other regulations or requirements are sourced from Federal funds sold and securities purchased under agreements to resell and Financial instruments owned in the consolidated statements of financial condition.

6. Variable Interest Entities and Securitization Activities.

The Company is involved with various special purpose entities (“SPEs”) in the normal course of business. In most cases, these entities are deemed to be VIEs.

39

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors do not have the characteristics of a controlling financial interest. Excluding entities subject to the Deferral (as defined in Note 2 to the consolidated financial statements included in the Form 10-K), the primary beneficiary of a VIE is the party that both (1) has the power to direct the activities of a VIE that most significantly affect the VIE’s economic performance and (2) has an obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Company consolidates entities of which it is the primary beneficiary.

The Company’s variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Company’s involvement with VIEs arises primarily from:

• Interests purchased in connection with market-making activities, securities held in its available for sale portfolio and retained interests held as a result of securitization activities, including re-securitization transactions.

• Guarantees issued and residual interests retained in connection with municipal bond securitizations.

• Servicing residential and commercial mortgage loans held by VIEs.

• Loans made to and investments in VIEs that hold debt, equity, real estate or other assets.

• Derivatives entered into with VIEs.

• Structuring of credit-linked notes (“CLN”) or other asset-repackaged notes designed to meet the investment objectives of clients.

• Other structured transactions designed to provide tax-efficient yields to the Company or its clients.

The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE’s structure and activities, the power to make significant economic decisions held by the Company and by other parties, and the variable interests owned by the Company and other parties.

The power to make the most significant economic decisions may take a number of different forms in different types of VIEs. The Company considers servicing or collateral management decisions as representing the power to make the most significant economic decisions in transactions such as securitizations or CDOs. As a result, the Company does not consolidate securitizations or CDOs for which it does not act as the servicer or collateral manager unless it holds certain other rights to replace the servicer or collateral manager or to require the liquidation of the entity. If the Company serves as servicer or collateral manager, or has certain other rights described in the previous sentence, the Company analyzes the interests in the VIE that it holds and consolidates only those VIEs for which it holds a potentially significant interest of the VIE.

The structure of securitization vehicles and CDOs are driven by several parties, including loan seller(s) in securitization transactions, the collateral manager in a CDO, one or more rating agencies, a financial guarantor in some transactions and the underwriter(s) of the transactions, who serve to reflect specific investor demand. In addition, subordinate investors, such as the “B-piece” buyer in commercial mortgage backed securitizations or equity investors in CDOs, can influence whether specific loans are excluded from a CMBS transaction or investment criteria in a CDO.

For many transactions, such as re-securitization transactions, CLNs and other asset-repackaged notes, there are no significant economic decisions made on an ongoing basis. In these cases, the Company focuses its analysis on

40

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

decisions made prior to the initial closing of the transaction and at the termination of the transaction. Based upon factors, which include an analysis of the nature of the assets, including whether the assets were issued in a transaction sponsored by the Company and the extent of the information available to the Company and to investors, the number, nature and involvement of investors, other rights held by the Company and investors, the standardization of the legal documentation and the level of the continuing involvement by the Company, including the amount and type of interests owned by the Company and by other investors, the Company concluded in most of these transactions that decisions made prior to the initial closing were shared between the Company and the initial investors. The Company focused its control decision on any right held by the Company or investors related to the termination of the VIE. Most re-securitization transactions, CLNs and other asset-repackaged notes have no such termination rights.

Except for consolidated VIEs included in other structured financings and managed real estate partnerships in the tables below, the Company accounts for the assets held by the entities primarily in Financial instruments owned and the liabilities of the entities as Other secured financings in the condensed consolidated statements of financial condition. For consolidated VIEs included in other structured financings, the Company accounts for the assets held by the entities primarily in Premises, equipment and software costs, and Other assets in the condensed consolidated statements of financial condition. For consolidated VIEs included in managed real estate partnerships, the Company accounts for the assets held by the entities primarily in Financial instruments owned—Investments in the condensed consolidated statements of financial condition. Except for consolidated VIEs included in other structured financings, the assets and liabilities are measured at fair value, with changes in fair value reflected in earnings.

The assets owned by many consolidated VIEs cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many consolidated VIEs are non-recourse to the Company. In certain other consolidated VIEs, the Company has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

The following tables present information at March 31, 2012 and December 31, 2011 about VIEs that the Company consolidates. Consolidated VIE assets and liabilities are presented after intercompany eliminations and include assets financed on a non-recourse basis.

	At March 31, 2012
	Mortgage and Asset-backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
	(dollars in millions)
VIE assets	$	1,977	$	129	$	2,308	$	896	$	2,796
VIE liabilities	$	1,304	$	65	$	115	$	2,611	$	549

	At December 31, 2011
	Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
	(dollars in millions)
VIE assets	$	2,414	$	102	$	2,207	$	918	$	1,937
VIE liabilities	$	1,699	$	69	$	102	$	2,576	$	556

In general, the Company’s exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE’s assets recognized in its financial statements, net of losses absorbed by third-party holders of the VIE’s liabilities. At March 31, 2012 and December 31, 2011, managed real estate partnerships reflected noncontrolling

41

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

interests in the Company’s condensed consolidated financial statements of $1,719 million and $1,653 million, respectively. The Company also had additional maximum exposure to losses of approximately $194 million and $200 million at March 31, 2012 and December 31, 2011, respectively. This additional exposure related primarily to certain derivatives (e.g., instead of purchasing senior securities, the Company has sold credit protection to synthetic CDOs through credit derivatives that are typically related to the most senior tranche of the CDO) and commitments, guarantees and other forms of involvement.

The following tables present information about certain non-consolidated VIEs in which the Company had variable interests at March 31, 2012 and December 31, 2011. The tables include all VIEs in which the Company has determined that its maximum exposure to loss is greater than specific thresholds or meets certain other criteria. Most of the VIEs included in the tables below are sponsored by unrelated parties; the Company’s involvement generally is the result of the Company’s secondary market-making activities or through securities held in its available for sale portfolio (see Note 4).

	At March 31, 2012
	Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
	(dollars in millions)
VIE assets that the Company does not consolidate (unpaid principal balance)(1)	$	195,492	$	20,910	$	6,650	$	1,899	$	28,678
Maximum exposure to loss:
Debt and equity interests(2)	$	16,785	$	748	$	134	$	937	$	2,436
Derivative and other contracts		92		98		4,133		—		1,102
Commitments, guarantees and other		592		—		—		775		990
Total maximum exposure to loss	$	17,469	$	846	$	4,267	$	1,712	$	4,528
Carrying value of exposure to loss—Assets:
Debt and equity interests(2)	$	16,785	$	748	$	134	$	596	$	2,436
Derivative and other contracts		91		42		7		—		338
Total carrying value of exposure to loss—Assets	$	16,876	$	790	$	141	$	596	$	2,774
Carrying value of exposure to loss—Liabilities:
Derivative and other contracts	$	13	$	3	$	1	$	—	$	128
Commitments, guarantees and other		—		—		—		13		168
Total carrying value of exposure to loss—Liabilities	$	13	$	3	$	1	$	13	$	296

(1) Mortgage and asset-backed securitizations include VIE assets as follows: $11.3 billion of residential mortgages; $55.4 billion of commercial mortgages; $110.3 billion of U.S. agency collateralized mortgage obligations; and $18.5 billion of other consumer or commercial loans.

(2) Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.7 billion of residential mortgages; $0.9 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.7 billion of other consumer or commercial loans.

42

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	At December 31, 2011
	Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
	(dollars in millions)
VIE assets that the Company does not consolidate (unpaid principal balance)(1)	$	231,110	$	7,593	$	6,833	$	1,944	$	20,997
Maximum exposure to loss:
Debt and equity interests(2)	$	16,469	$	491	$	201	$	978	$	2,413
Derivative and other contracts		103		843		4,141		—		1,209
Commitments, guarantees and other		208		—		—		804		561
Total maximum exposure to loss	$	16,780	$	1,334	$	4,342	$	1,782	$	4,183
Carrying value of exposure to loss—Assets:
Debt and equity interests(2)	$	16,469	$	491	$	201	$	640	$	2,413
Derivative and other contracts		101		657		24		—		338
Total carrying value of exposure to loss—Assets	$	16,570	$	1,148	$	225	$	640	$	2,751
Carrying value of exposure to loss—Liabilities:
Derivative and other contracts	$	13	$	159	$	—	$	—	$	114
Commitments, guarantees and other		—		—		—		14		176
Total carrying value of exposure to loss—Liabilities	$	13	$	159	$	—	$	14	$	290

(1) Mortgage and asset-backed securitizations include VIE assets as follows: $9.1 billion of residential mortgages; $81.7 billion of commercial mortgages; $121.6 billion of U.S. agency collateralized mortgage obligations; and $18.7 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period’s presentation.

(2) Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $1.1 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.3 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period’s presentation.

The Company’s maximum exposure to loss often differs from the carrying value of the VIE’s assets. The maximum exposure to loss is dependent on the nature of the Company’s variable interest in the VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, total return swaps, written put options, and the fair value of certain other derivatives and investments the Company has made in the VIEs. Liabilities issued by VIEs generally are non-recourse to the Company. Where notional amounts are utilized in quantifying maximum exposure related to derivatives, such amounts do not reflect fair value writedowns already recorded by the Company.

The Company’s maximum exposure to loss does not include the offsetting benefit of any financial instruments that the Company may utilize to hedge these risks associated with the Company’s variable interests. In addition, the Company’s maximum exposure to loss is not reduced by the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.

Securitization transactions generally involve VIEs. Primarily as a result of its secondary market-making activities, the Company owned additional securities issued by securitization SPEs for which the maximum exposure to loss is less than specific thresholds. These additional securities totaled $3.7 billion at March 31, 2012. These securities were either retained in connection with transfers of assets by the Company, acquired in connection with secondary market-making activities or held in the Company’s available for sale portfolio.

43

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Securities issued by securitization SPEs consist of $0.7 billion of securities backed primarily by residential mortgage loans, $1.0 billion of securities backed by U.S. agency collateralized mortgage obligations, $0.8 billion of securities backed by commercial mortgage loans, $0.6 billion of securities backed by collateralized debt obligations or collateralized loan obligations and $0.6 billion backed by other consumer loans, such as credit card receivables, automobile loans and student loans. The Company’s primary risk exposure is to the securities issued by the SPE owned by the Company, with the risk highest on the most subordinate class of beneficial interests. These securities generally are included in Financial instruments owned—Corporate and other debt or Securities available for sale and are measured at fair value. The Company does not provide additional support in these transactions through contractual facilities, such as liquidity facilities, guarantees or similar derivatives. The Company’s maximum exposure to loss generally equals the fair value of the securities owned.

The Company’s transactions with VIEs primarily include securitizations, municipal tender option bond trusts, credit protection purchased through CLNs, other structured financings, collateralized loan and debt obligations, equity-linked notes, managed real estate partnerships and asset management investment funds. The Company’s continuing involvement in VIEs that it does not consolidate can include ownership of retained interests in Company-sponsored transactions, interests purchased in the secondary market (both for Company-sponsored transactions and transactions sponsored by third parties), derivatives with securitization SPEs (primarily interest rate derivatives in commercial mortgage and residential mortgage securitizations and credit derivatives in which the Company has purchased protection in synthetic CDOs), and as servicer in residential mortgage securitizations in the U.S. and Europe and commercial mortgage securitizations in Europe. Such activities are further described in Note 7 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

Transfers of Assets with Continuing Involvement.

The following tables present information at March 31, 2012 regarding transactions with SPEs in which the Company, acting as principal, transferred financial assets with continuing involvement and received sales treatment.

	At March 31, 2012
	Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit- Linked Notes and Other
	(dollars in millions)
SPE assets (unpaid principal balance)(1)	$	40,715	$	78,844	$	23,591	$	13,824
Retained interests (fair value):
Investment grade	$	13	$	20	$	493	$	3
Non-investment grade		113		51		—		1,549
Total retained interests (fair value)	$	126	$	71	$	493	$	1,552
Interests purchased in the secondary market (fair value):
Investment grade	$	24	$	227	$	60	$	394
Non-investment grade		153		76		—		13
Total interests purchased in the secondary market (fair value)	$	177	$	303	$	60	$	407
Derivative assets (fair value)	$	12	$	1,214	$	—	$	151
Derivative liabilities (fair value)	$	28	$	23	$	—	$	392

(1) Amounts include assets transferred by unrelated transferors.

44

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	At March 31, 2012
	Level 1		Level 2		Level 3		Total
	(dollars in millions)
Retained interests (fair value):
Investment grade	$	—	$	526	$	3	$	529
Non-investment grade		—		154		1,559		1,713
Total retained interests (fair value)	$	—	$	680	$	1,562	$	2,242
Interests purchased in the secondary market (fair value):
Investment grade	$	—	$	705	$	—	$	705
Non-investment grade		—		223		19		242
Total interests purchased in the secondary market (fair value)	$	—	$	928	$	19	$	947
Derivative assets (fair value)	$	—	$	745	$	632	$	1,377
Derivative liabilities (fair value)	$	—	$	380	$	63	$	443

The following tables present information at December 31, 2011 regarding transactions with SPEs in which the Company, acting as principal, transferred assets with continuing involvement and received sales treatment.

	At December 31, 2011
	Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit- Linked Notes and Other
	(dollars in millions)
SPE assets (unpaid principal balance)(1)	$	41,977	$	85,333	$	33,728	$	14,315
Retained interests (fair value):
Investment grade	$	14	$	22	$	1,151	$	2
Non-investment grade		106		44		—		1,545
Total retained interests (fair value)	$	120	$	66	$	1,151	$	1,547
Interests purchased in the secondary market (fair value):
Investment grade	$	45	$	164	$	20	$	411
Non-investment grade		149		82		—		11
Total interests purchased in the secondary market (fair value)	$	194	$	246	$	20	$	422
Derivative assets (fair value)	$	18	$	1,200	$	—	$	223
Derivative liabilities (fair value)	$	30	$	31	$	—	$	510

(1) Amounts include assets transferred by unrelated transferors.

45

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	At December 31, 2011
	Level 1		Level 2		Level 3		Total
	(dollars in millions)
Retained interests (fair value):
Investment grade	$	—	$	1,186	$	3	$	1,189
Non-investment grade		—		74		1,621		1,695
Total retained interests (fair value)	$	—	$	1,260	$	1,624	$	2,884
Interests purchased in the secondary market (fair value):
Investment grade	$	—	$	638	$	2	$	640
Non-investment grade		—		126		116		242
Total interests purchased in the secondary market (fair value)	$	—	$	764	$	118	$	882
Derivative assets (fair value)	$	—	$	869	$	572	$	1,441
Derivative liabilities (fair value)	$	—	$	541	$	30	$	571

Transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the condensed consolidated statements of income. The Company may act as underwriter of the beneficial interests issued by securitization vehicles. Investment banking underwriting net revenues are recognized in connection with these transactions. The Company may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are included in the condensed consolidated statements of financial condition at fair value. Any changes in the fair value of such retained interests are recognized in the condensed consolidated statements of income.

Net gains on sales of assets in securitization transactions at the time of the sale were not material in the quarters ended March 31, 2012 and 2011.

During the quarters ended March 31, 2012 and 2011, the Company received proceeds from new securitization transactions of $6.0 billion and $7.9 billion, respectively. During the quarters ended March 31, 2012 and 2011, the Company received proceeds from cash flows from retained interests in securitization transactions of $1.7 billion and $2.4 billion, respectively.

The Company has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Company (see Note 11).

Failed Sales.

In order to be treated as a sale of assets for accounting purposes, a transaction must meet all of the criteria stipulated in the accounting guidance for the transfer of financial assets. If the transfer fails to meet these criteria, that transfer of financial assets is treated as a failed sale. In such case, the Company continues to recognize the assets in Financial instruments owned, and the Company recognizes the associated liabilities in Other secured financings in the condensed consolidated statements of financial condition.

The assets transferred to many unconsolidated VIEs in transactions accounted for as failed sales cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many unconsolidated VIEs are non-recourse to the Company. In certain other failed sale transactions, the Company has the unilateral right to remove assets or provide additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents information about the carrying value (equal to fair value) of assets and liabilities resulting from transfers of financial assets treated by the Company as secured financings:

	At March 31, 2012				At December 31, 2011
	Carrying Value of				Carrying Value of
	Assets		Liabilities		Assets		Liabilities
	(dollars in millions)
Commercial mortgage loans	$	111	$	111	$	121	$	121
Credit-linked notes		318		268		383		339
Equity-linked transactions		812		778		1,243		1,214
Other		90		90		75		74

Mortgage Servicing Activities.

Mortgage Servicing Rights.    The Company may retain servicing rights to certain mortgage loans that are sold. These transactions create an asset referred to as MSRs, which totaled approximately $99 million and $133 million at March 31, 2012 and December 31, 2011, respectively, and are included within Intangible assets and carried at fair value in the condensed consolidated statements of financial condition.

SPE Mortgage Servicing Activities.    The Company services residential mortgage loans in the U.S. and commercial mortgage loans in Europe owned by SPEs, including SPEs sponsored by the Company and SPEs not sponsored by the Company. The Company generally holds retained interests in Company-sponsored SPEs. In some cases, as part of its market-making activities, the Company may own some beneficial interests issued by both Company-sponsored and non-Company sponsored SPEs.

The Company provides no credit support as part of its servicing activities. The Company is required to make servicing advances to the extent that it believes that such advances will be reimbursed. Reimbursement of servicing advances is a senior obligation of the SPE, senior to the most senior beneficial interests outstanding. Outstanding advances are included in Other assets and are recorded at cost, net of allowances. Advances at March 31, 2012 and December 31, 2011 totaled approximately $1.2 billion and $1.3 billion, respectively, net of allowances of $5 million and $14 million at March 31, 2012 and December 31, 2011, respectively.

The following tables present information about the Company’s mortgage servicing activities for SPEs to which the Company transferred loans at March 31, 2012 and December 31, 2011:

	At March 31, 2012
	Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs			Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
	(dollars in millions)
Assets serviced (unpaid principal balance)	$	9,545		$	2,119		$	6,157	$	924
Amounts past due 90 days or greater (unpaid principal balance)(1)	$	2,867		$	339		$	—	$	—
Percentage of amounts past due 90 days or greater(1)		30.0	%		16.0	%		—		—
Credit losses	$	167		$	18		$	—	$	—

(1) Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	At December 31, 2011
	Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs			Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
	(dollars in millions)
Assets serviced (unpaid principal balance)	$	9,821		$	2,180		$	5,750	$	1,596
Amounts past due 90 days or greater (unpaid principal balance)(1)	$	3,087		$	354		$	—	$	—
Percentage of amounts past due 90 days or greater(1)		31.4	%		16.2	%		—		—
Credit losses	$	631		$	81		$	—	$	—

(1) Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

The Company also serviced residential and commercial mortgage loans for SPEs sponsored by unrelated parties with unpaid principal balances totaling $10 billion and $11 billion at March 31, 2012 and December 31, 2011, respectively.

The agreement to sell Saxon assets includes MSRs which totaled approximately $84 million and approximately $119 million at March 31, 2012 and December 31, 2011, respectively. After the completion of this asset sale, the Company will retain the servicing rights for residential mortgage loans held by consolidated SPEs with an unpaid principal balance of approximately $836 million and approximately $872 million at March 31, 2012 and December 31, 2011, respectively (see Notes 1 and 20).

7. Financing Receivables.

Loans held for investment.

The Company’s loans held for investment are recorded at amortized cost and classified as Loans in the condensed consolidated statements of financial condition.

The Company’s loans held for investment at March 31, 2012 and December 31, 2011 included the following:

	At March 31, 2012		At December 31, 2011
	(dollars in millions)
Commercial and industrial	$	5,358	$	5,083
Consumer loans		5,462		5,170
Residential real estate loans		5,092		4,674
Wholesale real estate loans		406		328
Total loans held for investment(1)	$	16,318	$	15,255

(1) Amounts are net of allowances of $26 million and $17 million at March 31, 2012 and December 31, 2011, respectively.

The above table does not include loans held for sale of $411 million and $114 million at March 31, 2012 and December 31, 2011, respectively.

The Company’s Credit Risk Management Department evaluates new obligors before credit transactions are initially approved, and at least annually thereafter for consumer and industrial loans. For corporate and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

commercial loans, credit evaluations typically involve the evaluation of financial statements, assessment of leverage, liquidity, capital strength, asset composition and quality, market capitalization and access to capital markets, cash flow projections and debt service requirements, and the adequacy of collateral, if applicable. The Company’s Credit Risk Management Department will also evaluate strategy, market position, industry dynamics, obligor’s management and other factors that could affect the obligor’s risk profile. For residential real estate and consumer loans, the initial credit evaluation includes, but is not limited to, review of the obligor’s income, net worth, liquidity, collateral, loan-to-value ratio, and credit bureau information. Subsequent credit monitoring for residential real estate loans is performed at the portfolio level. Consumer loan collateral values are monitored on an ongoing basis.

At March 31, 2012, the Company collectively evaluated for impairment, gross of the allowance, commercial and industrial loans, consumer loans, residential real estate loans and wholesale real estate loans of $5,326 million, $5,465 million, $5,094 million and $373 million, respectively. The Company individually evaluated for impairment, gross of the allowance, commercial and industrial loans and wholesale real estate loans of $52 million and $34 million, respectively. Commercial and industrial loans of approximately $31 million and wholesale real estate loans of approximately $34 million were impaired at March 31, 2012. Approximately 99% of the Company’s loan portfolio was current at March 31, 2012.

At December 31, 2011, the Company collectively evaluated for impairment gross commercial and industrial loans, consumer loans, residential real estate loans and wholesale real estate loans of $4,934 million, $5,072 million, $4,675 million and $278 million, respectively. The Company individually evaluated for impairment gross commercial and industrial loans, consumer and wholesale real estate loans of $163 million, $100 million and $50 million, respectively. Commercial and industrial loans of approximately $33 million and wholesale real estate loans of approximately $50 million were impaired at December 31, 2011. Approximately 99% of the Company’s loan portfolio was current at December 31, 2011.

The Company assigned an internal grade of “doubtful” to certain commercial asset-backed and wholesale real estate loans totaling $35 million and $87 million at March 31, 2012 and December 31, 2011, respectively. Doubtful loans can be classified as current if the borrower is making payments in accordance with the loan agreement. The Company assigned an internal grade of “pass” to the majority of its remaining loan portfolio.

For a description of the Company’s loan portfolio and credit quality indicators utilized in its credit monitoring process, see Note 8 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

Employee Loans.

Employee loans are granted primarily in conjunction with a program established in the Global Wealth Management Group business segment to retain and recruit certain employees. These loans are recorded in Receivables—Fees, interest and other in the consolidated statements of financial condition. These loans are full recourse, generally require periodic payments and have repayment terms ranging from one to 12 years. The Company establishes a reserve for loan amounts it does not consider recoverable from terminated employees, which is recorded in Compensation and benefits expense. At March 31, 2012, the Company had $6,053 million of employee loans, net of an allowance of approximately $131 million. At December 31, 2011, the Company had $5,610 million of employee loans, net of an allowance of approximately $119 million.

The Company has also granted loans to other employees primarily in conjunction with certain after-tax leveraged investment arrangements. At March 31, 2012, the balance of these loans was $167 million, net of an allowance of

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

approximately $131 million. At December 31, 2011, the balance of these loans was $162 million, net of an allowance of approximately $133 million. The Company establishes a reserve for non-recourse loan amounts not recoverable from employees, which is recorded in Other expense.

Collateralized Transactions.

In certain instances, the Company enters into reverse repurchase agreements and securities borrowed transactions to acquire securities to cover short positions, to settle other securities obligations and to accommodate customers’ needs. The Company also engages in securities financing transactions for customers through margin lending (see Note 5).

Servicing Advances.

As part of its servicing activities, the Company may make servicing advances to the extent that it believes that such advances will be reimbursed (see Note 6).

8. Goodwill and Net Intangible Assets.

The Company tests goodwill for impairment on an annual basis and on an interim basis when certain events or circumstances exist. The Company tests for impairment at the reporting unit level, which is generally at the level of or one level below its business segments. For both the annual and interim tests, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques the Company believes market participants would use for each of the reporting units.

The estimated fair values of the reporting units are generally determined utilizing methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies. The Company also utilizes a discounted cash flow methodology for certain reporting units.

The Company completed its annual goodwill impairment testing at July 1, 2011. The Company’s testing did not indicate any goodwill impairment. Due to the volatility in the equity markets, the economic outlook and the Company’s common shares trading below book value during the quarter ended March 31, 2012, the Company performed additional impairment testing at March 31, 2012, which did not result in any goodwill impairment. Adverse market or economic events could result in impairment charges in future periods.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill.

Changes in the carrying amount of the Company’s goodwill, net of accumulated impairment losses for the quarter ended March 31, 2012, were as follows:

	Institutional Securities		Global Wealth Management Group		Asset Management		Total
	(dollars in millions)
Goodwill at December 31, 2011(1)	$	330	$	5,616	$	740	$	6,686
Foreign currency translation adjustments and other		14		—		—		14
Goodwill at March 31, 2012(1)	$	344	$	5,616	$	740	$	6,700

(1) The amount of the Company’s goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27 million related to the Asset Management business segment, was $7,400 million and $7,386 million at March 31, 2012 and December 31, 2011, respectively.

Net Intangible Assets.

Changes in the carrying amount of the Company’s intangible assets for the quarter ended March 31, 2012 were as follows:

	Institutional Securities			Global Wealth Management Group			Asset Management		Total
	(dollars in millions)
Amortizable net intangible assets at December 31, 2011	$	229		$	3,641		$	2	$	3,872
Mortgage servicing rights (see Note 6)		122			11			—		133
Indefinite-lived intangible assets		—			280			—		280
Net intangible assets at December 31, 2011	$	351		$	3,932		$	2	$	4,285
Amortizable net intangible assets at December 31, 2011	$	229		$	3,641		$	2	$	3,872
Foreign currency translation adjustments and other		3			—			—		3
Amortization expense		(4	)		(80	)		—		(84	)
Impairment losses(1)		(2	)		—			—		(2	)
Intangible assets acquired during the period		2			—			—		2
Amortizable net intangible assets at March 31, 2012		228			3,561			2		3,791
Mortgage servicing rights (see Note 6)		87			12			—		99
Indefinite-lived intangible assets		—			280			—		280
Net intangible assets at March 31, 2012	$	315		$	3,853		$	2	$	4,170

(1) Impairment losses are recorded within Other expenses.

9. Long-Term Borrowings and Other Secured Financings.

The Company’s long-term borrowings included the following components:

	At March 31, 2012		At December 31, 2011
	(dollars in millions)
Senior debt	$	167,986	$	175,471
Subordinated debt		3,899		3,910
Junior subordinated debentures		4,838		4,853
Total	$	176,723	$	184,234

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MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the quarter ended March 31, 2012, the Company issued notes with a principal amount of approximately $5 billion. During the quarter ended March 31, 2012, approximately $16 billion of notes were matured or retired.

The weighted average maturity of the Company’s long-term borrowings, based upon stated maturity dates, was approximately 5.3 years and 5.0 years at March 31, 2012 and December 31, 2011, respectively.

FDIC’s Temporary Liquidity Guarantee Program.

At March 31, 2012 and December 31, 2011, the Company had long-term debt outstanding of $4.7 billion and $12.1 billion, respectively, under the Temporary Liquidity Guarantee Program (“TLGP”). The issuance of debt under the TLPG expired on December 31, 2010, but the existing long-term debt outstanding is guaranteed until June 30, 2012. These borrowings are senior unsecured debt obligations of the Company and guaranteed by the FDIC under the TLGP. The FDIC has concluded that the guarantee is backed by the full faith and credit of the U.S. government.

Other Secured Financings.

Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Company is deemed to be the primary beneficiary, pledged commodities, certain equity-linked notes and other secured borrowings. See Note 6 for further information on other secured financings related to variable interest entities and securitization activities.

The Company’s other secured financings consisted of the following:

	At March 31, 2012		At December 31, 2011
	(dollars in millions)
Secured financings with original maturities greater than one year	$	19,883	$	18,696
Secured financings with original maturities one year or less		305		275
Failed sales(1)		1,247		1,748
Total(2)	$	21,435	$	20,719

(1) For more information on failed sales, see Note 6.

(2) Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

10. Derivative Instruments and Hedging Activities.

The Company trades, makes markets and takes proprietary positions globally in listed futures, OTC swaps, forwards, options and other derivatives referencing, among other things, interest rates, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, asset-backed security indices, property indices, mortgage-related and other asset-backed securities, and real estate loan products. The Company uses these instruments for trading, foreign currency exposure management and asset and liability management.

The Company manages its trading positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). The Company manages the market risk associated with its trading activities on a Company-wide basis, on a worldwide trading division level and on an individual product basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s derivative products consist of the following:

	At March 31, 2012				At December 31, 2011
	Assets		Liabilities		Assets		Liabilities
	(dollars in millions)
Exchange traded derivative products	$	3,882	$	6,071	$	4,103	$	4,969
OTC derivative products		36,134		36,694		43,961		41,484
Total	$	40,016	$	42,765	$	48,064	$	46,453

The Company incurs credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the failure of a counterparty to perform according to the terms of the contract. The Company’s exposure to credit risk at any point in time is represented by the fair value of the derivative contracts reported as assets. The fair value of a derivative represents the amount at which the derivative could be exchanged in an orderly transaction between market participants and is further described in Notes 2 and 3.

In connection with its OTC derivative activities, the Company generally enters into master netting agreements and collateral arrangements with counterparties. These agreements provide the Company with the ability to offset a counterparty’s rights and obligations, request additional collateral when necessary or liquidate the collateral in the event of counterparty default.

The tables below present a summary by counterparty credit rating and remaining contract maturity of the fair value of OTC derivatives in a gain position at March 31, 2012 and December 31, 2011, respectively. Fair value is presented in the final column, net of collateral received (principally cash and U.S. government and agency securities):

OTC Derivative Products—Financial Instruments Owned at March 31, 2012(1)

	Years to Maturity								Cross-Maturity and Cash Collateral Netting(3)			Net Exposure Post-Cash Collateral		Net Exposure Post-Collateral
Credit Rating(2)	Less than 1		1 - 3		3 - 5		Over 5
	(dollars in millions)
AAA	$	224	$	1,058	$	1,276	$	7,837	$	(5,813	)	$	4,582	$	4,408
AA		2,983		5,988		5,226		16,675		(22,926	)		7,946		5,959
A		6,867		5,478		10,791		28,012		(41,189	)		9,959		6,769
BBB		3,456		3,638		2,838		14,690		(16,673	)		7,949		6,544
Non-investment grade		2,931		2,991		1,832		4,216		(6,272	)		5,698		3,144
Total	$	16,461	$	19,153	$	21,963	$	71,430	$	(92,873	)	$	36,134	$	26,824

(1) Fair values shown represent the Company’s net exposure to counterparties related to the Company’s OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2) Obligor credit ratings are determined by the Company’s Credit Risk Management Department.

(3) Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

OTC Derivative Products—Financial Instruments Owned at December 31, 2011(1)

	Years to Maturity								Cross-Maturity and Cash Collateral Netting(3)			Net Exposure Post-Cash Collateral		Net Exposure Post-Collateral
Credit Rating(2)	Less than 1		1 - 3		3 - 5		Over 5
	(dollars in millions)
AAA	$	621	$	1,615	$	1,586	$	10,375	$	(7,513	)	$	6,684	$	6,389
AA		5,578		7,547		5,972		21,068		(31,074	)		9,091		7,048
A		7,576		5,538		10,224		27,417		(41,608	)		9,147		7,117
BBB		4,437		4,448		3,231		17,758		(17,932	)		11,942		10,337
Non-investment grade		2,819		2,949		2,703		5,084		(6,458	)		7,097		4,158
Total	$	21,031	$	22,097	$	23,716	$	81,702	$	(104,585	)	$	43,961	$	35,049

(1) Fair values shown represent the Company’s net exposure to counterparties related to the Company’s OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2) Obligor credit ratings are determined by the Company’s Credit Risk Management Department.

(3) Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

Hedge Accounting.

The Company applies hedge accounting using various derivative financial instruments to hedge interest rate and foreign exchange risk arising from assets and liabilities not held at fair value as part of asset and liability management and foreign currency exposure management.

The Company’s hedges are designated and qualify for accounting purposes as one of the following types of hedges: hedges of exposure to changes in fair value of assets and liabilities being hedged (fair value hedges) and hedges of net investments in foreign operations whose functional currency is different from the reporting currency of the parent company (net investment hedges).

For all hedges where hedge accounting is being applied, effectiveness testing and other procedures to ensure the ongoing validity of the hedges are performed at least monthly.

Fair Value Hedges—Interest Rate Risk.    The Company’s designated fair value hedges consisted primarily of interest rate swaps designated as fair value hedges of changes in the benchmark interest rate of fixed rate senior long-term borrowings. The Company uses regression analysis to perform an ongoing prospective and retrospective assessment of the effectiveness of these hedging relationships (i.e., the Company applies the “long-haul” method of hedge accounting). A hedging relationship is deemed effective if the fair values of the hedging instrument (derivative) and the hedged item (debt liability) change inversely within a range of 80% to 125%. The Company considers the impact of valuation adjustments related to the Company’s own credit spreads and counterparty credit spreads to determine whether they would cause the hedging relationship to be ineffective.

For qualifying fair value hedges of benchmark interest rates, the changes in the fair value of the derivative and the changes in the fair value of the hedged liability provide offset of one another and, together with any resulting ineffectiveness, are recorded in Interest expense. When a derivative is de-designated as a hedge, any basis adjustment remaining on the hedged liability is amortized to Interest expense over the remaining life of the liability using the effective interest method.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Net Investment Hedges.    The Company may utilize forward foreign exchange contracts to manage the currency exposure relating to its net investments in non-U.S. dollar functional currency operations. No hedge ineffectiveness is recognized in earnings since the notional amounts of the hedging instruments equal the portion of the investments being hedged and the currencies being exchanged are the functional currencies of the parent and investee. The gain or loss from revaluing hedges of net investments in foreign operations at the spot rate is deferred and reported within Accumulated other comprehensive income (loss) in Total Equity, net of tax effects. The forward points on the hedging instruments are recorded in Interest income.

The following tables summarize the fair value of derivative instruments designated as accounting hedges and the fair value of derivative instruments not designated as accounting hedges by type of derivative contract on a gross basis. Fair values of derivative contracts in an asset position are included in Financial instruments owned—Derivative and other contracts. Fair values of derivative contracts in a liability position are reflected in Financial instruments sold, not yet purchased—Derivative and other contracts.

	Assets at March 31, 2012					Liabilities at March 31, 2012
	Fair Value			Notional		Fair Value			Notional
	(dollars in millions)
Derivatives designated as accounting hedges:
Interest rate contracts	$	7,759		$	72,728	$	—		$	—
Foreign exchange contracts		392			12,845		148			9,692
Total derivatives designated as accounting hedges		8,151			85,573		148			9,692
Derivatives not designated as accounting hedges(1):
Interest rate contracts		783,760			20,207,486		762,593			19,864,081
Credit contracts		99,996			2,382,764		93,766			2,331,035
Foreign exchange contracts		47,707			1,718,721		50,783			1,803,265
Equity contracts		46,538			673,987		51,149			689,748
Commodity contracts		40,116			430,298		40,506			385,031
Other		61			3,448		72			6,058
Total derivatives not designated as accounting hedges		1,018,178			25,416,704		998,869			25,079,218
Total derivatives	$	1,026,329		$	25,502,277	$	999,017		$	25,088,910
Cash collateral netting		(68,587	)		—		(38,526	)		—
Counterparty netting		(917,726	)		—		(917,726	)		—
Total derivatives	$	40,016		$	25,502,277	$	42,765		$	25,088,910

(1) Notional amounts include net notionals related to long and short futures contracts of $85 billion and $75 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $189 million and $36 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Assets at December 31, 2011					Liabilities at December 31, 2011
	Fair Value			Notional		Fair Value			Notional
	(dollars in millions)
Derivatives designated as accounting hedges:
Interest rate contracts	$	8,151		$	71,706	$	—		$	—
Foreign exchange contracts		348			12,222		57			7,111
Total derivatives designated as accounting hedges		8,499			83,928		57			7,111
Derivatives not designated as accounting hedges(1):
Interest rate contracts		904,725			21,099,876		880,027			21,005,733
Credit contracts		138,791			2,466,623		130,726			2,428,042
Foreign exchange contracts		61,995			1,582,364		64,691			1,604,493
Equity contracts		46,287			603,290		48,286			595,146
Commodity contracts		39,778			411,661		39,998			374,594
Other		598			11,662		2,275			24,905
Total derivatives not designated as accounting hedges		1,192,174			26,175,476		1,166,003			26,032,913
Total derivatives	$	1,200,673		$	26,259,404	$	1,166,060		$	26,040,024
Cash collateral netting		(77,938	)		—		(44,936	)		—
Counterparty netting		(1,074,671	)		—		(1,074,671	)		—
Total derivatives	$	48,064		$	26,259,404	$	46,453		$	26,040,024

(1) Notional amounts include net notionals related to long and short futures contracts of $77 billion and $66 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $605 million and $37 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

The following tables summarize the gains or losses reported on derivative instruments designated and qualifying as accounting hedges for the quarters ended March 31, 2012 and 2011, respectively.

Derivatives Designated as Fair Value Hedges.

The following table presents gains (losses) reported on derivative instruments and the related hedge item as well as the hedge ineffectiveness included in Interest expense in the condensed consolidated statements of income from interest rate contracts:

	Gains (Losses) Recognized
	Three Months Ended March 31,
Product Type	2012			2011
	(dollars in millions)
Derivatives	$	(546	)	$	(1,095	)
Borrowings		698			1,258
Total	$	152		$	163

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Derivatives Designated as Net Investment Hedges.

	Gains (Losses) Recognized in OCI (effective portion)
	Three Months Ended March 31,
Product Type	2012		2011
	(dollars in millions)
Foreign exchange contracts(1)	$	21	$	(126	)
Total	$	21	$	(126	)

(1) Losses of $66 million and $47 million were recognized in income related to amounts excluded from hedge effectiveness testing during the quarters ended March 31, 2012 and 2011, respectively.

The table below summarizes gains (losses) on derivative instruments not designated as accounting hedges for the quarters ended March 31, 2012 and 2011, respectively:

	Gains (Losses) Recognized in Income(1)(2)
	Three Months Ended March 31,
Product Type	2012			2011
	(dollars in millions)
Interest rate contracts	$	1,607		$	925
Credit contracts		(672	)		(697	)
Foreign exchange contracts		595			(339	)
Equity contracts		(828	)		(1,319	)
Commodity contracts		(576	)		(271	)
Other contracts		55			208
Total derivative instruments	$	181		$	(1,493	)

(1) Gains (losses) on derivative contracts not designated as hedges are primarily included in Principal transactions—Trading.

(2) Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Principal transactions—Trading.

The Company also has certain embedded derivatives that have been bifurcated from the related structured borrowings. Such derivatives are classified in Long-term borrowings and had a net fair value of $42 million and $53 million at March 31, 2012 and December 31, 2011, respectively, and a notional value of $3,299 million and $3,312 million at March 31, 2012 and December 31, 2011, respectively. The Company recognized gains of $7 million and losses of $19 million related to changes in the fair value of its bifurcated embedded derivatives for the quarters ended March 31, 2012 and 2011, respectively.

At March 31, 2012 and December 31, 2011, the amount of payables associated with cash collateral received that was netted against derivative assets was $68.6 billion and $77.9 billion, respectively, and the amount of receivables in respect of cash collateral paid that was netted against derivative liabilities was $38.5 billion and $44.9 billion, respectively. Cash collateral receivables and payables of $276 million and $32 million, respectively, at March 31, 2012 and $268 million and $9 million, respectively, at December 31, 2011, were not offset against certain contracts that did not meet the definition of a derivative.

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Credit-Risk-Related Contingencies.

In connection with certain OTC trading agreements, the Company may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit ratings downgrade. At March 31, 2012, the aggregate fair value of OTC derivative contracts that contain credit-risk-related contingent features that are in a net liability position totaled $34,669 million, for which the Company has posted collateral of $28,717 million, in the normal course of business. The long-term credit ratings on the Company by Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”) are currently at different levels (commonly referred to as “split ratings”). At March 31, 2012, the following are the amounts of additional collateral termination payments or other contractual amounts that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company’s long-term credit rating under various scenarios: $135 million (A3 Moody’s/A- S&P) and $3,432 million (Baa1 Moody’s/ BBB+ S&P). Of these amounts, $2,883 million at March 31, 2012 related to bilateral arrangements between the Company and other parties where upon the downgrade of one party, the downgraded party must deliver incremental collateral to the other party. These bilateral downgrade arrangements are a risk management tool used extensively by the Company as credit exposures are reduced if counterparties are downgraded.

Credit Derivatives and Other Credit Contracts.

The Company enters into credit derivatives, principally through credit default swaps, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Company’s counterparties are banks, broker-dealers, insurance and other financial institutions, and monoline insurers.

The tables below summarize the notional and fair value of protection sold and protection purchased through credit default swaps at March 31, 2012 and December 31, 2011:

	At March 31, 2012
	Maximum Potential Payout/Notional
	Protection Sold				Protection Purchased
	Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
	(dollars in millions)
Single name credit default swaps	$	1,285,767	$	21,182	$	1,266,956	$	(20,328	)
Index and basket credit default swaps		716,615		13,068		548,335		(11,560	)
Tranched index and basket credit default swaps		349,543		8,100		546,583		(16,692	)
Total	$	2,351,925	$	42,350	$	2,361,874	$	(48,580	)

	At December 31, 2011
	Maximum Potential Payout/Notional
	Protection Sold				Protection Purchased
	Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
	(dollars in millions)
Single name credit default swaps	$	1,325,045	$	47,045	$	1,315,333	$	(45,345	)
Index and basket credit default swaps		787,228		29,475		601,452		(24,373	)
Tranched index and basket credit default swaps		320,131		17,109		545,476		(31,976	)
Total	$	2,432,404	$	93,629	$	2,462,261	$	(101,694	)

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The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at March 31, 2012:

	Protection Sold
	Maximum Potential Payout/Notional										Fair Value (Asset)/ Liability(1)(2)
	Years to Maturity
Credit Ratings of the Reference Obligation	Less than 1		1-3		3-5		Over 5		Total
	(dollars in millions)
Single name credit default swaps:
AAA	$	1,733	$	5,488	$	16,458	$	10,828	$	34,507	$	673
AA		11,876		19,269		23,462		12,448		67,055		603
A		77,436		116,747		85,603		46,123		325,909		4,760
BBB		139,019		207,126		113,761		57,297		517,203		(2,771	)
Non-investment grade		95,683		124,621		79,016		41,773		341,093		17,917
Total		325,747		473,251		318,300		168,469		1,285,767		21,182
Index and basket credit default swaps(3):
AAA		49,836		68,416		48,295		26,424		192,971		(1,688	)
AA		3,945		7,973		10,567		9,691		32,176		202
A		4,023		11,023		29,450		16,832		61,328		1,708
BBB		8,605		82,109		186,346		77,980		355,040		1,519
Non-investment grade		111,557		119,125		125,080		68,881		424,643		19,427
Total		177,966		288,646		399,738		199,808		1,066,158		21,168
Total credit default swaps sold	$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350
Other credit contracts(4)(5)	$	186	$	1,125	$	527	$	2,721	$	4,559	$	(1,787	)
Total credit derivatives and other credit contracts	$	503,899	$	763,022	$	718,565	$	370,998	$	2,356,484	$	40,563

(1) Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2) Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3) Credit ratings are calculated internally.

(4) Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5) Fair value amount shown represents the fair value of the hybrid instruments.

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The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at December 31, 2011:

	Protection Sold
	Maximum Potential Payout/Notional										Fair Value (Asset)/ Liability(1)(2)
	Years to Maturity
Credit Ratings of the Reference Obligation	Less than 1		1-3		3-5		Over 5		Total
	(dollars in millions)
Single name credit default swaps:
AAA	$	1,290	$	5,681	$	24,087	$	12,942	$	44,000	$	1,536
AA		12,416		22,043		23,341		10,986		68,786		1,597
A		67,344		124,445		85,543		47,640		324,972		8,683
BBB		131,588		218,262		115,320		64,347		529,517		4,789
Non-investment grade		94,105		133,867		82,163		47,635		357,770		30,440
Total		306,743		504,298		330,454		183,550		1,325,045		47,045
Index and basket credit default swaps(3):
AAA		48,115		49,997		33,584		19,110		150,806		(907	)
AA		6,584		15,349		9,498		15,745		47,176		1,053
A		5,202		18,996		17,396		12,286		53,880		2,470
BBB		8,525		99,004		235,888		32,057		375,474		8,365
Non-investment grade		112,451		141,042		160,537		65,993		480,023		35,603
Total		180,877		324,388		456,903		145,191		1,107,359		46,584
Total credit default swaps sold	$	487,620	$	828,686	$	787,357	$	328,741	$	2,432,404	$	93,629
Other credit contracts(4)(5)	$	65	$	2,356	$	717	$	2,469	$	5,607	$	(1,146	)
Total credit derivatives and other credit contracts	$	487,685	$	831,042	$	788,074	$	331,210	$	2,438,011	$	92,483

(1) Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2) Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3) Credit ratings are calculated internally.

(4) Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5) Fair value amount shown represents the fair value of the hybrid instruments.

Single Name Credit Default Swaps.    A credit default swap protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a periodic premium (generally quarterly) over the life of the contract and is protected for the period. The Company in turn will have to perform under a credit default swap if a credit event as defined under the contract occurs. Typical credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay and restructuring of the obligations of the referenced entity. In order to provide an indication of the current payment status or performance risk of the credit default swaps, the external credit ratings of the underlying reference entity of the credit default swaps are disclosed.

Index and Basket Credit Default Swaps.    Index and basket credit default swaps are credit default swaps that reference multiple names through underlying baskets or portfolios of single name credit default swaps. Generally, in the event of a default on one of the underlying names, the Company will have to pay a pro rata portion of the total notional amount of the credit default index or basket contract. In order to provide an indication of the current payment status or performance risk of these credit default swaps, the weighted average external credit ratings of the underlying reference entities comprising the basket or index were calculated and disclosed.

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The Company also enters into index and basket credit default swaps where the credit protection provided is based upon the application of tranching techniques. In tranched transactions, the credit risk of an index or basket is separated into various portions of the capital structure, with different levels of subordination. The most junior tranches cover initial defaults, and once losses exceed the notional of the tranche, they are passed on to the next most senior tranche in the capital structure.

When external credit ratings are not available, credit ratings were determined based upon an internal methodology.

Credit Protection Sold through CLNs and CDOs.    The Company has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Company.

Purchased Credit Protection with Identical Underlying Reference Obligations.    For single name credit default swaps and non-tranched index and basket credit default swaps, the Company has purchased protection with a notional amount of approximately $2.0 trillion and $1.9 trillion at March 31, 2012 and December 31, 2011, compared with a notional amount of approximately $1.8 trillion and $2.1 trillion, at March 31, 2012 and December 31, 2011, respectively, of credit protection sold with identical underlying reference obligations. In order to identify purchased protection with the same underlying reference obligations, the notional amount for individual reference obligations within non-tranched indices and baskets was determined on a pro rata basis and matched off against single name and non-tranched index and basket credit default swaps where credit protection was sold with identical underlying reference obligations.

The purchase of credit protection does not represent the sole manner in which the Company risk manages its exposure to credit derivatives. The Company manages its exposure to these derivative contracts through a variety of risk mitigation strategies, which include managing the credit and correlation risk across single name, non-tranched indices and baskets, tranched indices and baskets, and cash positions. Aggregate market risk limits have been established for credit derivatives, and market risk measures are routinely monitored against these limits. The Company may also recover amounts on the underlying reference obligation delivered to the Company under credit default swaps where credit protection was sold.

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11. Commitments, Guarantees and Contingencies.

Commitments.

The Company’s commitments associated with outstanding letters of credit and other financial guarantees obtained to satisfy collateral requirements, investment activities, corporate lending and financing arrangements, mortgage lending and margin lending at March 31, 2012 are summarized below by period of expiration. Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

	Years to Maturity								Total at March 31, 2012
	Less than 1		1-3		3-5		Over 5
	(dollars in millions)
Letters of credit and other financial guarantees obtained to satisfy collateral requirements	$	2,068	$	12	$	6	$	—	$	2,086
Investment activities		1,160		238		44		274		1,716
Primary lending commitments—investment grade(1)(2)		10,181		9,854		31,778		1,997		53,810
Primary lending commitments—non-investment grade(2)		2,182		2,789		9,981		897		15,849
Secondary lending commitments(3)		56		203		20		112		391
Commitments for secured lending transactions		1,299		251		198		—		1,748
Forward starting reverse repurchase agreements and securities borrowing agreements(4)		74,317		—		—		—		74,317
Commercial and residential mortgage-related commitments		1,378		26		201		450		2,055
Other commitments		1,262		248		5		1		1,516
Total	$	93,903	$	13,621	$	42,233	$	3,731	$	153,488

(1) This amount includes commitments to asset-backed commercial paper conduits of $275 million at March 31, 2012, of which $138 million have maturities of less than one year and $137 million of which have maturities of one to three years.

(2) This amount includes $12.2 billion of investment grade and $3.5 billion of non-investment grade unfunded commitments accounted for as held for investment and $68 million of investment grade and $191 million of non-investment grade unfunded commitments accounted for as held for sale at March 31, 2012. The remainder of these lending commitments are carried at fair value.

(3) These commitments are recorded at fair value within Financial instruments owned and Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition (see Note 3).

(4) The Company enters into forward starting reverse repurchase and securities borrowing agreements (agreements that have a trade date at or prior to March 31, 2012 and settle subsequent to period-end) that are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations. These agreements primarily settle within three business days and of the amount at March 31, 2012, $70.7 billion settled within three business days.

For further description of these commitments, refer to Note 13 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

The Company sponsors several non-consolidated investment funds for third-party investors where the Company typically acts as general partner of, and investment advisor to, these funds and typically commits to invest a minority of the capital of such funds, with subscribing third-party investors contributing the majority. The Company’s employees, including its senior officers, as well as the Company’s directors, may participate on the same terms and conditions as other investors in certain of these funds that the Company forms primarily for client investment, except that the Company may waive or lower applicable fees and charges for its employees. The Company has contractual capital commitments, guarantees, lending facilities and counterparty arrangements with respect to these investment funds.

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Guarantees.

The table below summarizes certain information regarding the Company’s obligations under guarantee arrangements at March 31, 2012:

	Maximum Potential Payout/Notional										Carrying Amount (Asset)/ Liability			Collateral/ Recourse
	Years to Maturity
Type of Guarantee	Less than 1		1-3		3-5		Over 5		Total
	(dollars in millions)
Credit derivative contracts(1)	$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350		$	—
Other credit contracts		186		1,125		527		2,721		4,559		(1,787	)		—
Non-credit derivative contracts(1)		1,084,120		889,974		375,232		424,365		2,773,691		85,784			—
Standby letters of credit and other financial guarantees issued(2)(3)		1,247		1,704		1,253		5,604		9,808		(141	)		6,788
Market value guarantees		—		51		188		553		792		13			89
Liquidity facilities		4,827		305		37		67		5,236		(7	)		6,552
Whole loan sales representations and warranties		—		—		—		24,366		24,366		79			—
Securitization representations and warranties		—		—		—		78,029		78,029		35			—
General partner guarantees		83		18		25		156		282		77			—

(1) Carrying amounts of derivative contracts are shown on a gross basis prior to cash collateral or counterparty netting. For further information on derivative contracts, see Note 10.

(2) Approximately $2.6 billion of standby letters of credit are also reflected in the “Commitments” table in primary and secondary lending commitments. Standby letters of credit are recorded at fair value within Financial instruments owned or Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition.

(3) Amounts include guarantees issued by consolidated real estate funds sponsored by the Company of approximately $225 million. These guarantees relate to obligations of the fund’s investee entities, including guarantees related to capital expenditures and principal and interest debt payments. Accrued losses under these guarantees of approximately $7 million are reflected as a reduction of the carrying value of the related fund investments, which are reflected in Financial instruments owned—Investments on the condensed consolidated statement of financial condition.

For further description of these guarantees, refer to Note 13 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

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The Company has obligations under certain guarantee arrangements, including contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying measure (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or non-occurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Also included as guarantees are contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity’s failure to perform under an agreement, as well as indirect guarantees of the indebtedness of others. The Company’s use of guarantees is described below by type of guarantee:

Other Guarantees and Indemnities.

In the normal course of business, the Company provides guarantees and indemnifications in a variety of commercial transactions. These provisions generally are standard contractual terms. Certain of these guarantees and indemnifications are described below.

• Trust Preferred Securities.    The Company has established Morgan Stanley Capital Trusts for the limited purpose of issuing trust preferred securities to third parties and lending the proceeds to the Company in exchange for junior subordinated debentures. The Company has directly guaranteed the repayment of the trust preferred securities to the holders thereof to the extent that the Company has made payments to a Morgan Stanley Capital Trust on the junior subordinated debentures. In the event that the Company does not make payments to a Morgan Stanley Capital Trust, holders of such series of trust preferred securities would not be able to rely upon the guarantee for payment of those amounts. The Company has not recorded any liability in the condensed consolidated financial statements for these guarantees and believes that the occurrence of any events (i.e., non-performance on the part of the paying agent) that would trigger payments under these contracts is remote. See Note 15 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K for details on the Company’s junior subordinated debentures.

• Indemnities.    The Company provides standard indemnities to counterparties for certain contingent exposures and taxes, including U.S. and foreign withholding taxes, on interest and other payments made on derivatives, securities and stock lending transactions, certain annuity products and other financial arrangements. These indemnity payments could be required based on a change in the tax laws or change in interpretation of applicable tax rulings or a change in factual circumstances. Certain contracts contain provisions that enable the Company to terminate the agreement upon the occurrence of such events. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated.

• Exchange/Clearinghouse Member Guarantees.    The Company is a member of various U.S. and non-U.S. exchanges and clearinghouses that trade and clear securities and/or derivative contracts. Associated with its membership, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange or the clearinghouse. While the rules governing different exchange or clearinghouse memberships vary, in general the Company’s guarantee obligations would arise only if the exchange or clearinghouse had previously exhausted its resources. The maximum potential payout under these membership agreements cannot be estimated. The Company has not recorded any contingent liability in the condensed consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote.

• Merger and Acquisition Guarantees.    The Company may, from time to time, in its role as investment banking advisor be required to provide guarantees in connection with certain European merger and acquisition transactions. If required by the regulating authorities, the Company provides a guarantee that the acquirer in the merger and acquisition transaction has or will have sufficient funds to complete the transaction and would then be required to make the acquisition payments in the event the acquirer’s funds are insufficient at the completion date of the transaction. These arrangements generally cover the time

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frame from the transaction offer date to its closing date and, therefore, are generally short term in nature. The maximum potential amount of future payments that the Company could be required to make cannot be estimated. The Company believes the likelihood of any payment by the Company under these arrangements is remote given the level of the Company’s due diligence associated with its role as investment banking advisor.

• Guarantees on Morgan Stanley Stable Value Program.    On September 30, 2009, the Company entered into an agreement with the investment manager for the Stable Value Program (“SVP”), a fund within the Company’s 401(k) plan, and certain other third parties. Under the agreement, the Company contributed $20 million to the SVP on October 15, 2009 and recorded the contribution in Compensation and benefits expense. Additionally, the Company may have a future obligation to make a payment of $40 million to the SVP following the third anniversary of the agreement, after which the SVP would be wound down over a period of time. The future obligation is contingent upon whether the market-to-book value ratio of the portion of the SVP that is subject to certain book-value stabilizing contracts has fallen below a specific threshold and the Company and the other parties to the agreement all decline to make payments to restore the SVP to such threshold as of the third anniversary of the agreement. The Company has not recorded a liability for this guarantee in the condensed consolidated financial statements.

In the ordinary course of business, the Company guarantees the debt and/or certain trading obligations (including obligations associated with derivatives, foreign exchange contracts and the settlement of physical commodities) of certain subsidiaries. These guarantees generally are entity or product specific and are required by investors or trading counterparties. The activities of the subsidiaries covered by these guarantees (including any related debt or trading obligations) are included in the Company’s condensed consolidated financial statements.

Contingencies.

Legal.    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 are in financial distress. These actions have included, but are not limited to, residential mortgage and credit crisis related matters. Over the last several years, the level of litigation and investigatory activity focused on residential mortgage and credit crisis related matters 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 regarding residential mortgages and related securities in the future and, while the Company has identified below any individual proceedings where the Company believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that have not yet been notified to the Company or are not yet determined to be probable or possible and reasonably estimable losses.

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, including, among other matters, 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 condensed 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. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In

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addition, even where loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss.

For certain legal proceedings, the Company cannot reasonably estimate such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. 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, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding.

For certain other legal proceedings, the Company can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued, but does not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the Company’s condensed consolidated financial statements as a whole, other than the matters referred to in the following paragraphs.

On September 25, 2009, the Company was named as a defendant in a lawsuit styled Citibank, N.A. v. Morgan Stanley & Co. International, PLC, which was pending in the United States District Court for the Southern District of New York (“SDNY”). The lawsuit relates to a credit default swap referencing the Capmark VI CDO (“Capmark”), which was structured by Citibank, N.A. (“Citi N.A.”). At issue is whether, as part of the swap agreement, Citi N.A. was obligated to obtain the Company’s prior written consent before it exercised its rights to liquidate Capmark upon the occurrence of certain contractually-defined credit events. Citi N.A. is seeking approximately $245 million in compensatory damages plus interest and costs. On October 8, 2010, the court issued an order denying Citi N.A.’s motion for judgment on the pleadings as to the Company’s counterclaim for reformation and granting Citi N.A.’s motion for judgment on the pleadings as to the Company’s counterclaim for estoppel. On May 25, 2011, the court issued an order denying the Company’s motion for summary judgment and granting Citi N.A.’s cross motion for summary judgment. On June 27, 2011, the court entered a judgment in favor of Citi N.A. for $269 million plus post-judgment interest and costs, and the Company filed a notice of appeal with the United States Court of Appeals for the Second Circuit, which appeal is now pending. Based on currently available information, the Company believes it could incur a loss of up to approximately $269 million plus post-judgment interest.

On August 25, 2008, the Company and two ratings agencies were named as defendants in a purported class action related to securities issued by a structured investment vehicle called Cheyne Finance (the “Cheyne SIV”). The case is styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. and is pending in the SDNY. The complaint alleges, among other things, that the ratings assigned to the securities issued by the Cheyne SIV were false and misleading because the ratings did not accurately reflect the risks associated with the subprime residential mortgage backed securities held by the Cheyne SIV. On September 2, 2009, the court dismissed all of the claims against the Company except for plaintiffs’ claims for common law fraud. On June 15, 2010, the court denied plaintiffs’ motion for class certification. On July 20, 2010, the court granted plaintiffs leave to replead their aiding and abetting common law fraud claims against the Company, and those claims were added in an amended complaint filed on August 5, 2010. On December 27, 2011, the court permitted plaintiffs to reinstate their causes of action for negligent misrepresentation and breach of fiduciary duty against the Company. The Company moved to dismiss these claims on January 10, 2012. On January 5, 2012, the court permitted plaintiffs to amend their Complaint and assert a negligence claim against the Company. The amended complaint was filed on January 9, 2012 and the Company moved to dismiss the negligence claim on January 17, 2012. On January 23, 2012, the Company moved for summary judgment with respect to the fraud and aiding and abetting fraud claims. There are 15 plaintiffs in this action asserting claims related to approximately $983 million of securities issued by the Cheyne SIV. Plaintiffs have not alleged the amount of their alleged investments and are seeking, among other things, unspecified compensatory and punitive damages. Based on currently available

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information, the Company believes that the defendants could incur a loss up to the amount of plaintiffs’ claimed compensatory damages, once specified, related to their alleged purchase of approximately $983 million of securities issued by the Cheyne SIV plus pre- and post-judgment interest, fees and costs.

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, which is styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al. and is pending in the Supreme Court of the State of New York, New York County. The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court presiding over this action denied the Company’s motion to dismiss the complaint. On March 21, 2011, the Company appealed the order denying its motion to dismiss the complaint. On July 7, 2011, the appellate court affirmed the lower court’s decision denying the motion to dismiss. Based on currently available information, the Company believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against the Company and other defendants in the Superior Court of the State of California. These actions are styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints were filed on June 10, 2010. The complaints allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass through certificates backed by securitization trusts containing residential mortgage loans. The original amount of the certificates allegedly sold to plaintiff by the Company in these cases was approximately $980 million collectively. The complaints raise claims under both the federal securities laws and California law and seek, among other things, to rescind the plaintiff’s purchase of such certificates. On July 29, 2011 and September 8, 2011, the court presiding over these cases dismissed the federal securities law claims against the Company, but denied the Company’s motion to dismiss with respect to other claims. At March 31, 2012, the current unpaid balance of the mortgage pass through certificates at issue in these cases was approximately $398 million and the certificates had not yet incurred losses. Based on currently available information, the Company believes it could incur a loss up to the difference between the $398 million unpaid balance of these certificates and their fair market value at the time of a judgment against the Company, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and would be entitled to an offset for interest received by the plaintiff prior to a judgment.

12. Regulatory Requirements.

Morgan Stanley.    The Company is a financial holding company under the Bank Holding Company Act of 1956, as amended, and is subject to the regulation and oversight of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Federal Reserve establishes capital requirements for the Company, including well-capitalized standards, and evaluates the Company’s compliance with such capital requirements. The Office of the Comptroller of the Currency establishes similar capital requirements and standards for the Company’s national bank subsidiaries.

The Company calculates its capital ratios and risk-weighted assets (“RWA”) in accordance with the capital adequacy standards for financial holding companies adopted by the Federal Reserve. These standards are based upon a framework described in the “International Convergence of Capital Measurement and Capital Standards,” July 1988, as amended, also referred to as Basel I. In December 2007, the U.S. banking regulators published final

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regulation incorporating the Basel II Accord, which requires internationally active banking organizations, as well as certain of their U.S. bank subsidiaries, to implement Basel II standards over the next several years. In July 2010, the Company began reporting its capital adequacy standards on a parallel basis to its regulators under Basel I and Basel II as part of a phased implementation of Basel II.

In June 2011, the U.S. banking regulators published final regulations implementing a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring certain institutions supervised by the Federal Reserve, including the Company, be subject to capital requirements that are not less than the generally applicable risk-based capital requirements. As a result, the generally applicable capital standards, which are based on Basel I standards, but may themselves change over time, will serve as a permanent floor to minimum capital requirements calculated under the Basel II standards the Company is currently required to implement, as well as future capital standards.

In December 2009, the Basel Committee released proposals on risk-based capital, leverage and liquidity standards, known as “Basel III”. Basel III contains new capital standards that raise the quality of capital and strengthen counterparty credit risk capital requirements and introduces a leverage ratio as a supplemental measure to the risk-based ratio. Basel III includes a new capital conservation buffer, which imposes a common equity requirement above the new minimum that can be depleted under stress, subject to restrictions on capital actions, a new additional loss absorbency capital requirement for global systemically important banks (“GSIB”), such as the Company, and a new countercyclical buffer, which regulators can activate during periods of excessive credit growth in their jurisdiction. The Basel III proposals complement an earlier proposal for revisions to the market risk framework that increases capital requirements for securitizations within the Company’s trading book. In 2011, the U.S. regulators issued proposed rules that are intended to implement certain aspects of the market risk framework proposals. While precise dates for the implementation of the new requirements in the U.S. have not been announced, the U.S. regulators will require implementation of Basel III subject to an extended phase-in period.

At March 31, 2012, the Company was in compliance with Basel I capital requirements with ratios of Tier 1 capital to RWAs of 16.8% and total capital to RWAs of 18.1% (6% and 10% being well-capitalized for regulatory purposes, respectively). In addition, financial holding companies are subject to a Tier 1 leverage ratio as defined by the Federal Reserve. The Company calculated its Tier 1 leverage ratio as Tier 1 capital divided by adjusted average total assets (which reflects adjustments for disallowed goodwill, certain intangible assets, deferred tax assets and financial and non-financial equity investments). The adjusted average total assets are derived using weekly balances for the year. At March 31, 2012, the Company was in compliance with this leverage restriction, with a Tier 1 leverage ratio of 7.0% (5% being well-capitalized for regulatory purposes).

At March 31, 2012, the Company calculated its RWAs in accordance with the regulatory capital requirements of the Federal Reserve, which is consistent with guidelines described under Basel I. RWAs reflect both on and off-balance sheet risk of the Company. The risk capital calculations will evolve over time as the Company enhances its risk management methodology and incorporates improvements in modeling techniques while maintaining compliance with the regulatory requirements and interpretations.

The following table summarizes the capital measures for the Company:

	March 31, 2012					December 31, 2011
	Balance		Ratio			Balance		Ratio
	(dollars in millions)
Tier 1 common capital(1)(2)	$	42,151		13.3	%	$	39,785		12.7	%
Tier 1 capital(2)		53,527		16.8	%		51,114		16.3	%
Total capital(2)		57,587		18.1	%		54,956		17.5	%
RWAs(2)		317,693		—			314,055		—
Adjusted average assets(2)		760,071		—			769,578		—
Tier 1 leverage(2)		—		7.0	%		—		6.6	%

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(1) Tier 1 common capital ratio equals Tier 1 common capital divided by RWAs. On December 30, 2011, the Federal Reserve formalized regulatory definitions for Tier 1 common capital and Tier 1 common capital ratio. The Federal Reserve defined Tier 1 common capital as Tier 1 capital less non-common elements in Tier 1 capital, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities. Previously, the Company’s definition of Tier 1 common capital included all of the items noted in the Federal Reserve’s definition, but it also included an adjustment for the portion of goodwill and non-servicing intangible assets associated with MSSB’s noncontrolling interests (i.e., Citigroup, Inc.’s (“Citi”) share of MSSB’s goodwill and intangibles). The Company’s conformance to the Federal Reserve’s definition under the final rule reduced its Tier 1 common capital and Tier 1 common ratio by approximately $4.2 billion and 132 basis points, respectively at December 31, 2011.

(2) The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company’s Tier 1 common capital, Tier 1 capital, Total capital, RWAs and adjusted average assets by such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratio by approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points.

Tier 1 capital ratio increased quarter-over-quarter due to an increase in capital. Tier 1 leverage ratio increased quarter-over-quarter due to a decrease in adjusted average assets.

The Company’s U.S. Bank Operating Subsidiaries.    The Company’s domestic bank operating subsidiaries are subject to various regulatory capital requirements as administered by U.S. federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s U.S. bank operating subsidiaries’ financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company’s U.S. bank operating subsidiaries must meet specific capital guidelines that involve quantitative measures of the Company’s U.S. bank operating subsidiaries’ assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

At March 31, 2012, the Company’s U.S. bank operating subsidiaries met all capital adequacy requirements to which they are subject and exceeded all regulatory mandated and targeted minimum regulatory capital requirements to be well-capitalized. There are no conditions or events that management believes have changed the Company’s U.S. bank operating subsidiaries’ category.

The table below sets forth the capital information for the Company’s U.S. bank operating subsidiaries, which are U.S. depository institutions:

	March 31, 2012					December 31, 2011
	Amount		Ratio			Amount		Ratio
	(dollars in millions)
Total capital (to RWAs):
Morgan Stanley Bank, N.A.	$	10,496		17.4	%	$	10,222		17.8	%
Morgan Stanley Private Bank, National Association	$	1,298		27.8	%	$	1,278		31.9	%
Tier I capital (to RWAs):
Morgan Stanley Bank, N.A.	$	8,980		14.9	%	$	8,703		15.1	%
Morgan Stanley Private Bank, National Association	$	1,295		27.7	%	$	1,275		31.8	%
Leverage ratio:
Morgan Stanley Bank, N.A.	$	8,980		13.4	%	$	8,703		13.2	%
Morgan Stanley Private Bank, National Association	$	1,295		10.6	%	$	1,275		10.2	%

Under regulatory capital requirements adopted by the U.S. federal banking agencies, U.S. depository institutions, in order to be considered well-capitalized, must maintain a ratio of total capital to RWAs of 10%, a capital ratio of Tier 1 capital to RWAs of 6%, and a ratio of Tier 1 capital to average book assets (leverage ratio) of 5%. Each U.S. depository institution subsidiary of the Company must be well-capitalized in order for the Company to continue to qualify as a financial holding company and to continue to engage in the broadest range of financial activities permitted for financial holding companies. At March 31, 2012 and December 31, 2011, the

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Company’s U.S. depository institutions maintained capital at levels in excess of the universally mandated well-capitalized levels. These subsidiary depository institutions maintain capital at levels sufficiently in excess of the “well-capitalized” requirements to address any additional capital needs and requirements identified by the federal banking regulators.

MS&Co. and Other Broker-Dealers.    MS&Co. is a registered broker-dealer and registered futures commission merchant and, accordingly, is subject to the minimum net capital requirements of the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, Inc. and the U.S. Commodity Futures Trading Commission. MS&Co. has consistently operated with capital in excess of its regulatory capital requirements. MS&Co.’s net capital totaled $7,842 million and $8,249 million at March 31, 2012 and December 31, 2011, respectively, which exceeded the amount required by $6,660 million and $7,215 million, respectively. MS&Co. is required to hold tentative net capital in excess of $1 billion and net capital in excess of $500 million in accordance with the market and credit risk standards of Appendix E of SEC Rule 15c3-1. MS&Co. is also required to notify the SEC in the event that its tentative net capital is less than $5 billion. At March 31, 2012, MS&Co. had tentative net capital in excess of the minimum and the notification requirements.

Morgan Stanley Smith Barney LLC is a registered broker-dealer and registered futures commission merchant and, accordingly, is subject to the minimum net capital requirements of the SEC, the Financial Industry Regulatory Authority, Inc. and the U.S. Commodity Futures Trading Commission. Morgan Stanley Smith Barney LLC has consistently operated with capital in excess of its regulatory capital requirements. Morgan Stanley Smith Barney LLC clears certain customer activity directly and introduces other business to MS&Co. and Citigroup, Inc. MSIP, a London-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Authority, and MSMS, a Tokyo-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Agency. MSIP and MSMS have consistently operated in excess of their respective regulatory capital requirements.

Other Regulated Subsidiaries.    Certain other U.S. and non-U.S. subsidiaries are subject to various securities, commodities and banking regulations, and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries have consistently operated in excess of their local capital adequacy requirements.

Morgan Stanley Derivative Products Inc. (“MSDP”), a derivative products subsidiary rated Aa3 by Moody’s and AAA by S&P, maintains certain operating restrictions that have been reviewed by Moody’s and S&P. MSDP is operated such that creditors of the Company should not expect to have any claims on the assets of MSDP, unless and until the obligations to its own creditors are satisfied in full. Creditors of MSDP should not expect to have any claims on the assets of the Company or any of its affiliates, other than the respective assets of MSDP.

13. Total Equity.

Morgan Stanley Shareholders’ Equity.

During the quarters ended March 31, 2012 and 2011, the Company did not purchase any of its common stock as part of its share repurchase program. At March 31, 2012, the Company had approximately $1.6 billion remaining under its current share repurchase authorization. Share repurchases by the Company are subject to regulatory approval.

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14. Earnings per Common Share.

Basic earnings per common share (“EPS”) is computed by dividing earnings (loss) available to Morgan Stanley common shareholders by the weighted average number of common shares outstanding for the period. Common shares outstanding include common stock and vested restricted stock units (“RSUs”) where recipients have satisfied either the explicit vesting terms or retirement eligibility requirements. Diluted EPS reflects the assumed conversion of all dilutive securities. The Company calculates EPS using the two-class method and determines whether instruments granted in share-based payment transactions are participating securities (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 in the Form 10-K). The following table presents the calculation of basic and diluted EPS (in millions, except for per share data):

	Three Months Ended March 31,
	2012			2011
Basic EPS:
Income from continuing operations	$	149		$	1,145
Net gain (loss) from discontinued operations		(15	)		(15	)
Net income		134			1,130
Net income applicable to noncontrolling interests		228			162
Net income (loss) applicable to Morgan Stanley		(94	)		968
Less: Preferred dividends (Series A Preferred Stock)		(11	)		(11	)
Less: Preferred dividends (Series B Preferred Stock)		—			(196	)
Less: Preferred dividends (Series C Preferred Stock)		(13	)		(13	)
Less: Allocation of earnings to participating RSUs(1):
From continuing operations		(1	)		(12	)
Earnings (loss) applicable to Morgan Stanley common shareholders	$	(119	)	$	736
Weighted average common shares outstanding		1,877			1,456
Earnings (loss) per basic common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.52
Net gain (loss) from discontinued operations		(0.01	)		(0.01	)
Earnings (loss) per basic common share	$	(0.06	)	$	0.51
Diluted EPS:
Earnings (loss) applicable to Morgan Stanley common shareholders	$	(119	)	$	736
Weighted average common shares outstanding		1,877			1,456
Effect of dilutive securities:
Stock options and RSUs(1)		—			16
Weighted average common shares outstanding and common stock equivalents		1,877			1,472
Earnings (loss) per diluted common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.51
Net income (loss) from discontinued operations		(0.01	)		(0.01	)
Earnings (loss) per diluted common share	$	(0.06	)	$	0.50

(1) RSUs that are considered participating securities participate in all of the earnings of the Company in the computation of basic EPS, and therefore, such RSUs are not included as incremental shares in the diluted calculation.

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The following securities were considered antidilutive and, therefore, were excluded from the computation of diluted EPS:

	Three Months Ended March 31,
Number of Antidilutive Securities Outstanding at End of Period:	2012		2011
	(shares in millions)
RSUs and Performance-based stock units		103		26
Stock options		45		60
Series B Preferred Stock		—		311
Total		148		397

15. Interest Income and Interest Expense.

Details of Interest income and Interest expense were as follows:

	Three Months Ended March 31,
	2012			2011
	(dollars in millions)
Interest income(1):
Financial instruments owned(2)	$	791		$	918
Securities available for sale		86			88
Loans		118			105
Interest bearing deposits with banks		27			35
Federal funds sold and securities purchased under agreements to resell and Securities borrowed		113			277
Other		407			436
Total Interest income	$	1,542		$	1,859
Interest expense(1):
Deposits	$	45		$	66
Commercial paper and other short-term borrowings		13			8
Long-term debt		1,254			1,313
Securities sold under agreements to repurchase and Securities loaned		463			471
Other		(174	)		(5	)
Total Interest expense	$	1,601		$	1,853
Net interest	$	(59	)	$	6

(1) Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument’s fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

(2) Interest expense on Financial instruments sold, not yet purchased is reported as a reduction to Interest income on Financial instruments owned.

16. Employee Benefit Plans.

The Company sponsors various pension plans for the majority of its U.S. and non-U.S. employees. The Company provides certain other postretirement benefits, primarily health care and life insurance, to eligible U.S. employees. The Company also provides certain postemployment benefits to certain former employees or inactive employees prior to retirement.

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Effective January 1, 2011, the Morgan Stanley Employees Retirement Plan (the “Pension Plan”) for U.S. participants ceased accruals of benefits under the Pension Plan.

The components of the Company’s net periodic benefit expense for its pension and postretirement plans were as follows:

	Three Months Ended March 31,
	2012			2011
	(dollars in millions)
Service cost, benefits earned during the period	$	8		$	8
Interest cost on projected benefit obligation		41			42
Expected return on plan assets		(28	)		(33	)
Net amortization of prior service costs		(3	)		(4	)
Net amortization of actuarial loss		7			5
Net periodic benefit expense	$	25		$	18

17. Income Taxes.

The Company is under continuous examination by the Internal Revenue Service (the “IRS”) and other tax authorities in certain countries, such as Japan and the U.K., and states in which the Company has significant business operations, such as New York. The Company is currently under examination by the IRS Appeals Office for the remaining issues covering tax years 1999 – 2005. Also, the Company is currently at various levels of field examination with respect to audits with the IRS, as well as New York State and New York City, for tax years 2006 – 2008 and 2007 – 2009, respectively. During 2012, the Company expects to reach a conclusion with U.K. tax authorities on substantially all issues through tax year 2009. Also during 2012, the Company expects to reach a conclusion with the Japanese tax authorities on substantially all issues covering tax years 2007 – 2008 and commence an audit covering tax years 2009 – 2010.

The Company believes that the resolution of tax matters will not have a material effect on the condensed consolidated statements of financial condition of the Company, although a resolution could have a material impact on the Company’s condensed consolidated statements of income for a particular future period and on the Company’s effective income tax rate for any period in which such resolution occurs. The Company has established a liability for unrecognized tax benefits that the Company believes is adequate in relation to the potential for additional assessments. Once established, the Company adjusts unrecognized tax benefits only when more information is available or when an event occurs necessitating a change.

It is reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits and impact on the effective tax rate over the next 12 months.

The Company’s effective tax rate from continuing operations for the quarter ended March 31, 2011 included a $447 million net tax benefit from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance. The deferred tax asset and valuation allowance were recognized in income from discontinued operations in 2010 in connection with the recognition of a $1.2 billion loss due to writedowns and related costs following the Company’s commitment to a plan to dispose of Revel Entertainment Group, LLC (“Revel”). The Company recorded the valuation allowance because the Company did not believe it was more likely than not that it would have sufficient future net capital gain to realize the benefit of the expected capital loss to be recognized upon the disposal of Revel. During the quarter ended March 31, 2011, the disposal of Revel was restructured as a

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tax-free like kind exchange and the disposal was completed. The restructured transaction changed the character of the future taxable loss to ordinary. The Company reversed the valuation allowance because the Company believes it is more likely than not that it will have sufficient future ordinary taxable income to recognize the recorded deferred tax asset. In accordance with the applicable accounting literature, this reversal of a previously established valuation allowance due to a change in circumstances was recognized in income from continuing operations.

18. Segment and Geographic Information.

Segment Information.

The Company structures its segments primarily based upon the nature of the financial products and services provided to customers and the Company’s management organization. The Company provides a wide range of financial products and services to its customers in each of its business segments: Institutional Securities, Global Wealth Management Group and Asset Management. For further discussion of the Company’s business segments, see Note 1.

Revenues and expenses directly associated with each respective segment are included in determining its operating results. Other revenues and expenses that are not directly attributable to a particular segment are allocated based upon the Company’s allocation methodologies, generally based on each segment’s respective net revenues, non-interest expenses or other relevant measures.

As a result of treating certain intersegment transactions as transactions with external parties, the Company includes an Intersegment Eliminations category to reconcile the business segment results to the Company’s consolidated results. Intersegment eliminations also reflect the effect of fees paid by the Institutional Securities business segment to the Global Wealth Management Group business segment related to the bank deposit program.

Selected financial information for the Company’s segments is presented below:

Three Months Ended March 31, 2012	Institutional Securities			Global Wealth Management Group		Asset Management			Intersegment Eliminations			Total
	(dollars in millions)
Total non-interest revenues	$	3,484		$	3,004	$	541		$	(35	)	$	6,994
Net interest		(461	)		410		(8	)		—			(59	)
Net revenues(1)	$	3,023		$	3,414	$	533		$	(35	)	$	6,935
Income (loss) from continuing operations before income taxes	$	(312	)	$	387	$	128		$	—		$	203
Provision for (benefit from) income taxes		(105	)		121		38			—			54
Income (loss) from continuing operations		(207	)		266		90			—			149
Discontinued operations(2):
Gain from discontinued operations		24			2		1			—			27
Provision for income taxes		41			1		—			—			42
Net gain (loss) on discontinued operations		(17	)		1		1			—			(15	)
Net income (loss)		(224	)		267		91			—			134
Net income applicable to noncontrolling interests		89			74		65			—			228
Net income (loss) applicable to Morgan Stanley	$	(313	)	$	193	$	26		$	—		$	(94	)

74

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Three Months Ended March 31, 2011	Institutional Securities			Global Wealth Management Group		Asset Management			Intersegment Eliminations			Total
	(dollars in millions)
Total non-interest revenues	$	3,895		$	3,063	$	630		$	(20	)	$	7,568
Net interest		(327	)		341		(8	)		—			6
Net revenues(1)	$	3,568		$	3,404	$	622		$	(20	)	$	7,574
Income from continuing operations before income taxes	$	432		$	344	$	125		$	—		$	901
Provision for (benefit from) income taxes		(363	)		89		30			—			(244	)
Income from continuing operations		795			255		95			—			1,145
Discontinued operations(2):
Gain (loss) from discontinued operations		(38	)		3		6			1			(28	)
Provision for (benefit from) income taxes		(15	)		1		—			1			(13	)
Net gain (loss) on discontinued operations		(23	)		2		6			—			(15	)
Net income		772			257		101			—			1,130
Net income applicable to noncontrolling interests		61			74		27			—			162
Net income applicable to Morgan Stanley	$	711		$	183	$	74		$	—		$	968

(1) In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179 million at December 31, 2011 (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

(2) See Notes 1 and 20 for discussion of discontinued operations.

Net Interest	Institutional Securities			Global Wealth Management Group		Asset Management			Intersegment Eliminations			Total
	(dollars in millions)
Three Months Ended March 31 2012
Interest income	$	1,145		$	490	$	3		$	(96	)	$	1,542
Interest expense		1,606			80		11			(96	)		1,601
Net interest	$	(461	)	$	410	$	(8	)	$	—		$	(59	)
Three Months Ended March 31 2011
Interest income	$	1,486		$	453	$	4		$	(84	)	$	1,859
Interest expense		1,813			112		12			(84	)		1,853
Net interest	$	(327	)	$	341	$	(8	)	$	—		$	6

Total Assets(1)	Institutional Securities		Global Wealth Management Group		Asset Management		Total
	(dollars in millions)
At March 31, 2012	$	670,662	$	103,235	$	7,133	$	781,030
At December 31, 2011	$	641,456	$	101,427	$	7,015	$	749,898

(1) Corporate assets have been fully allocated to the Company’s business segments.

75

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Geographic Information.

The Company operates in both U.S. and non-U.S. markets. The Company’s non-U.S. business activities are principally conducted through European and Asian locations. The net revenues disclosed in the following table reflect the regional view of the Company’s consolidated net revenues on a managed basis, based on the following methodology:

• Institutional Securities: advisory and equity underwriting—client location, debt underwriting—revenue recording location, sales and trading—trading desk location.

• Global Wealth Management Group: global representative coverage location.

• Asset Management: client location, except for Merchant Banking and Real Estate Investing businesses, which are based on asset location.

	Three Months Ended March 31,
Net Revenues	2012		2011
	(dollars in millions)
Americas	$	4,790	$	5,466
Europe, Middle East, and Africa		1,154		1,667
Asia		991		441
Net revenues	$	6,935	$	7,574

19. Equity Method Investments.

The Company has investments accounted for under the equity method of accounting (see Note 1) of $4,384 million and $4,524 million at March 31, 2012 and December 31, 2011, respectively, included in Other investments in the condensed consolidated statements of financial condition. Losses from these investments were $32 million and $660 million for the quarters ended March 31, 2012 and 2011, respectively and are included in Other revenues in the condensed consolidated statements of income. The loss for 2011 included the loss related to the Company’s 40% stake in MUMSS, as described below. See Note 24 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K for further information.

Japanese Securities Joint Venture

On May 1, 2010, the Company and Mitsubishi UFJ Financial Group, Inc. (“MUFG”) formed a joint venture in Japan of their respective investment banking and securities businesses. MUFG and the Company have integrated their respective Japanese securities companies by forming two joint venture companies. MUFG contributed the investment banking, wholesale and retail securities businesses conducted in Japan by Mitsubishi UFJ Securities Co., Ltd. into Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”). The Company contributed the investment banking operations conducted in Japan by its subsidiary MSMS, formerly known as Morgan Stanley Japan Securities Co., Ltd., into MUMSS (MSMS, together with MUMSS, the “Joint Venture”). MSMS will continue its sales and trading and capital markets business conducted in Japan. Following the respective contributions to the Joint Venture and a cash payment of 23 billion yen ($247 million), from MUFG to the Company, the Company owns a 40% economic interest in the Joint Venture and MUFG owns a 60% economic interest in the Joint Venture.

The Company holds a 40% voting interest and MUFG holds a 60% voting interest in MUMSS, while the Company holds a 51% voting interest and MUFG holds a 49% voting interest in MSMS. The Company continues to consolidate MSMS in its consolidated financial statements and, commencing on May 1, 2010,

76

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accounted for its interest in MUMSS as an equity method investment within the Institutional Securities business segment. During the quarters ended March 31, 2012 and 2011, the Company recorded a gain (loss) of $27 million and $(655) million, respectively, within Other revenues in the condensed consolidated statements of income, arising from the Company’s 40% stake in MUMSS.

In order to enhance the risk management at MUMSS, during the quarter ended March 31, 2011, the Company entered into a transaction with MUMSS whereby the risk associated with the fixed income trading positions that previously caused the majority of the aforementioned MUMSS losses in 2011 was transferred to MSMS. In return for entering into the transaction, the Company received total consideration of $659 million, which represented the estimated fair value of the fixed income trading positions transferred.

At March 31, 2012, the Company performed an impairment review of its equity method investment in MUMSS in view of the current financial performance of MUMSS and the current state of the Japanese economy. The Company recorded no other-than-temporary impairment loss at March 31, 2012. Adverse market or economic events, as well as further deterioration of economic performance, could result in impairment charges of this investment in future periods.

20. Discontinued Operations.

See Note 1 for a discussion of the Company’s discontinued operations.

The table below provides information regarding amounts included in discontinued operations:

	Three Months Ended March 31,
	2012		2011
	(dollars in millions)
Net revenues(1):
Saxon	$	76	$	24
Quilter		31		33
Other(2)		—		10
	$	107	$	67
Pre-tax gain (loss) on discontinued operations(1):
Revel	$	—	$	(10	)
Saxon(3)		25		(34	)
Quilter		2		3
Other(2)		—		13
	$	27	$	(28	)

(1) Amounts included eliminations of intersegment activity.

(2) Amounts included in Other for the three months ended March 31, 2011 are related to CityMortgage Bank, Retail Asset Management and other.

(3) Amount included a pre-tax gain of approximately $51 million primarily resulting from the subsequent increase in fair value of Saxon, which had incurred impairment losses of $98 million in the quarter ended December 31, 2011, as well as approximately $5 million of severance costs incurred in connection with the disposition of Saxon. See Note 21 for a further discussion of the disposition of Saxon.

77

MORGAN STANLEY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

21. Subsequent Events.

Common Dividend.

On April 19, 2012, the Company announced that its Board of Directors declared a quarterly dividend per common share of $0.05. The dividend is payable on May 15, 2012 to common shareholders of record on April 30, 2012.

Long-Term Borrowings.

Subsequent to March 31, 2012 and through April 30, 2012, the Company’s long-term borrowings (net of issuances) decreased by approximately $1.6 billion.

Quilter.

On April 2, 2012, the Company closed the sale of Quilter, its retail wealth management business in the U.K. The Company has classified Quilter as held for sale within the Global Wealth Management Group business segment and the results of its operations are presented as discontinued operations for all periods presented.

Saxon.

On October 24, 2011, the Company announced that it had reached an agreement to sell Saxon, a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation. During the first quarter of 2012, the transaction was restructured as a sale of Saxon’s assets, the first phase of which was completed in the second quarter of 2012. The remaining operations of Saxon are expected to be wound down within the year. The Company expects to incur incremental wind-down costs in future periods. The results of Saxon are reported as discontinued operations within the Institutional Securities business segment for all periods presented.

78

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Morgan Stanley:

We have reviewed the accompanying condensed consolidated statement of financial condition of Morgan Stanley and subsidiaries (the “Company”) as of March 31, 2012, and the related condensed consolidated statements of income, comprehensive income, cash flows and changes in total equity for the three-month periods ended March 31, 2012 and March 31, 2011. These condensed consolidated financial statements are the responsibility of the management of the Company.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of the Company as of December 31, 2011, and the related consolidated statements of income, comprehensive income, cash flows and changes in total equity for the year then ended (not presented herein) included in the Company’s Annual Report on Form 10-K; and in our report dated February 27, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, 2011 is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.

/s/ Deloitte & Touche LLP

New York, New York

May 7, 2012

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction.

Morgan Stanley, a financial holding company, is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Global Wealth Management Group and Asset Management. The Company, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley” and the “Company” mean Morgan Stanley and its consolidated subsidiaries.

A summary of the activities of each of the Company’s business segments is as follows:

Institutional Securities provides capital raising; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; corporate lending; sales, trading, financing and market-making activities in equity and fixed income securities and related products, including foreign exchange and commodities; and investment activities.

Global Wealth Management Group, which includes the Company’s 51% interest in Morgan Stanley Smith Barney Holdings LLC (“MSSB”), provides brokerage and investment advisory services to individual investors and small-to-medium sized businesses and institutions covering various investment alternatives; financial and wealth planning services; annuity and other insurance products; credit and other lending products; cash management services; retirement services; and trust and fiduciary services and engages in fixed income principal trading, which primarily facilitates clients’ trading or investments in such securities.

Asset Management provides a broad array of investment strategies that span the risk/return spectrum across geographies, asset classes and public and private markets to a diverse group of clients across the institutional and intermediary channels as well as high net worth clients.

See Notes 1 and 20 to the condensed consolidated financial statements for a discussion of the Company’s discontinued operations.

The results of operations in the past have been, and in the future may continue to be, materially affected by many factors, including the effect of economic and political conditions and geopolitical events; the effect of market conditions, particularly in the global equity, fixed income, credit and commodities markets, including corporate and mortgage (commercial and residential) lending and commercial real estate markets; the impact of current, pending and future legislation (including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)), regulation (including capital, leverage and liquidity requirements), and legal actions in the United States of America (“U.S.”) and worldwide; the level and volatility of equity, fixed income, and commodity prices and interest rates, currency values and other market indices; the availability and cost of both credit and capital as well as the credit ratings assigned to the Company’s unsecured short-term and long-term debt; investor sentiment and confidence in the financial markets; the performance of the Company’s acquisitions, joint ventures, strategic alliances or other strategic arrangements (including MSSB and with Mitsubishi UFJ Financial Group, Inc. (“MUFG”)); the Company’s reputation; inflation, natural disasters and acts of war or terrorism; the actions and initiatives of current and potential competitors as well as governments, regulators and self-regulatory organizations and technological changes; or a combination of these or other factors. In addition, legislative, legal and regulatory developments related to the Company’s businesses are likely to increase costs, thereby affecting results of operations. These factors also may have an impact on the Company’s ability to achieve its strategic objectives. For a further discussion of these and other important factors that could affect the Company’s business, see “Business—Competition” and “Business—Supervision and Regulation” in Part I, Item 1 and “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”) and “Other Matters” herein.

80

The discussion of the Company’s results of operations below may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect the Company’s future results, please see “Forward-Looking Statements” immediately preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A and “Executive Summary—Significant Items” in Part II, Item  7 of the Form 10-K and “Other Matters” herein.

Executive Summary.

Financial Information and Statistical Data (dollars in millions, except where noted and per share amounts).

	Three Months Ended March 31,
	2012			2011
Net revenues:
Institutional Securities	$	3,023		$	3,568
Global Wealth Management Group		3,414			3,404
Asset Management		533			622
Intersegment Eliminations		(35	)		(20	)
Consolidated net revenues	$	6,935		$	7,574
Net income	$	134		$	1,130
Net income applicable to noncontrolling interests		228			162
Net income (loss) applicable to Morgan Stanley	$	(94	)	$	968
Income (loss) from continuing operations applicable to Morgan Stanley:
Institutional Securities	$	(296	)	$	734
Global Wealth Management Group		193			182
Asset Management		25			68
Intersegment Eliminations		—			—
Income (loss) from continuing operations applicable to Morgan Stanley	$	(78	)	$	984
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations applicable to Morgan Stanley	$	(78	)	$	984
Net gain (loss) from discontinued operations applicable to Morgan Stanley(1)		(16	)		(16	)
Net income (loss) applicable to Morgan Stanley	$	(94	)	$	968
Earnings (loss) applicable to Morgan Stanley common shareholders		(119	)		736
Earnings (loss) per basic common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.52
Net gain (loss) from discontinued operations(1)		(0.01	)		(0.01	)
Earnings (loss) per basic common share(2)	$	(0.06	)	$	0.51
Earnings (loss) per diluted common share:
Income (loss) from continuing operations	$	(0.05	)	$	0.51
Net gain (loss) from discontinued operations(1)		(0.01	)		(0.01	)
Earnings (loss) per diluted common share(2)	$	(0.06	)	$	0.50
Regional net revenues(3):
Americas	$	4,790		$	5,466
Europe, Middle East and Africa		1,154			1,667
Asia		991			441
Net revenues	$	6,935		$	7,574

81

Financial Information and Statistical Data (dollars in millions, except where noted and per share amounts)—(Continued).

	Three Months Ended March 31,
	2012			2011
Average common equity (dollars in billions)(4):
Institutional Securities	$	29.5		$	33.2
Global Wealth Management Group		13.3			13.1
Asset Management		2.5			2.6
Parent capital		15.2			(0.8	)
Total from continuing operations		60.5			48.1
Discontinued operations		—			—
Consolidated average common equity	$	60.5		$	48.1
Return on average common equity(4)(5):
Institutional Securities		N/M			7	%
Global Wealth Management Group		6	%		5	%
Asset Management		4	%		9	%
Consolidated		N/M			6	%
Book value per common share(6)	$	30.74		$	31.45
Tangible common equity(7)	$	54,156		$	41,673
Tangible book value per common share(8)	$	27.37		$	26.97
Effective income tax rate from continuing operations(9)		26.5	%		(27.1	)%
Worldwide employees		59,569			62,494
Average liquidity (dollars in billions)(10):
Parent company liquidity	$	71		$	77
Bank and other subsidiaries liquidity		107			95
Total liquidity	$	178		$	172
Capital ratios at March 31, 2012 and 2011(11)(12):
Total capital ratio		18.1	%		16.1	%
Tier 1 common capital ratio		13.3	%		8.9	%
Tier 1 capital ratio		16.8	%		14.4	%
Tier 1 leverage ratio		7.0	%		6.1	%
Consolidated assets under management or supervision (dollars in billions)(13):
Asset Management(14)	$	304		$	276
Global Wealth Management Group		527			498
Total	$	831		$	774

82

Financial Information and Statistical Data (dollars in millions, except where noted and per share amounts)—(Continued).

	Three Months Ended March 31,
	2012			2011
Institutional Securities:
Pre-tax profit margin(15)		N/M			12	%
Global Wealth Management Group:
Global representatives		17,193			18,124
Annualized revenues per global representative (dollars in thousands)(16)	$	787		$	747
Assets by client segment (dollars in billions):
$10 million or more	$	588		$	544
$1 million to $10 million		735			728
Subtotal $1 million or more		1,323			1,272
$100,000 to $1 million		381			395
Less than $100,000		40			39
Total client assets	$	1,744		$	1,706
Fee-based assets as a percentage of total client assets		30	%		29	%
Client assets per global representative(17)	$	101		$	94
Global fee-based asset flows (dollars in billions)	$	8.7		$	17.5
Bank deposits (dollars in billions)(18)	$	112		$	112
Global retail locations		743			820
Pre-tax profit margin(15)		11	%		10	%
Asset Management:
Assets under management or supervision (dollars in billions)	$	304		$	276
Pre-tax profit margin(15)		24	%		20	%
Selective Management Financial Measures—Non-GAAP(19):
Net Revenues—Non-GAAP	$	8,913		$	7,763
Income from continuing operations applicable to Morgan Stanley—Non-GAAP	$	1,376		$	1,100
Income per diluted common share from continuing operations—Non-GAAP	$	0.71		$	0.59
Return on average common equity from continuing operations—Non-GAAP		9.2	%		7.3	%

N/M—Not Meaningful.

N/A—Not Applicable. Information is not comparable.

(1) See Notes 1 and 20 to the condensed consolidated financial statements for information on discontinued operations.

(2) For the calculation of basic and diluted earnings per share (“EPS”), see Note 14 to the condensed consolidated financial statements.

(3) Regional net revenues include the impact of the fluctuation in the Company’s credit spreads and other credit factors (“Debt-Related Credit Spreads”) on certain of the Company’s long-term and short-term borrowings, primarily structured notes (“Borrowings”), that are accounted for at fair value.

(4) Beginning in the quarter ended March 31, 2012, the Company and segment Required Capital is met by Tier 1 common capital. Prior to the current quarter, the Company’s Required Capital was met by regulatory Tier 1 capital or Tier 1 common equity. Segment capital for prior periods has been recast under this framework.

(5) The calculation of return on average common equity uses income from continuing operations applicable to Morgan Stanley less preferred dividends as a percentage of average common equity. The return on average common equity is a non-Generally Accepted Accounting Principle (“GAAP”) financial measure that the Company considers to be a useful measure to the Company and investors to assess operating performance. The computation of average common equity for each business segment is determined using the Company’s Required Capital framework (“Required Capital Framework”), an internal capital adequacy measure (see “Liquidity and Capital Resources—Required Capital” herein). The Required Capital Framework will evolve over time to respond to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques (see “Liquidity and Capital Resources—Regulatory Requirements” herein for further information on risk-based capital, leverage and liquidity standards, known as “Basel III,” which were proposed by the Basel Committee on Banking Supervision (the “Basel Committee”) in December 2009). The effective tax rates used in the computation of business segment return on average common equity were determined on a separate entity basis. Excluding the effects of the aggregate discrete tax benefit in the quarter ended March 31, 2011, the return on average common equity for the Institutional Securities business segment would have been 1% (see “Executive Summary—Overview of the Quarter Ended March 31, 2012 Financial Results” herein).

83

(6) Book value per common share equals common shareholders’ equity of $60,816 million at March 31, 2012 and $48,589 million at March 31, 2011 divided by common shares outstanding of 1,978 million at March 31, 2012 and 1,545 million at March 31, 2011.

(7) Tangible common equity is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and investors use to assess capital adequacy. For a discussion of tangible common equity, see “Liquidity and Capital Resources—The Balance Sheet” herein.

(8) Tangible book value per common share is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and investors use to assess capital adequacy. Tangible book value per common share equals tangible common equity divided by period-end common shares outstanding.

(9) For a discussion of the effective income tax rate, see “Executive Summary—Overview of the Quarter Ended March 31, 2012 Financial Results”.

(10) For a discussion of average liquidity, see “Liquidity and Capital Resources—Liquidity and Trading Management—Global Liquidity Reserve” herein.

(11) On December 30, 2011, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) formalized regulatory definitions for Tier 1 common capital and Tier 1 common capital ratio. The Company’s Tier 1 common ratio at March 31, 2011 was recast to confirm to this definition. The Company’s Total capital ratio, Tier 1 common capital ratio and Tier 1 capital ratio at March 31, 2011 have also been adjusted based on revised guidance from the Federal Reserve about the Company’s capital treatment for over-the-counter (“OTC”) derivative collateral. For a discussion of Total capital ratio, Tier 1 common capital ratio, Tier 1 capital ratio and Tier 1 leverage ratio, see “Liquidity and Capital Resources—Regulatory Requirements” herein.

(12) The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company’s Tier 1 common capital, Tier 1 capital and Total capital by such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratio by approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points.

(13) Revenues and expenses associated with these assets are included in the Company’s Global Wealth Management Group and Asset Management business segments.

(14) Amounts exclude the Asset Management business segment’s proportionate share of assets managed by entities in which it owns a minority stake.

(15) Pre-tax profit margin is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues.

(16) Annualized net revenues per global representative for the quarters ended March 31, 2012 and 2011 equals Global Wealth Management Group’s net revenues divided by the quarterly weighted average global representative headcount for the quarters ended March 31, 2012 and 2011, respectively.

(17) Client assets per global representative equal total period-end client assets divided by period-end global representative headcount.

(18) Approximately $57 billion and $54 billion of the bank deposit balances at March 31, 2012 and 2011, respectively, are held at Company-affiliated depositories with the remainder held at Citigroup, Inc. (“Citi”) affiliated depositories. These deposit balances are held at certain of the Company’s Federal Deposit Insurance Corporation (the “FDIC”) insured depository institutions for the benefit of the Company’s clients through their accounts. For additional information regarding the Company’s deposits, see “Liquidity and Capital Resources—Funding Management—Deposits” herein.

84

(19) From time to time, the Company may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. For these purposes, “GAAP” refers to generally accepted accounting principles in the United States. The Securities and Exchange Commission (“SEC”) defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that excludes or includes amounts or is subject to adjustments that effectively exclude, or include, amounts from the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by the Company are provided as additional information to investors in order to provide them with further transparency about, or an alternative method for assessing, our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever the Company refers to a non-GAAP financial measure, the Company will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference with such comparable GAAP financial measure. The return on average common equity is calculated as annualized earnings applicable to Morgan Stanley common shareholders from continuing operations, prior to the allocation of income to participating restricted stock units, divided by average common equity. The return on average common equity excluding the impact of Debt-Related Credit Spreads on Borrowings is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and investors use to assess operating performance. The table below presents a reconciliation of selective management financial measures from a non-GAAP to a GAAP basis:

	Three Months Ended March 31,
	2012			2011
Reconciliation of Selective Management Financial Measures from a Non-GAAP to a GAAP Basis (dollars in millions, except per share amounts)
Net Revenues
Net Revenues—Non-GAAP	$	8,913		$	7,763
Impact of Debt-Related Credit Spreads on Borrowings		(1,978	)		(189	)
Net Revenues—GAAP	$	6,935		$	7,574
Income from continuing operations applicable to Morgan Stanley
Income applicable to Morgan Stanley—Non-GAAP	$	1,376		$	1,100
Impact of Debt-Related Credit Spreads on Borrowings (net of tax benefits of $524 million and $73 million for the three months ended March 31 2012 and 2011, respectively)		(1,454	)		(116	)
Income (loss) applicable to Morgan Stanley—GAAP	$	(78	)	$	984
Earnings (loss) per diluted common share
Income per diluted common share from continuing operations—Non-GAAP	$	0.71		$	0.59
Impact of Debt-Related Credit Spreads on Borrowings		(0.76	)		(0.08	)
Income (loss) per common diluted share from continuing operations—GAAP	$	(0.05	)	$	0.51
Average diluted shares—Non-GAAP (in millions)		1,903			1,472
Impact of Debt-Related Credit Spreads on Borrowings (in millions)		(26	)		—
Average diluted shares—GAAP (in millions)		1,877			1,472
Average common equity
Income applicable to Morgan Stanley—Non-GAAP	$	1,352		$	880
Impact of Debt-Related Credit Spreads on Borrowings (net of tax benefits of $524 million and $73 million for the three months ended March 31 2012 and 2011, respectively)		(1,454	)		(116	)
Income (loss) applicable to Morgan Stanley—GAAP	$	(102	)	$	764
Average common equity—Non-GAAP	$	59,033		$	48,171
Impact of inception to date Debt-Related Credit Spreads on Borrowings, net of tax		1,452			(44	)
Average common equity—GAAP	$	60,485		$	48,127

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Global Market and Economic Conditions.

During the first quarter of 2012, global market and economic conditions improved modestly from 2011 year-end. The U.S. economy expanded moderately and financial stresses in Europe lessened to some degree following a number of actions taken by European policymakers. Despite these improvements, global market and economic conditions continued to be challenged by concerns about the continuing European sovereign debt crisis, lack of robust economic recovery in the U.S., and slowing economic growth in emerging markets.

In the U.S., major equity market indices ended the first quarter of 2012 higher compared with the beginning of the year primarily due to improved investor confidence in the global economic recovery. U.S. economic activity continued to expand at a moderate pace in the first quarter of 2012. Conditions in the labor market continued to improve as the unemployment rate decreased to 8.2% at March 31, 2012 from 8.5% at December 31, 2011. However, certain sectors of the residential real estate market and investments in commercial real estate projects remained challenged in the first quarter of 2012. Consumer spending and business investments continued to improve and concerns about crude oil supplies contributed to a rise in oil prices during the quarter, although overall consumer price inflation was relatively subdued. The Federal Open Market Committee (“FOMC”) of the Federal Reserve kept key interest rates at historically low levels, and at March 31, 2012, the federal funds target rate was between zero and 0.25%, and the discount rate was 0.75%. In the first quarter of 2012, the FOMC announced that key interest rates will likely remain at historically low levels at least through late 2014.

In Europe, real gross domestic product growth stabilized in the first quarter of 2012. Major European equity market indices ended the quarter higher compared with the beginning of the year, as investors’ concerns about the sovereign debt crisis, especially in Greece, Ireland, Italy, Portugal and Spain (the “European Peripherals”), and the sovereign debt exposures in the European banking system receded during the quarter. The euro area unemployment rate increased to 10.9% at March 31, 2012 from 10.6% at December 31, 2011. At March 31, 2012, the European Central Bank’s (“ECB”) benchmark interest rate was 1.00%, and the Bank of England’s (“BOE”) benchmark interest rate was 0.50%, both of which were unchanged from December 31, 2011. In the first quarter of 2012, the BOE increased the size of its quantitative easing program in order to inject further monetary stimulus into the economy in the United Kingdom (“U.K.”), and during the first quarter of 2012 the U.K. entered into a technical recession (two consecutive quarters of negative gross domestic product). During the first quarter of 2012, funding conditions for euro-area banks eased as the ECB conducted its second three-year refinancing operation and widened the pool of eligible collateral for refinancing operations. In February of 2012, European Union leaders agreed on a new bailout and debt-restructuring agreement designed to reduce Greece’s debt. In the first four months of 2012, rating agencies downgraded the credit ratings for some European countries, and Spain joined other European countries by entering into a technical recession.

In Asia, major stock markets closed out the first quarter of 2012 higher compared with the beginning of the year. Japan’s economic activity remained flat during the first quarter of 2012. To further stimulate its economy, in February and April of 2012, the Bank of Japan increased the size of its quantitative easing program twice. Japan’s benchmark interest rate remained within a range of zero to 0.1% during the first quarter of 2012. China’s gross domestic product growth continued to moderate during the first quarter of 2012 as import and export growth slowed sharply after domestic tightening measures and global economic turmoil impacted consumption. To stimulate the Chinese economy, the People’s Bank of China cut its bank reserve requirement by 0.5% in February 2012.

Overview of the Quarter Ended March 31, 2012 Financial Results.

Consolidated Results.    The Company recorded a net loss applicable to Morgan Stanley of $94 million on net revenues of $6,935 million during the quarter ended March 31, 2012 (“current quarter”), compared with net income applicable to Morgan Stanley of $968 million on net revenues of $7,574 million in the quarter ended March 31, 2011 (“prior year period”).

Net revenues in the current quarter included negative revenue of $1,978 million, or $(0.76) per diluted share, due to the impact of the tightening of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted

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for at fair value, compared with negative revenues of $189 million in the prior year period. Non-interest expenses were relatively flat at $6,732 million in the current quarter. Compensation expenses increased 3% in the current quarter compared to the prior year period, and included severance expense of $138 million related to staff reductions. Non-compensation expenses decreased 4% in the current quarter.

Diluted EPS and diluted EPS from continuing operations were $(0.06) and $(0.05), respectively, in the current quarter compared with $0.50 and $0.51, respectively, in the prior year period.

Excluding the impact of the Company’s Debt–Related Credit Spreads on Borrowings, in the current quarter, net revenues were $8,913 million and diluted EPS from continuing operations was $0.71 per share, compared to $7,763 million and $0.59 per share, respectively, in the prior year period.

The Company’s effective tax rate from continuing operations was 26.5% and a benefit of (27.1)% for the quarter ended March 31, 2012 and March 31, 2011, respectively. The results for the quarter ended March 31, 2011 included a net tax benefit of $447 million, or $0.30 per diluted share, from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance. Excluding this discrete tax benefit the annual effective tax rate in the quarter ended March 31, 2011 would have been 22.5%. The increase in the effective tax rate is primarily reflective of the geographic mix of earnings. For further discussion of the prior year discrete tax benefits, see “Executive Summary—Significant Items—Income Tax Benefits” herein.

During the current quarter, the Company announced that it reached an agreement to sell Quilter Holdings Ltd. (“Quilter”), its retail wealth management business in the U.K. This transaction, and the first phase of the previously announced disposition of Saxon, closed on April 2, 2012. The results of Quilter (reported in the Global Wealth Management Group business segment) and Saxon (reported in the Institutional Securities business segment) are presented as discontinued operations for all periods presented. Discontinued operations for the quarters ended March 31, 2012 and 2011 were a loss of $15 million in both periods.

Institutional Securities.    Income (loss) from continuing operations before taxes was $(312) million in the current quarter, compared with $432 million in the prior year period. Net revenues for the current quarter were $3,023 million compared with $3,568 million in the prior year period. The results in the current quarter included negative revenue of $1,978 million (fixed income and commodities: $1,597 million; equities: $381 million) due to the impact of the tightening of the Company’s Debt-Related Credit Spreads on Borrowings that were accounted for at fair value compared with negative revenue of $189 million (fixed income and commodities: approximately $159 million; equities: approximately $30 million) in the prior year period. Investment banking revenues for the current quarter decreased 16% to $851 million from the prior year period, reflecting lower revenues from equity underwriting transactions and lower advisory revenues, partially offset by higher revenues from fixed income underwriting transactions. The following sales and trading net revenues results exclude the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value. The presentation of net revenues excluding the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value is a non-GAAP financial measure that the Company considers useful for the Company and investors to allow further comparability of period to period operating performance. See “Business Segments—Institutional Securities—Sales and Trading Net Revenues” for more information. Excluding the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, fixed income and commodities sales and trading net revenues of $2,594 million increased 34% from a year ago, reflecting increased contributions from most products, with particular strength in interest rates, currency products, commodities and corporate credit, partially offset by lower revenues in securitized products. The results in the prior year period were negatively impacted by losses of $318 million from Monoline Insurers (“Monolines”) (see “Executive Summary—Significant Items—Monoline Insurers” herein for further information). Equity sales and trading net revenues, excluding the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, of $1,833 million increased 6% from a year ago reflecting solid performance across all regions with higher revenues in the derivative business and notable growth in electronic and retail volumes. Other sales and trading net losses in the current quarter were $286 million compared with losses of $460 million in the prior year period. Results in both quarters primarily reflected losses on economic hedges related to the Company’s long-term debt and costs

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related to the amount of liquidity held (“negative carry”). Other revenues in the current quarter were $58 million compared with negative revenues of $602 million in the prior year period. Results for the prior year period included a loss of $655 million arising from the Company’s 40% stake in Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”) (see “Executive Summary—Significant Items—Japanese Securities Joint Venture” herein). Non-interest expenses increased 6% to $3,335 million in the current quarter primarily due to higher Compensation and benefit expenses, which increased 10% to $2,108 million.

Global Wealth Management Group.    Income from continuing operations before taxes was $387 million in the current quarter compared with $344 million in the prior year period. Net revenues of $3,414 million in the current quarter were essentially unchanged from a year ago as higher asset management and net interest revenues were mostly offset by lower commissions. In the current quarter, Non-interest expenses of $3,027 million, including Compensation expenses of $2,105 million, were essentially unchanged from the prior year period. Total client asset balances were $1,744 billion at March 31, 2012 and client assets in fee-based accounts were $531 billion, or 30% of total client assets. Global fee based asset flows for the current quarter were $8.7 billion as compared with $17.5 billion in the prior year period.

Asset Management.    Income from continuing operations before taxes was $128 million in the current quarter compared with $125 million in the prior year period. Net revenues were $533 million in the current quarter compared with $622 million in the prior year period. The decrease in net revenues primarily reflected lower gains on principal investments in the Company’s Merchant Banking business, including certain investments associated with the Company’s employee deferred compensation and co-investment plans, partially offset by higher net investment gains associated with certain consolidated real estate funds sponsored by the Company. Asset management, distribution and administration fees increased 1% to $411 million in the current quarter, primarily reflecting higher performance fees and higher fund management and administration fees, primarily due to higher average assets under management. This increase was partially offset by the absence of FrontPoint Partners LLC (“FrontPoint”) in the current quarter compared with two months of FrontPoint fees in the prior year period. Non-interest expenses decreased 19% to $405 million in the current quarter, reflecting decreases in compensation expenses and non-compensation expenses.

Significant Items.

Corporate Lending.    The Company recorded the following amounts primarily associated with the portion of the loans and lending commitment portfolio carried at fair value within the Institutional Securities business segment (see “Business Segments—Institutional Securities—Sales and Trading Net Revenues” herein):

	Three Months Ended March 31,
	2012(1)			2011(1)
	(dollars in millions)
Gains on loans and lending commitments	$	770		$	209
Losses on hedges		(636	)		(135	)
Total gains	$	134		$	74

(1) Amounts include realized and unrealized gains (losses).

Japanese Securities Joint Venture.    During the quarters ended March 31, 2012 and 2011, the Company recorded a gain (loss) of $27 million and $(655) million, respectively, within Other revenues in the condensed consolidated statements of income, arising from the Company’s 40% stake in MUMSS (see Note 19 to the condensed consolidated financial statements).

Income Tax Benefit.    The Company’s effective tax rate from continuing operations for the quarter ended March 31, 2011 included a $447 million net tax benefit from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance. The deferred tax asset and valuation allowance were recognized in

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income from discontinued operations in 2010 in connection with the recognition of a $1.2 billion loss due to writedowns and related costs following the Company’s commitment to a plan to dispose of Revel Entertainment Group, LLC (“Revel”). The Company recorded the valuation allowance because the Company did not believe it was more likely than not that it would have sufficient future net capital gain to realize the benefit of the expected capital loss to be recognized upon the disposal of Revel. During the quarter ended March 31, 2011, the disposal of Revel was restructured as a tax-free like kind exchange and the disposal was completed. The restructured transaction changed the character of the future taxable loss to ordinary. The Company reversed the valuation allowance because the Company believes it is more likely than not that it will have sufficient future ordinary taxable income to recognize the recorded deferred tax asset. In accordance with the applicable accounting literature, this reversal of a previously established valuation allowance due to a change in circumstances was recognized in income from continuing operations.

Monoline Insurers.    The results for the quarter ended March 31, 2011 included a loss of $318 million related to the Company’s counterparty credit exposures to Monolines, principally MBIA Insurance Corporation (“MBIA”).

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Business Segments.

Substantially all of the Company’s operating revenues and operating expenses can be directly attributed to its business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective revenues or other relevant measures.

As a result of treating certain intersegment transactions as transactions with external parties, the Company includes an Intersegment Eliminations category to reconcile the business segment results to the Company’s consolidated results. Intersegment Eliminations also reflect the effect of fees paid by the Institutional Securities business segment to the Global Wealth Management Group business segment related to the bank deposit program. The Company did not recognize any Intersegment Elimination gains or losses in the quarters ended March 31, 2012 and March 31, 2011.

Net Revenues.

Principal Transactions—Trading.    Principal transactions—Trading revenues include revenues from customers’ purchases and sales of financial instruments in which the Company acts as principal and gains and losses on the Company’s positions, as well as proprietary trading activities for its own account. Principal transactions—Trading revenues includes the realized gains and losses from sales of cash instruments and derivative settlements, unrealized gains and losses from ongoing fair value changes of the Company’s positions related to market-making activities, and gains and losses related to investments associated with certain employee deferred compensation plans. In many markets, the realized and unrealized gains and losses from the purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in this line item since they relate to market-making positions. Commissions received for purchasing and selling listed equity securities and options are recorded separately in the Commissions and fees line item. Other cash and derivative instruments typically do not have fees associated with them and fees for related services would be recorded in Commissions and fees.

Principal Transactions—Investments.    The Company’s investments generally are held for long-term appreciation and generally are subject to significant sales restrictions. Estimates of the fair value of the investments may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions generally or in relation to specific transactions. In some cases, such investments are required or are a necessary part of offering other products. The revenues recorded are the result of realized gains and losses from sales and unrealized gains and losses from ongoing fair value changes of the Company’s holdings as well as from investments associated with certain employee deferred compensation plans. Typically, there are no fee revenues from these investments. The sales restrictions on the investments relate primarily to redemption and withdrawal restrictions on investments in real estate funds, hedge funds, and private equity funds, which include investments made in connection with certain employee deferred compensation plans (see Note 3 to the condensed consolidated financial statements). Restrictions on interests in exchanges and clearinghouses generally include a requirement to hold those interests for the period of time that the Company is clearing trades on that exchange or clearinghouse. Additionally, there are certain principal investments related to assets held by consolidated real estate funds, which are primarily related to holders of noncontrolling interests.

Commissions and Fees.    Commission and fee revenues primarily arise from agency transactions in listed and OTC equity securities, services related to sales and trading activities, and sales of mutual funds, futures, insurance products and options.

Asset Management, Distribution and Administration Fees.    Asset management, distribution and administration fees include fees associated with the management and supervision of assets, account services and administration, performance-based fees relating to certain funds, separately managed accounts, shareholder servicing, and the distribution of certain open-ended mutual funds.

Asset management, distribution and administration fees in the Global Wealth Management Group business segment also include revenues from individual investors electing a fee-based pricing arrangement and fees for

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investment management. Mutual fund distribution fees in the Global Wealth Management Group business segment are based on either the average daily fund net asset balances or average daily aggregate net fund sales and are affected by changes in the overall level and mix of assets under management or supervision.

Asset management fees in the Asset Management business segment arise from investment management services the Company provides to investment vehicles pursuant to various contractual arrangements. The Company receives fees primarily based upon mutual fund daily average net assets or based on monthly or quarterly invested equity for other vehicles. Performance-based fees in the Asset Management business segment are earned on certain funds as a percentage of appreciation earned by those funds and, in certain cases, are based upon the achievement of performance criteria. These fees are normally earned annually and are recognized on a monthly or quarterly basis.

Net Interest.    Interest income and Interest expense are a function of the level and mix of total assets and liabilities, including financial instruments owned and financial instruments sold, not yet purchased, securities available for sale, securities borrowed or purchased under agreements to resell, securities loaned or sold under agreements to repurchase, loans, deposits, commercial paper and other short-term borrowings, long-term borrowings, trading strategies, customer activity in the Company’s prime brokerage business, and the prevailing level, term structure and volatility of interest rates. Certain Securities purchased under agreements to resell (“reverse repurchase agreements”) and Securities sold under agreements to repurchase (“repurchase agreements”) and Securities borrowed and Securities loaned transactions may be entered into with different customers using the same underlying securities, thereby generating a spread between the interest revenue on the reverse repurchase agreements or securities borrowed transactions and the interest expense on the repurchase agreements or securities loaned transactions.

Market Making.

As a market maker, the Company stands ready to buy, sell or otherwise transact with customers under a variety of market conditions and provide firm or indicative prices in response to customer requests. The Company’s liquidity obligations can be explicit and obligatory in some cases, and in others, customers expect the Company to be willing to transact with them. In order to most effectively fulfill its market-making function, the Company engages in activities, across all of its trading businesses, that include, but are not limited to, (i) taking positions in anticipation of, and in response to customer demand to buy or sell, and—depending on the liquidity of the relevant market and the size of the position—holding those positions for a period of time; (ii) managing and assuming basis risk (risk associated with imperfect hedging) between customized customer risks and the standardized products available in the market to hedge those risks; (iii) building, maintaining, and re-balancing inventory, through trades with other market participants, and engaging in accumulation activities to accommodate anticipated customer demand; (iv) trading in the market to remain current on pricing and trends; and (v) engaging in other activities to provide efficiency and liquidity for markets. Interest income and expense are also impacted by market-making activities as debt securities held by the Company earn interest and securities are loaned, borrowed, sold with agreement to repurchase and purchased with agreement to resell.

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INSTITUTIONAL SECURITIES

INCOME STATEMENT INFORMATION

	Three Months Ended March 31,
	2012			2011
	(dollars in millions)
Revenues:
Investment banking	$	851		$	1,008
Principal transactions:
Trading		2,044			2,647
Investments		(49	)		143
Commissions and fees		548			669
Asset management, distribution and administration fees		32			30
Other		58			(602	)
Total non-interest revenues		3,484			3,895
Interest income		1,145			1,486
Interest expense		1,606			1,813
Net interest		(461	)		(327	)
Net revenues		3,023			3,568
Compensation and benefits		2,108			1,923
Non-compensation expenses		1,227			1,213
Total non-interest expenses		3,335			3,136
Income (loss) from continuing operations before income taxes		(312	)		432
Benefit from income taxes		(105	)		(363	)
Income (loss) from continuing operations		(207	)		795
Discontinued operations:
Income (loss) from discontinued operations		24			(38	)
Provision for (benefit from) income taxes		41			(15	)
Net gains (losses) on discontinued operations		(17	)		(23	)
Net income (loss)		(224	)		772
Net income applicable to noncontrolling interests		89			61
Net income (loss) applicable to Morgan Stanley	$	(313	)	$	711
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations	$	(296	)	$	734
Net gains (losses) from discontinued operations		(17	)		(23	)
Net income (loss) applicable to Morgan Stanley	$	(313	)	$	711

Noncontrolling Interests.    Noncontrolling interests primarily relate to Morgan Stanley MUFG Securities, Co., Ltd.

Discontinued Operations.    On October 24, 2011, the Company announced that it had reached an agreement to sell Saxon, a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation. During the first quarter of 2012, the transaction was restructured as a sale of Saxon’s assets, the first phase of which was completed in the second quarter of 2012. The remaining operations of Saxon are expected to be wound down within the year. The Company expects to incur incremental wind-down costs in future periods. The results of Saxon are reported as discontinued operations within the Institutional Securities business segment for all periods presented.

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On February 17, 2011, the Company completed the sale of Revel. The sale price approximated the carrying value of Revel at the time of disposal and, accordingly, the Company did not recognize any pre-tax gain or loss on the sale. The results of Revel are reported as discontinued operations within the Institutional Securities business segment for all periods presented through the date of sale. For further information on Revel, see Note 20 to the condensed consolidated financial statements.

Investment Banking.    Investment banking revenues were as follows:

	Three Months Ended March 31,
	2012		2011
	(dollars in millions)
Advisory revenues	$	313	$	385
Underwriting revenues:
Equity underwriting revenues		172		285
Fixed income underwriting revenues		366		338
Total underwriting revenues		538		623
Total investment banking revenues	$	851	$	1,008

The following table presents the Company’s volumes of announced and completed mergers and acquisitions, equity and equity-related offerings, and fixed income offerings:

	Three Months Ended March 31,
	2012(1)		2011(1)
	(dollars in billions)
Announced mergers and acquisitions(2)	$	106	$	147
Completed mergers and acquisitions(2)		74		246
Equity and equity-related offerings(3)		12		13
Fixed income offerings(4)		70		65

(1) Source: Thomson Reuters, data at April 11, 2012. Announced and completed mergers and acquisitions volumes are based on full credit to each of the advisors in a transaction. Equity and equity-related offerings and fixed income offerings are based on full credit for single book managers and equal credit for joint book managers. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal or change in the value of a transaction.

(2) Amounts include transactions of $100 million or more and announced mergers and acquisitions exclude terminated transactions.

(3) Amounts include Rule 144A and public common stock offerings, convertible offerings and rights offerings.

(4) Amounts include non-convertible preferred stock, mortgage-backed securities, asset-backed securities and taxable municipal debt. Amounts also include publicly registered and Rule 144A issues. Amounts exclude leveraged loans and self-led issuances.

Investment banking revenues for the quarter ended March 31, 2012 decreased 16% from the comparable period in 2011, reflecting lower revenues from equity underwriting transactions and lower advisory revenues, partially offset by higher revenues from fixed income underwriting transactions. Overall, underwriting revenues of $538 million decreased 14% from the quarter ended March 31, 2011. Equity underwriting revenues decreased 40% to $172 million in the quarter ended March 31, 2012 reflecting lower levels of market activity across all regions. Fixed income underwriting revenues increased 8% to $366 million in the quarter ended March 31, 2012, primarily reflecting growth in both bond issuance fees and loan syndication fees. Advisory revenues from merger, acquisition and restructuring transactions were $313 million in the quarter ended March 31, 2012, a decrease of 19% from the comparable period of 2011, reflecting lower levels of market activity.

Sales and Trading Net Revenues.    Sales and trading net revenues are composed of Principal transactions—Trading revenues; Commissions and fees; Asset management, distribution and administration fees; and Net interest revenues (expenses). In assessing the profitability of its sales and trading activities, the Company views these net revenues in the aggregate. In addition, decisions relating to principal transactions are based on an overall review of aggregate revenues and costs associated with each transaction or series of transactions. This review includes, among other things, an assessment of the potential gain or loss associated with a transaction,

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including any associated commissions and fees, dividends, the interest income or expense associated with financing or hedging the Company’s positions, and other related expenses. See Note 10 to the condensed consolidated financial statements for further information related to gains (losses) on derivative instruments.

Total sales and trading net revenues decreased to $2,163 million in the quarter ended March 31, 2012 from $3,019 million in the quarter ended March 31, 2011, reflecting lower equity and fixed income and commodities sales and trading net revenues, partially offset by lower losses in other sales and trading net revenues.

Sales and trading net revenues were as follows:

	Three Months Ended March 31,
	2012			2011(1)
	(dollars in millions)
Principal transactions—Trading	$	2,044		$	2,647
Commissions and fees		548			669
Asset management, distribution and administration fees		32			30
Net interest		(461	)		(327	)
Total sales and trading net revenues	$	2,163		$	3,019

(1) All prior-period amounts have been reclassified to conform to the current period’s presentation.

Sales and trading net revenues by business were as follows:

	Three Months Ended March 31,
	2012			2011(1)
	(dollars in millions)
Equity	$	1,452		$	1,702
Fixed income and commodities		997			1,777
Other(2)		(286	)		(460	)
Total sales and trading net revenues	$	2,163		$	3,019

(1) All prior-period amounts have been reclassified to conform to the current period’s presentation.

(2) Other sales and trading net revenues include net gains (losses) from certain loans and lending commitments and related hedges associated with the Company’s lending activities. Other sales and trading net revenues also include gains (losses) on economic hedges related to the Company’s long-term debt and net losses associated with costs related to the amount of liquidity held (“negative carry”).

The following sales and trading net revenues results exclude the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value(1). The reconciliation of sales and trading, including equity sales and trading and fixed income and commodities sales and trading net revenues from a non-GAAP to a GAAP basis is as follows:

	Three Months Ended March 31,
	2012			2011
	(dollars in millions)
Total sales and trading net revenues—non-GAAP(1)	$	4,141		$	3,208
Impact of Debt-Related Credit Spreads on Borrowings		(1,978	)		(189	)
Total sales and trading net revenues	$	2,163		$	3,019
Equity sales and trading net revenues—non-GAAP(1)	$	1,833		$	1,732
Impact of Debt-Related Credit Spreads on Borrowings		(381	)		(30	)
Equity sales and trading net revenues	$	1,452		$	1,702
Fixed income and commodities sales and trading net revenues—non-GAAP(1)	$	2,594		$	1,936
Impact of Debt-Related Credit Spreads on Borrowings		(1,597	)		(159	)
Fixed income and commodities sales and trading net revenues	$	997		$	1,777

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(1) Sales and trading net revenues, including fixed income and commodities and equity sales and trading net revenues that excluded the impact of Debt-Related Credit Spreads on Borrowings that are accounted for at fair value are non-GAAP financial measures that the Company considers useful for the Company and investors to allow further comparability of period to period operating performance.

Equity.    Equity sales and trading net revenues decreased 15% to $1,452 million in the quarter ended March 31, 2012 from the comparable period in 2011. The results in equity sales and trading net revenues also included negative revenue in the quarter ended March 31, 2012 of $381 million due to the impact of the tightening of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value compared with negative revenue of approximately $30 million in the quarter ended March 31, 2011. Equity sales and trading net revenues, excluding the impact of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, in the quarter ended March 31, 2012 increased 6% over the comparable period in 2011, reflecting performance across all regions with higher revenues in the derivatives business and notable growth in electronic and retail volumes.

In the quarter ended March 31, 2012, equity sales and trading net revenues also reflected gains of $44 million related to changes in the fair value of net derivative contracts attributable to the tightening of counterparties’ credit default swap spreads and other credit factors compared with gains of $12 million in the quarter ended March 31, 2011. The Company also recorded losses of $72 million in the quarter ended March 31, 2012 related to changes in the fair value of net derivative contracts attributable to the tightening of the Company’s credit default swap spreads and other credit factors compared with losses of $40 million in the quarter ended March 31, 2011. The gains and losses on credit default swap spreads and other credit factors do not reflect any gains or losses on related hedging instruments.

Fixed Income and Commodities.    Fixed income and commodities sales and trading net revenues decreased 44% to $997 million in the quarter ended March 31, 2012 from $1,777 million in the quarter ended March 31, 2011. Results in the quarter ended March 31, 2012 included negative revenue of $1,597 million due to the impact of the tightening of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, compared with negative revenue of approximately $159 million in the quarter ended March 31, 2011. Fixed income and commodities sales and trading net revenues, excluding the impact of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, in the quarter ended March 31, 2012 increased 34% over the comparable period in 2011. Fixed income net revenues, excluding the impact of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, in the quarter ended March 31, 2012 increased 31% over the comparable period in 2011. The results in fixed income in the quarter ended March 31, 2012 reflected higher revenues in interest rate and currency products and corporate credit products, partially offset by lower revenues in securitized products due to lower trading volumes. Results in the quarter ended March 31, 2011 also included losses of $318 million from Monolines (see “Executive Summary—Significant Items—Monoline Insurers” herein for further information). Commodity net revenues, excluding the impact of the Company’s Debt-Related Credit Spreads on Borrowings that are accounted for at fair value, increased 30% in the quarter ended March 31, 2012, primarily due to higher levels of client activity, including structured transactions.

In the quarter ended March 31, 2012, fixed income and commodities sales and trading net revenues reflected net gains of $492 million related to changes in the fair value of net derivative contracts attributable to the tightening of counterparties’ credit default swap spreads and other credit factors compared with gains of $857 million in the quarter ended March 31, 2011. The Company also recorded losses of $763 million in the quarter ended March 31, 2012 related to changes in the fair value of net derivative contracts attributable to the tightening of the Company’s credit default swap spreads and other credit factors compared with losses of $156 million in the quarter ended March 31, 2011. The gains and losses on credit default swap spreads and other credit factors do not reflect any gains or losses on related hedging instruments.

Other.    In addition to the equity and fixed income and commodities sales and trading net revenues discussed above, sales and trading revenues included other trading revenues, consisting of certain activities associated with the Company’s lending activities, gains (losses) on economic hedges related to the Company’s long-term debt

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and negative carry. Other sales and trading net revenues reflected a net loss of $286 million in the quarter ended March 31, 2012 compared with a net loss of $460 million in the quarter ended March 31, 2011. The results in both quarters primarily reflected losses on economic hedges related to the Company’s long-term debt and negative carry. Results in the quarter ended March 31, 2012 were partially offset by net gains of $134 million associated with the portion of the loan and lending commitment portfolio carried at fair value (mark-to-market valuations and realized gains of $770 million and losses on related hedges of $636 million). Results in the prior year quarter were partially offset by net gains of approximately $74 million associated with the portion of the loan and lending commitment portfolio carried at fair value (mark-to-market valuations and realized gains of approximately $209 million offset by losses on related hedges of approximately $135 million).

Effective April 1, 2012, the Company began accounting for all new “relationship-driven” and “event-driven” loans and lending commitments as either held for investment or held for sale. This corporate lending portfolio has grown and the Company expects this trend to continue. See “Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Institutional Securities Activities—Credit Exposure—Corporate Lending” in Part I, Item 3, herein.

Net Interest.    Net interest expense increased to $461 million in the quarter ended March 31, 2012 from $327 million in the quarter ended March 31, 2011 primarily due to lower interest revenues in reverse repurchase agreements and stock lending transactions.

Principal Transactions—Investments.    Principal transaction net investment losses of $49 million were recognized in the quarter ended March 31, 2012 compared with net investment gains of $143 million in the quarter ended March 31, 2011. Results in the quarter ended March 31, 2012 primarily included mark-to-market losses on principal investments. Results in the quarter ended March 31, 2011 reflected gains in principal investments in real estate funds and investments associated with certain employee deferred compensation plans and co-investment plans.

Other.    Other gains of $58 million were recognized in the quarter ended March 31, 2012 compared with other losses of $602 million in the quarter ended March 31, 2011. The results in the quarters ended March 31, 2012 and 2011, primarily included a gain (loss) of $27 million and $(655) million, respectively, arising from the Company’s 40% stake in MUMSS (see “Executive Summary—Significant Items—Japanese Securities Joint Venture” herein).

Non-interest Expenses.    Non-interest expenses increased 6% in the quarter ended March 31, 2012. The increase was primarily due to higher compensation expenses. Compensation and benefits expenses increased 10% in the quarter ended March 31, 2012, primarily due to higher net revenues, excluding the impact of the Company’s Debt—Related Credit Spreads on Borrowings that are accounted for at fair value, and severance expense of $108 million related to reductions in force in January 2012. Non-compensation expenses increased 1% in the quarter ended March 31, 2012 compared with the prior year period. Information processing and communications expense increased 12% in the quarter ended March 31, 2012, primarily due to ongoing investments in technology. Professional services expenses increased 21% in the quarter ended March 31, 2012, primarily due to higher consulting expenses. Other expenses decreased 27% in the quarter ended March 31, 2012, primarily due to lower litigation expenses.

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GLOBAL WEALTH MANAGEMENT GROUP

INCOME STATEMENT INFORMATION

	Three Months Ended March 31,
	2012		2011
	(dollars in millions)
Revenues:
Investment banking	$	205	$	204
Principal transactions:
Trading		371		333
Investments		2		4
Commissions and fees		630		770
Asset management, distribution and administration fees		1,739		1,662
Other		57		90
Total non-interest revenues		3,004		3,063
Interest income		490		453
Interest expense		80		112
Net interest		410		341
Net revenues		3,414		3,404
Compensation and benefits		2,105		2,109
Non-compensation expenses		922		951
Total non-interest expenses		3,027		3,060
Income from continuing operations before income taxes		387		344
Provision for income taxes		121		89
Income from continuing operations		266		255
Discontinued operations:
Income from discontinued operations		2		3
Provision for income taxes		1		1
Net gain on discontinued operations		1		2
Net income		267		257
Net income applicable to noncontrolling interests		74		74
Net income applicable to Morgan Stanley	$	193	$	183
Amounts applicable to Morgan Stanley:
Income from continuing operations	$	193	$	182
Net gain from discontinued operations		—		1
Net income applicable to Morgan Stanley	$	193	$	183

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Net Revenues.    Global Wealth Management Group’s net revenues are composed of Transactional, Asset management, Net interest and Other revenues. Transactional revenues include Investment banking, Principal transactions—Trading, and Commissions and fees. Asset management revenues include Asset management, distribution and administration fees and fees related to the bank deposit program. Net interest revenues include net interest revenues related to the bank deposit program, interest on securities available for sale and all other net interest revenues. Other revenues include revenues from available for sale securities, customer account services fees, other miscellaneous revenues and revenues from Principal transactions—Investments.

	Three Months Ended March 31,
	2012		2011
	(dollars in millions)
Revenues:
Transactional	$	1,206	$	1,307
Asset management		1,739		1,662
Net interest		410		341
Other		59		94
Net revenues	$	3,414	$	3,404

MSSB.    On May 31, 2009, MSSB was formed (see Note 3 to the consolidated financial statements included in the 2011 Form 10-K). The Company owns 51% of MSSB, which is consolidated. Net income applicable to noncontrolling interests for all periods primarily represents Citi’s interest in MSSB.

Quilter.    On April 2, 2012, the Company closed the sale of Quilter, its retail wealth management business in the U.K. The Company has classified Quilter as held for sale within the Global Wealth Management Group business segment and the results of its operations are presented as discontinued operations for all periods presented.

Transactional.

Investment Banking.    Investment banking revenues were $205 million in the quarter ended March 31, 2012, essentially unchanged from the comparable period of 2011.

Principal Transactions—Trading.    Principal transactions—Trading revenues increased 11% in the quarter ended March 31, 2012 from the comparable period of 2011, primarily due to gains related to investments associated with certain employee deferred compensation plans, higher revenues from corporate fixed income securities and unit investment trusts, partially offset by lower revenues from corporate equity securities, government securities, derivatives and structured products.

Commissions and Fees.    Commissions and fees revenues decreased 18% in the quarter ended March 31, 2012 from the comparable period of 2011, primarily due to lower client activity.

Asset Management.

Asset Management, Distribution and Administration Fees.    Asset management, distribution and administration fees increased 5% in the quarter ended March 31, 2012 from the comparable period of 2011, primarily due to higher fee-based revenues and higher revenues from the bank deposit program on balances held at Citi depositories. The referral fees for deposits placed with Citi affiliated depository institutions were $82 million and $65 million in the quarters ended March 31, 2012 and 2011, respectively.

Balances in the bank deposit program increased to $112.0 billion at March 31, 2012 from $111.5 billion at March 31, 2011. Deposits held by Company-affiliated FDIC-insured depository institutions were $57 billion at March 31, 2012 and $54 billion at March 31, 2011.

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Client assets in fee-based accounts increased to $531 billion and represented 30% of total client assets at March 31, 2012, compared with $490 billion and 29% at March 31, 2011, respectively. Total client asset balances increased to $1,744 billion at March 31, 2012 from $1,706 billion at March 31, 2011, primarily due to the impact of market conditions and net new asset inflows. Client asset balances in households with assets greater than $1 million increased to $1,323 billion at March 31, 2012 from $1,272 billion at March 31, 2011. Global fee-based asset net inflows decreased to $8.7 billion at March 31, 2012 from $17.5 billion at March 31, 2011.

Net Interest.

Net interest increased 20% in the quarter ended March 31, 2012 from the comparable period of 2011, primarily resulting from an increase in Interest income from the securities available for sale portfolio and higher revenues from the bank deposit program.

Other.

Principal Transactions—Investments.    Principal transaction net investment gains were $2 million in the quarter ended March 31, 2012 compared with net investment gains of $4 million in the quarter ended March 31, 2011. The decrease primarily reflected losses related to investments associated with certain employee deferred compensation plans compared with such investments in the prior year.

Other.    Other revenues were $57 million in the quarter ended March 31, 2012, a decrease of 37% from the comparable period of 2011, primarily due to lower gains on sales of securities available for sale, lower proxy and other fees, lower credit card revenues and a higher allowance for loan losses.

Non-interest Expenses.    Non-interest expenses decreased 1% in the quarter ended March 31, 2012 from the comparable period of 2011. Compensation and benefits expense was essentially unchanged in the quarter ended March 31, 2012 from the comparable period of 2011. Non-compensation expenses decreased 3% in the quarter ended March 31, 2012 from the comparable period of 2011. In the quarter ended March 31, 2012, marketing and business development expense increased 12% from the comparable period of 2011, primarily due to higher costs associated with conferences and seminars. Professional services expense decreased 10% in the quarter ended March 31, 2012 from the comparable period of 2011, primarily due to lower technology consulting costs.

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ASSET MANAGEMENT

INCOME STATEMENT INFORMATION

	Three Months Ended March  31,
	2012			2011
	(dollars in millions)
Revenues:
Investment banking	$	7		$	2
Principal transactions:
Trading		(6	)		(1	)
Investments		132			182
Asset management, distribution and administration fees		411			405
Other		(3	)		42
Total non-interest revenues		541			630
Interest income		3			4
Interest expense		11			12
Net interest		(8	)		(8	)
Net revenues		533			622
Compensation and benefits		218			253
Non-compensation expenses		187			244
Total non-interest expenses		405			497
Income from continuing operations before income taxes		128			125
Provision for income taxes		38			30
Income from continuing operations		90			95
Discontinued operations:
Gain from discontinued operations		1			6
Provision for (benefit from) income taxes		—			—
Net gain from discontinued operations		1			6
Net income		91			101
Net income applicable to noncontrolling interests		65			27
Net income applicable to Morgan Stanley	$	26		$	74
Amounts applicable to Morgan Stanley:
Income from continuing operations	$	25		$	68
Net gain from discontinued operations		1			6
Net income applicable to Morgan Stanley	$	26		$	74

Noncontrolling Interests.    Noncontrolling interests are primarily related to the consolidation of certain real estate funds sponsored by the Company.

Discontinued Operations.    Discontinued operations in the quarters ended March 31, 2012 and March 31, 2011 primarily include results of operations related to the sale of substantially all of its retail asset management business, including Van Kampen Investments Inc., to Invesco Ltd. See Note 20 for further information.

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Statistical Data.

The Asset Management business segment’s period-end and average assets under management or supervision were as follows:

	At March 31,				Average For The Three  Months Ended March 31,
	2012		2011		2012		2011
	(dollars in billions)
Assets under management or supervision by asset class:
Traditional Asset Management:
Equity	$	117	$	116	$	111	$	112
Fixed income		58		61		58		61
Liquidity		75		55		74		55
Alternatives(1)		26		18		25		18
Total Traditional Asset Management		276		250		268		246
Real Estate Investing		19		17		19		16
Merchant Banking:
Private Equity		9		9		9		9
FrontPoint(2)		—		—		—		3
Total Merchant Banking		9		9		9		12
Total assets under management or supervision	$	304	$	276	$	296	$	274
Share of minority stake assets(2)(3)	$	6	$	8	$	5	$	7

(1) The alternatives asset class includes a range of investment products such as funds of hedge funds, funds of private equity funds and funds of real estate funds.

(2) On March 1, 2011, the Company and the principals of FrontPoint completed a transaction whereby FrontPoint senior management and portfolio managers own a majority equity stake in FrontPoint and the Company retains a minority stake. At March 31, 2011, the assets under management attributed to FrontPoint are represented within the share of minority stake assets.

(3) Amounts represent the Asset Management business segment’s proportional share of assets managed by entities in which it owns a minority stake.

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Activity in the Asset Management business segment’s assets under management or supervision during the quarters ended March 31, 2012 and 2011 were as follows:

	Three Months Ended March 31,
	2012			2011(1)
	(dollars in billions)
Balance at beginning of period	$	287		$	272
Net flows by asset class:
Traditional Asset Management:
Equity		(1	)		2
Fixed income		(1	)		(1	)
Liquidity		1			2
Alternatives(2)		—			—
Total Traditional Asset Management		(1	)		3
Real Estate Investing		1			—
Merchant Banking:
FrontPoint(3)		—			(2	)
Total Merchant Banking		—			(2	)
Total net flows		—			1
Net market appreciation		17			7
Decrease due to FrontPoint transaction		—			(4	)
Total net increase		17			4
Balance at end of period	$	304		$	276

(1) All prior-period amounts have been reclassified to conform to the current period’s presentation.

(2) The alternatives asset class includes a range of investment products such as funds of hedge funds, funds of private equity funds and funds of real estate funds.

(3) The amount for the quarter ended March 31, 2011 includes two months of net flows related to FrontPoint.

Principal Transactions—Investments.    The Company recorded principal transactions net investment gains of $132 million in the quarter ended March 31, 2012 compared with net gains of $182 million in the quarter ended March 31, 2011. The decrease in the quarter ended March 31, 2012 was primarily related to lower net investment gains in the Company’s Merchant Banking business, including certain investments associated with the Company’s employee deferred compensation and co-investment plans, partially offset by higher net investment gains associated with certain consolidated real estate funds sponsored by the Company.

Asset Management, Distribution and Administration Fees.    Asset management, distribution and administration fees increased 1% in the quarter ended March 31, 2012 compared with the prior year period. The increase primarily reflected higher performance fees and higher fund management and administration fees, primarily due to higher average assets under management. The increase in revenues was partially offset by the absence of FrontPoint in the quarter ended March 31, 2012 compared with two months of FrontPoint fees in the quarter ended March 31, 2011.

The Company’s assets under management increased $28 billion from $276 billion at March 31, 2011 to $304 billion at March 31, 2012 reflecting net customer inflows primarily in the Company’s liquidity funds. The Company recorded net customer inflows of $0.2 billion in the quarter ended March 31, 2012 compared with net inflows of $1.4 billion in the quarter ended March 31, 2011.

Other.    Other losses were $3 million in the quarter ended March 31, 2012 as compared with gains of $42 million in the quarter ended March 31, 2011. The decrease in the quarter ended March 31, 2012 primarily

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reflected lower revenues associated with the Company’s minority stake investments in Avenue Capital Group, a New York based investment manager, and Lansdowne Partners, a London-based investment manager.

Non-interest Expenses.    Non-interest expenses decreased 19% in the quarter ended March 31, 2012 compared with the quarter ended March 31, 2011, reflecting a decrease in compensation expenses and non-compensation expenses. Compensation and benefits expenses decreased 14% in the quarter ended March 31, 2012 compared with the prior year period primarily related to lower net revenues, including the absence of FrontPoint in the quarter ended March 31, 2012 compared with two months of FrontPoint expenses in the quarter ended March 31, 2011. Non-compensation expenses decreased 23% in the quarter ended March 31, 2012 compared with the prior year period, which included indemnification losses related to the FrontPoint transaction recognized in Other expenses.

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Other Matters.

Real Estate.

The Company acts as the general partner for various real estate funds and also invests in certain of these funds as a limited partner. The Company’s real estate investments at March 31, 2012 and December 31, 2011 are described below. Such amounts exclude investments associated with certain employee deferred compensation and co-investment plans.

At March 31, 2012 and December 31, 2011, the condensed consolidated statements of financial condition included amounts representing real estate investment assets of condensed consolidated subsidiaries of approximately $2.1 billion and $2.0 billion, respectively, including noncontrolling interests of approximately $1.7 billion and $1.6 billion, respectively, for a net amount of $0.4 billion in both periods. This net presentation is a non-GAAP financial measure that the Company considers to be a useful measure for the Company and investors to use in assessing the Company’s net exposure. In addition, the Company has contractual capital commitments, guarantees, lending facilities and counterparty arrangements with respect to real estate investments of $0.7 billion at March 31, 2012.

In addition to the Company’s real estate investments, the Company engages in various real estate-related activities, including origination of loans secured by commercial and residential properties. The Company also securitizes and trades in a wide range of commercial and residential real estate and real estate-related whole loans, mortgages and other real estate. In connection with these activities, the Company has provided, or otherwise agreed to be responsible for, representations and warranties. Under certain circumstances, the Company may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached. The Company continues to monitor its real estate-related activities in order to manage its exposures and potential liability from these markets and businesses. See “Legal Proceedings—Residential Mortgage and Credit Crisis Related Matters” in Part II, Item 1, herein and see Note 11 to the condensed consolidated financial statements.

See Note 11 to the condensed consolidated financial statements for further information.

Regulatory Outlook.

On July 21, 2010, President Obama signed the Dodd-Frank Act into law. While certain portions of the Dodd-Frank Act were effective immediately, other portions will be effective only following extended transition periods. Moreover, implementation of the Dodd-Frank Act will be accomplished through numerous rulemakings by multiple governmental agencies, only a portion of which have been completed. It remains difficult to assess fully the impact that the Dodd-Frank Act will have on the Company and on the financial services industry generally. In addition, various international developments, such as the adoption of risk-based capital, leverage and liquidity standards by the Basel Committee, known as “Basel III,” will impact the Company in the coming years.

It is likely that 2012 and subsequent years will see further material changes in the way major financial institutions are regulated in both the U.S. and other markets in which the Company operates, although it remains difficult to predict which further reform initiatives will become law, how such reforms will be implemented or the exact impact they will have on the Company’s business, financial condition, results of operations and cash flows for a particular future period.

For a further discussion regarding the regulatory outlook for the Company, please refer to “Supervision and Regulation” in Part I, Item 1 included in the Form 10-K.

Activities Restrictions under the Volcker Rule.    On April 19, 2012, the Federal Reserve issued guidance regarding when banking entities, such as the Company, must bring their activities, investments, relationships and transactions into compliance with the Volcker Rule. The guidance confirms that banking entities will have until July 21, 2014 to bring all of their activities and investments into conformance with the Volcker Rule, subject to possible extensions. Banking entities must act in good faith and develop a conformance plan that is as specific as possible about how they will fully conform all of their covered activities and investments by July 21, 2014, unless that period is extended by the Federal Reserve.

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Critical Accounting Policies.

The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require the Company to make estimates and assumptions (see Note 1 to the condensed consolidated financial statements). The Company believes that of its significant accounting policies (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K and Note 2 to the condensed consolidated financial statements), the following policies involve a higher degree of judgment and complexity.

Fair Value.

Financial Instruments Measured at Fair Value.    A significant number of the Company’s financial instruments are carried at fair value. The Company makes estimates regarding valuation of assets and liabilities measured at fair value in preparing the condensed consolidated financial statements. These assets and liabilities include but are not limited to:

• Financial instruments owned and Financial instruments sold, not yet purchased;

• Securities available for sale;

• Securities received as collateral and Obligation to return securities received as collateral;

• Certain Securities purchased under agreements to resell;

• Certain Deposits;

• Certain Commercial paper and other short-term borrowings, primarily structured notes;

• Certain Securities sold under agreements to repurchase;

• Certain Other secured financings; and

• Certain Long-term borrowings, primarily structured notes.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable prices and inputs and minimizes the use of unobservable prices and inputs by requiring that the relevant observable inputs be used when available. The hierarchy is broken down into three levels, wherein Level 1 uses observable prices in active markets, and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, require the greatest use of judgment. In periods of market disruption, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be recategorized from Level 1 to Level 2 or Level 2 to Level 3. In addition, a downturn in market conditions could lead to declines in the valuation of many instruments. For further information on the valuation process, fair value definition, Level 1, Level 2, Level 3 and related valuation techniques, and quantitative information about and sensitivity of significant unobservable inputs used in Level 3 fair value measurements, see Notes 2 and 4 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K and Notes 2 and 3 to the condensed consolidated financial statements.

Level 3 Assets and Liabilities.    The Company’s Level 3 assets before the impact of cash collateral and counterparty netting across the levels of the fair value hierarchy were $29.7 billion and $32.5 billion at March 31, 2012 and December 31, 2011, respectively, and represented approximately 9% and 10% at March 31, 2012 and December 31, 2011, respectively, of the assets measured at fair value (approximately 4% of total assets at March 31, 2012 and December 31, 2011). Level 3 liabilities before the impact of cash collateral and counterparty netting across the levels of the fair value hierarchy were $9.9 billion and $11.2 billion at March 31, 2012 and December 31, 2011, respectively, and represented approximately 5% and 6%, respectively, of the Company’s liabilities measured at fair value.

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Assets and Liabilities Measured at Fair Value on a Non-recurring Basis.    At March 31, 2012, certain of the Company’s assets were measured at fair value on a non-recurring basis, primarily relating to loans, other investments, premises, equipment and software costs, and intangible assets. The Company incurs losses or gains for any adjustments of these assets to fair value. A downturn in market conditions could result in impairment charges in future periods.

For assets and liabilities measured at fair value on a non-recurring basis, fair value is determined by using various valuation approaches. The same hierarchy as described above, which maximizes the use of observable inputs and minimizes the use of unobservable inputs by generally requiring that the observable inputs be used when available, is used in measuring fair value for these items.

For further information on assets and liabilities that are measured at fair value on a non-recurring basis, see Note 3 to the condensed consolidated financial statements.

Fair Value Control Processes.    The Company employs control processes to validate the fair value of its financial instruments, including those derived from pricing models. These control processes are designed to ensure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable. For more information regarding the Company’s valuation policies, processes and procedures, see Note 2 to the condensed consolidated financial statements.

Goodwill and Intangible Assets.

Goodwill.    The Company tests goodwill for impairment on an annual basis on July 1 and on an interim basis when certain events or circumstances exist. The Company tests for impairment at the reporting unit level, which is generally at the level of or one level below its business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all of the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill. For both the annual and interim tests, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques the Company believes market participants would use for each of the reporting units. The estimated fair values are generally determined utilizing methodologies that incorporate price-to-book, price-to-earnings and assets under management multiples of certain comparable companies. The Company also utilizes a discounted cash flow methodology for certain reporting units.

Intangible Assets.    Amortizable intangible assets are amortized over their estimated useful lives and are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, an impairment exists when the carrying amount of the intangible asset exceeds its fair value. An impairment loss will be recognized only if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows.

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Indefinite-lived intangible assets are not amortized but are reviewed annually (or more frequently when certain events or circumstances exist) for impairment. For indefinite-lived intangible assets, an impairment exists when the carrying amount exceeds its fair value.

For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Adverse market or economic events could result in impairment charges in future periods.

See Notes 3 and 8 to the condensed consolidated financial statements for additional information about goodwill and intangible assets.

Legal, Regulatory and Tax Contingencies.

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, including, among other matters, accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

Accruals for litigation and regulatory proceedings are generally determined on a case-by-case basis. Where available information indicates that it is probable a liability had been incurred at the date of the condensed 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. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. For certain legal proceedings, the Company can estimate possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued. For certain other legal proceedings, the Company cannot reasonably estimate such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding.

The Company is subject to the income and indirect tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which the Company has significant business operations. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. The Company must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and the expense for indirect taxes and must also make estimates about when certain items affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. The Company periodically evaluates the likelihood of assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the guidance on accounting for unrecognized tax benefits. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.

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The 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 services income until such income is repatriated to the United States as a dividend. This provision, which expired for taxable years beginning on or after January 1, 2012, had previously been extended by Congress on several occasions, including the most recent extension which occurred during 2010. If this provision is extended again with respect to such income earned during 2012, the overall financial impact to the Company would depend upon the level, composition and geographic mix of earnings but could decrease the Company’s 2012 annual effective tax rate and have a favorable impact on the Company’s net income, but not its cash flows due to utilization of tax attributes carryforwards.

Significant judgment is required in making these estimates, and the actual cost of a legal claim, tax assessment or regulatory fine/penalty may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any. See Notes 11 and 17 to the condensed consolidated financial statements for additional information on legal proceedings and tax examinations.

Special Purpose Entities and Variable Interest Entities.

The Company’s involvement with special purpose entities (“SPE”) consists primarily of the following:

• Transferring financial assets into SPEs;

• Acting as an underwriter of beneficial interests issued by securitization vehicles;

• Holding one or more classes of securities issued by, or making loans to or investments in, SPEs that hold debt, equity, real estate or other assets;

• Purchasing and selling (in both a market-making and a proprietary-trading capacity) securities issued by SPEs/variable interest entities (“VIE”), whether such vehicles are sponsored by the Company or not;

• Entering into derivative transactions with SPEs (whether or not sponsored by the Company);

• Providing warehouse financing to collateralized debt obligations and collateralized loan obligations;

• Entering into derivative agreements with non-SPEs whose value is derived from securities issued by SPEs;

• Servicing assets held by SPEs or holding servicing rights related to assets held by SPEs that are serviced by others under subservicing arrangements;

• Serving as an asset manager to various investment funds that may invest in securities that are backed, in whole or in part, by SPEs; and

• Structuring and/or investing in other structured transactions designed to provide enhanced, tax-efficient yields to the Company or its clients.

The Company engages in securitization activities related to commercial and residential mortgage loans, U.S. agency collateralized mortgage obligations, corporate bonds and loans, municipal bonds and other types of financial instruments. The Company’s involvement with SPEs is discussed further in Note 6 to the condensed consolidated financial statements.

In most cases, these SPEs are deemed for accounting purposes to be VIEs. The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors do not have the characteristics of a controlling financial interest. Entities that previously met the criteria as qualifying SPEs that were not subject to consolidation prior to January 1, 2010 became subject to the consolidation requirements for VIEs on that date. Excluding entities subject to the Deferral (as defined in Note 2 to the condensed consolidated financial statements), effective January 1, 2010, the primary beneficiary of a VIE is the party that both (1) has the power to direct the activities of a VIE that most significantly affect the VIE’s economic performance and (2) has an obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Company consolidates entities of which it is the primary beneficiary.

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The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE’s structure and activities, the power to make significant economic decisions held by the Company and by other parties and the variable interests owned by the Company and other parties.

See Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K for information on accounting guidance adopted on January 1, 2010 for transfers of financial assets.

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Liquidity and Capital Resources.

The Company’s senior management establishes the liquidity and capital policies of the Company. Through various risk and control committees, the Company’s senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity and interest rate and currency sensitivity of the Company’s asset and liability position. The Company’s Treasury Department, Firm Risk Committee, Asset and Liability Management Committee and other control groups assist in evaluating, monitoring and controlling the impact that the Company’s business activities have on its condensed consolidated statements of financial condition, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board’s Risk Committee.

The Balance Sheet.

The Company actively monitors and evaluates the composition and size of its balance sheet. A substantial portion of the Company’s total assets consists of liquid marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment. The liquid nature of these assets provides the Company with flexibility in managing the size of its balance sheet. The Company’s total assets increased to $781,030 million at March 31, 2012 from $749,898 million at December 31, 2011. The increase in total assets was primarily due to an increase in Securities borrowed, Financial instruments owned—Corporate equities, Federal funds sold and securities purchased under agreements to resell and Securities received as collateral.

The Company’s assets and liabilities are primarily related to transactions attributable to sales and trading and securities financing activities. At March 31, 2012, securities financing assets and liabilities were $365 billion and $284 billion, respectively. At December 31, 2011, securities financing assets and liabilities were $332 billion and $268 billion, respectively. Securities financing transactions include repurchase and resale agreements, securities borrowed and loaned transactions, securities received as collateral and obligation to return securities received. Securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase are treated as collateralized financings (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K and Note 5 to the condensed consolidated financial statements). Securities sold under agreements to repurchase and Securities loaned were $142 billion at March 31, 2012 and averaged $158 billion during the quarter ended March 31, 2012. Securities purchased under agreements to resell and Securities borrowed were $278 billion at March 31, 2012 and averaged $283 billion during the quarter ended March 31, 2012.

Securities financing assets and liabilities also include matched book transactions with minimal market, credit and/or liquidity risk. Matched book transactions accommodate customers, as well as obtain securities for the settlement and financing of inventory positions. The customer receivable portion of the securities financing transactions includes customer margin loans, collateralized by customer owned securities, and customer cash, which is segregated according to regulatory requirements. The customer payable portion of the securities financing transactions primarily includes customer payables to the Company’s prime brokerage clients. The Company’s risk exposure on these transactions is mitigated by collateral maintenance policies that limit the Company’s credit exposure to customers. Included within securities financing assets were $18 billion and $12 billion at March 31, 2012 and December 31, 2011, respectively, recorded in accordance with accounting guidance for the transfer of financial assets that represented offsetting assets and liabilities for fully collateralized non-cash loan transactions.

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The following table sets forth the Company’s tangible common equity at March 31, 2012 and December 31, 2011 and average balances during the quarter ended March 31, 2012:

	Balance at						Average Balance(1)
	March 31, 2012			December 31, 2011			For the Three Months Ended March 31, 2012
	(dollars in millions)
Common equity	$	60,816		$	60,541		$	60,485
Preferred equity		1,508			1,508			1,508
Morgan Stanley shareholders’ equity		62,324			62,049			61,993
Junior subordinated debentures issued to capital trusts		4,838			4,853			4,844
Less: Goodwill and net intangible assets(2)		(6,660	)		(6,691	)		(6,685	)
Tangible Morgan Stanley shareholders’ equity	$	60,502		$	60,211		$	60,152
Common equity	$	60,816		$	60,541		$	60,485
Less: Goodwill and net intangible assets(2)		(6,660	)		(6,691	)		(6,685	)
Tangible common equity(3)	$	54,156		$	53,850		$	53,800

(1) The Company calculates its average balances based upon month-end balances.

(2) The goodwill and net intangible assets deduction exclude mortgage servicing rights (net of disallowable mortgage servicing rights) of $90 million and $120 million at March 31, 2012 and December 31, 2011, respectively, and include only the Company’s share of MSSB’s goodwill and intangible assets.

(3) Tangible common equity, a non-GAAP financial measure, equals common equity less goodwill and net intangible assets as defined above. The Company views tangible common equity as a useful measure to investors because it is a commonly utilized metric and reflects the common equity deployed in the Company’s businesses.

Balance Sheet and Funding Activity for the Three Months Ended March 31, 2012.

During the quarter ended March 31, 2012, the Company issued notes with a principal amount of approximately $5 billion. In connection with the note issuances, the Company generally enters into certain transactions to obtain floating interest rates based primarily on short-term London Inter-Bank Offer Rate (“LIBOR”) trading levels. The weighted average maturity of the Company’s long-term borrowings, based upon stated maturity dates, was approximately 5.3 years at March 31, 2012. During the quarter ended March 31, 2012, approximately $16 billion in aggregate long-term borrowings were matured or retired. Subsequent to March 31, 2012 and through April 30, 2012, the Company’s long-term borrowings (net of issuances) decreased by approximately $1.6 billion.

At March 31, 2012, the aggregate outstanding carrying amount of the Company’s senior indebtedness was approximately $166 billion (including guaranteed obligations of the indebtedness of subsidiaries) compared with $176 billion at December 31, 2011. The decrease in the amount of senior indebtedness was primarily due to repayments of notes, net of new issuances in long-term and short-term borrowings.

Capital Management.

The Company’s senior management views capital as an important source of financial strength. The Company actively manages its consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines and, therefore, in the future may expand or contract its capital base to address the changing needs of its businesses. The Company attempts to maintain total capital, on a consolidated basis, at least equal to the sum of its operating subsidiaries’ equity.

At March 31, 2012, the Company had approximately $1.6 billion remaining under its current share repurchase program out of the $6 billion authorized by the Board of Directors in December 2006. The share repurchase program is for capital management purposes and considers, among other things, business segment capital needs

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as well as equity-based compensation and benefit plan requirements. Share repurchases by the Company are subject to regulatory approval. During the quarter ended March 31, 2012, the Company did not repurchase common stock as part of its capital management share repurchase program (see also “Unregistered Sales of Equity Securities and Use of Proceeds” in Part II, Item 2).

The Board of Directors determines the declaration and payment of dividends on a quarterly basis. In April 2012, the Company announced that its Board of Directors declared a quarterly dividend per common share of $0.05. In March 2012, the Company also announced that the Board of Directors declared a quarterly dividend of $252.78 per share of Series A Floating Rate Non-Cumulative Preferred Stock (represented by depositary shares, each representing 1/1,000th interest in a share of preferred stock and each having a dividend of $0.25278) and a quarterly dividend of $25.00 per share of Series C Non-Cumulative Non-Voting Perpetual Preferred Stock.

Required Capital.

The Company’s capital estimation is based on the Required Capital Framework, an internal capital adequacy measure. This framework is a risk-based internal use of capital measure, which is compared with the Company’s regulatory capital to help ensure the Company maintains an amount of risk-based going concern capital after absorbing potential losses from extreme stress events at a point in time. The difference between the Company’s regulatory capital and aggregate Required Capital is the Company’s Parent capital. Average Tier 1 common capital, aggregate Required Capital and Parent capital for the quarter ended March 31, 2012 were approximately $40.9 billion, $27.0 billion and $13.9 billion, respectively. The Company generally holds Parent capital for prospective regulatory requirements, including Basel III, organic growth, acquisitions and other capital needs.

Tier 1 common capital and common equity attribution to the business segments is based on capital usage calculated by Required Capital Framework. In principle, each business segment is capitalized as if it were an independent operating entity with limited diversification benefit between the business segments. Required Capital is assessed at each business segment and further attributed to product lines. This process is intended to align capital with the risks in each business segment in order to allow senior management to evaluate returns on a risk-adjusted basis. The Required Capital Framework will evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques. During 2012, the Company will continue to evaluate the framework with respect to the impact of future regulatory requirements, as appropriate.

Beginning in the quarter ended March 31, 2012, the Company and segment Required Capital is met by Tier 1 common capital. Prior to the current quarter, the Company’s Required Capital was met by regulatory Tier 1 capital or Tier 1 common equity. Segment capital for prior periods has been recast under this framework.

For a further discussion of the Company’s Tier 1 common capital, see “Regulatory Requirements” herein.

The following table presents the Company’s and business segments’ average Tier 1 common capital and average common equity for the quarter ended March 31, 2012 and the quarter ended December 31, 2011.

	Three Months Ended March 31, 2012				Three Months Ended December 31, 2011
	Average Tier 1 Common Capital		Average Common Equity		Average Tier 1 Common Capital		Average Common Equity
	(dollars in billions)
Institutional Securities	$	22.1	$	29.5	$	24.4	$	31.3
Global Wealth Management Group		3.6		13.3		3.3		13.0
Asset Management		1.3		2.5		1.3		2.5
Parent capital		13.9		15.2		11.6		13.8
Total	$	40.9	$	60.5	$	40.6	$	60.6

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Capital Covenants.

In October 2006 and April 2007, the Company executed replacement capital covenants in connection with offerings by Morgan Stanley Capital Trust VII and Morgan Stanley Capital Trust VIII (the “Capital Securities”), which become effective after the scheduled redemption date in 2046. Under the terms of the replacement capital covenants, the Company has agreed, for the benefit of certain specified holders of debt, to limitations on its ability to redeem or repurchase any of the Capital Securities for specified periods of time. For a complete description of the Capital Securities and the terms of the replacement capital covenants, see the Company’s Current Reports on Form 8-K dated October 12, 2006 and April 26, 2007.

Liquidity Risk Management Framework.

The primary goal of the Company’s liquidity risk management framework is to ensure that the Company has access to adequate funding across a wide range of market conditions. The framework is designed to enable the Company to fulfill its financial obligations and support the execution of the Company’s business strategies.

The following principles guide the Company’s liquidity risk management framework:

• Sufficient liquid assets should be maintained to cover maturing liabilities;

• Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;

• Source, counterparty, currency, region, and term of funding should be diversified; and

• Limited access to funding should be anticipated through the Contingency Funding Plan.

The core components of the Company’s liquidity risk management framework are the Contingency Funding Plan (“CFP”), Liquidity Stress Tests and the Global Liquidity Reserve. These elements support the Company’s target liquidity profile.

Contingency Funding Plan.

The Company maintains the CFP, which describes the data and information flows, limits and triggers, escalation procedures, roles and responsibilities, and available mitigating actions in the event of a liquidity stress. The CFP assesses current and future funding sources and uses and establishes a plan for monitoring and managing a potential liquidity stress event. A set of escalation triggers identifies early signs of stress and activates a response plan.

Liquidity Stress Tests.

The Company uses Liquidity Stress Tests to model liquidity outflows across multiple scenarios over a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events.

The assumptions underpinning the Liquidity Stress Tests include, but are not limited to, the following:

• No government support;

• No access to equity and unsecured debt markets;

• Repayment of all unsecured debt maturing within one year;

• Higher haircuts and significantly lower availability of secured funding;

• Additional collateral that would be required by trading counterparties and certain exchanges and clearing organizations related to a multi-notch credit rating downgrade;

• Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;

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• Discretionary unsecured debt buybacks;

• Drawdowns on unfunded commitments provided to third parties;

• Client cash withdrawals and reduction in customer short positions that fund long positions;

• Limited access to the foreign exchange swap markets;

• Return of securities borrowed on an uncollateralized basis; and

• Maturity roll-off of outstanding letters of credit with no further issuance.

The Liquidity Stress Tests are produced at the Parent company (“Parent”) and major operating subsidiary levels, as well as at major currency levels, to capture specific cash requirements and cash availability across the Company. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent. The Parent will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves that are subject to any regulatory, legal or tax constraints.

At March 31, 2012, the Company maintained sufficient liquidity to meet current and contingent funding obligations as modeled in its Liquidity Stress Tests.

Global Liquidity Reserve.

The Company maintains sufficient liquidity reserves (“Global Liquidity Reserve”) to cover daily funding needs and meet strategic liquidity targets sized by the CFP and Liquidity Stress Tests. These liquidity targets are based on the Company’s risk tolerance, balance sheet level and composition, subsidiary funding needs, and upcoming debt maturities, which are subject to change dependent on market and firm-specific events.

The Global Liquidity Reserve is held within the Parent and operating subsidiaries. The Global Liquidity Reserve is comprised of highly liquid and diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities, FDIC-guaranteed corporate debt and non-U.S. government securities.

Global Liquidity Reserve by Type of Investment.

The table below summarizes the Company’s Global Liquidity Reserve by type of investment:

	At March 31, 2012
	(dollars in billions)
Cash deposits with banks	$	10
Cash deposits with central banks		24
Unencumbered highly liquid securities:
U.S. Government obligations		81
U.S. agency and agency mortgage-backed securities		36
Non-U.S. sovereign obligations(1)		18
Investments in money market funds		—
Other investment grade securities		10
Global Liquidity Reserve	$	179

(1) Non-U.S sovereign obligations are composed of unencumbered German, French, Dutch, U.K., Brazilian and Japanese government obligations.

The ability to monetize assets during the start of a liquidity crisis is critical. The Company believes that the assets held in the Global Liquidity Reserve can be monetized within five business days in a stressed environment given the highly liquid and diversified nature of the reserves. The currency profile of the Global Liquidity Reserve is

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consistent with the CFP and Liquidity Stress Tests. In addition to the Global Liquidity Reserve, the Company has other cash and cash equivalents and other unencumbered assets that are available for monetization which are not included in the balances in the table above.

Global Liquidity Reserve Held by the Parent and Operating Subsidiaries.

The table below summarizes the Global Liquidity Reserve held by the Parent and operating subsidiaries:

					Average Balance(1)
	At March 31, 2012		At December 31, 2011		For the Three Months Ended March 31, 2012		For the Three Months Ended December 31, 2011
	(dollars in billions)
Parent	$	72	$	75	$	71	$	76
Non-Bank Subsidiaries:
Domestic		15		18		16		16
Foreign		27		26		28		24
Total Non-Bank Subsidiaries		42		44		44		40
Bank Subsidiaries:
Domestic		56		56		56		56
Foreign		9		7		7		7
Total Bank Subsidiaries		65		63		63		63
Total	$	179	$	182	$	178	$	179

(1) The Company calculates the average Global Liquidity Reserve based upon daily amounts.

The Company is exposed to intra-day settlement risk in connection with liquidity provided to its major broker-dealer subsidiaries for intra-day clearing and settlement of its securities and financing activity.

As mentioned in “Contingency Funding Plan,” the CFP assumes that the Parent will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves that are subject to any regulatory, legal or tax constraints.

Funding Management.

The Company’s funding management policies are designed to provide for financings that are executed in a manner that reduces the risk of disruption to the Company’s operations. The Company pursues a strategy of diversification of secured and unsecured funding sources (by product, by investor and by region) and attempts to ensure that the tenor of the Company’s liabilities equals or exceeds the expected holding period of the assets being financed.

The Company funds its balance sheet on a global basis through diverse sources. These sources may include the Company’s equity capital, long-term debt, repurchase agreements, securities lending, deposits, commercial paper, letters of credit and lines of credit. The Company has active financing programs for both standard and structured products targeting global investors and currencies.

Secured Financing.    A substantial portion of the Company’s total assets consists of liquid marketable securities and short-term collateralized receivables arising principally from its Institutional Securities business segment’s sales and trading activities. The liquid nature of these assets provides the Company with flexibility in funding these assets with secured financing. The Company’s goal is to achieve an optimal mix of durable secured and unsecured funding. The Institutional Securities business segment actively sources term secured funding. Secured funding investors principally focus on the quality of the eligible collateral posted, which is why the Company

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actively manages its secured financing book based on the quality of the assets being funded. The ability to fund less liquid assets may be impaired in a stress environment. To mitigate this risk, the Company obtains longer-term secured financing for less liquid assets.

The Company utilizes shorter term secured funding only for highly liquid assets and has established longer tenor targets for less liquid asset classes, for which funding may be at risk in the event of a market disruption. The Company defines highly liquid collateral as that which is consistent with the standards of the Global Liquidity Reserve, and less liquid collateral as that which does not meet those standards. At March 31, 2012, the weighted average maturity of the Company’s secured financing against less liquid collateral was greater than 120 days. To further minimize the refinancing risk of secured financing for less liquid collateral, the Company diversifies its investor base and limits the amount of monthly maturities for secured financing of less liquid collateral. Finally, in addition to the above risk management framework, the Company holds a portion of its Global Liquidity Reserve against the potential disruption to its secured financing capabilities.

Unsecured Financing.    The Company views long-term debt and deposits as stable sources of funding for core inventories and less liquid assets. Unencumbered securities and non security assets are financed with a combination of long and short term debt and deposits. When appropriate, the Company may use derivative products to conduct asset and liability management and to make adjustments to the Company’s interest rate risk profile (see Note 12 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

Temporary Liquidity Guarantee Program (“TLGP”).    In October 2008, the Secretary of the U.S. Treasury invoked the systemic risk exception of the FDIC Improvement Act of 1991, and the FDIC announced the TLGP. Based on the Final Rule adopted on November 21, 2008, the TLGP provides a guarantee, through the earlier of maturity or June 30, 2012, of certain senior unsecured debt issued by participating Eligible Entities (including the Company) between October 14, 2008 and June 30, 2009. Of the $23.8 billion issued by the Company under the TLGP, $4.7 billion was still outstanding at March 31, 2012.

Short-Term Borrowings.    The Company’s unsecured short-term borrowings consist of commercial paper, bank loans, bank notes and structured notes with maturities of 12 months or less at issuance.

The table below summarizes the Company’s short-term unsecured borrowings:

	At March 31, 2012		At   December  31, 2011
	(dollars in millions)
Commercial paper(1)	$	257	$	978
Other short-term borrowings		1,760		1,865
Total	$	2,017	$	2,843

(1) At December 31, 2011, the majority of the commercial paper balance was issued as part of client transactions and was not used for the Company’s general funding purposes. During the quarter ended March 31, 2012, the client transactions matured and the remaining balance at March 31, 2012 was used for the Company’s general funding purposes.

Deposits.    The Company’s bank subsidiaries’ funding sources include bank deposits, repurchase agreements, federal funds purchased, certificates of deposit, money market deposit accounts, demand deposit accounts, commercial paper and Federal Home Loan Bank advances. The vast majority of deposits in Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association (the “Subsidiary Banks”) are sourced from the Company’s retail brokerage accounts and are considered to have stable, low cost funding characteristics.

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Deposits were as follows:

	At March 31, 2012(1)		At December 31, 2011(1)
	(dollars in millions)
Savings and demand deposits(2)	$	63,950	$	63,029
Time deposits(3)		2,491		2,633
Total	$	66,441	$	65,662

(1) Total deposits subject to FDIC Insurance at March 31, 2012 and December 31, 2011 were $53 billion and $52 billion, respectively.

(2) Amounts include non-interest bearing deposits of $1,280 million and $1,270 million at March 31, 2012 and December 31, 2011, respectively.

(3) Certain time deposit accounts are carried at fair value under the fair value option (see Note 3 to the condensed consolidated financial statements).

With the passage of the Dodd-Frank Act, the statutory standard maximum deposit insurance amount was permanently increased to $250,000 per depositor and is in effect for the Subsidiary Banks.

Long-Term Borrowings.    The Company uses a variety of long-term debt funding sources to generate liquidity, taking CFP requirements into consideration. In addition, the issuance of long-term debt allows the Company to reduce reliance on short-term credit sensitive instruments (e.g., commercial paper and other unsecured short-term borrowings). Long-term borrowings are generally structured to ensure staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients. Availability and cost of financing to the Company can vary depending on market conditions, the volume of certain trading and lending activities, the Company’s credit ratings and the overall availability of credit.

The Company may from time to time engage in various transactions in the credit markets (including, for example, debt retirements) that it believes are in the best interests of the Company and its investors.

Long-term borrowings at March 31, 2012 consisted of the following:

	Parent		Subsidiaries		Total
	(dollars in millions)
Due in 2012	$	19,357	$	1,063	$	20,420
Due in 2013		24,697		479		25,176
Due in 2014		20,672		1,253		21,925
Due in 2015		18,448		4,128		22,576
Due in 2016		17,978		1,663		19,641
Thereafter		65,328		1,657		66,985
Total	$	166,480	$	10,243	$	176,723

Credit Ratings.

The Company relies on external sources to finance a significant portion of its day-to-day operations. The cost and availability of financing generally is impacted by the Company’s credit ratings. In addition, the Company’s credit ratings can have a significant impact on certain trading revenues, particularly in those businesses where longer term counterparty performance is critical, such as OTC derivative transactions, including credit derivatives and interest rate swaps. Issuer specific factors that are important to the determination of the Company’s credit ratings include governance, the level and quality of earnings, capital adequacy, funding and liquidity, risk appetite and management, asset quality, strategic direction and business mix. Additionally, the agencies will look at other industry-wide factors such as regulatory or legislative changes, macro-economic environment, and perceived levels of government support.

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The rating agencies have stated that they currently incorporate various degrees of uplift from perceived government support in the credit ratings of systemically important banks, including the credit ratings of the Company. Rating agencies continue to monitor progress of U.S. financial reform legislation to assess whether the possibility of extraordinary government support for the financial system in any future financial crises is negatively impacted. Legislative outcomes may lead to reduced uplift assumptions for U.S. banks and thereby place downward pressure on credit ratings. At the same time, proposed U.S. financial reform legislation also has positive implications for credit ratings such as higher standards for capital and liquidity levels. The net result on credit ratings and the timing of any change in rating agency assumptions on support is currently uncertain.

At April 30, 2012, the Company’s and Morgan Stanley Bank, N.A.’s senior unsecured ratings were as set forth below. The long-term credit ratings on the Company by Moody’s Investor Services, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”) are currently at different levels (commonly referred to as “split ratings”).

	Company			Morgan Stanley Bank, N.A.
	Short-Term Debt	Long-Term Debt	Rating Outlook	Short-Term Debt	Long-Term Debt	Rating Outlook
Dominion Bond Rating Service Limited	R-1 (middle)	A (high)	Negative	—	—	—
Fitch Ratings	F1	A	Stable	F1	A	Stable
Moody’s Investor Services, Inc.(1)	P-1	A2	Downgrade Review	P-1	A1	Downgrade Review
Rating and Investment Information, Inc.	a-1	A+	Negative	—	—	—
Standard & Poor’s	A-2	A-	Negative	A-1	A	Negative

(1) On February 15, 2012, Moody’s placed the ratings of 17 banks on review for downgrade in the context of a broad review of global banks with capital markets operations. As part of this review, Moody’s placed the Company’s and Morgan Stanley Bank, N.A’s “A2/A1” long-term and “P-1” short-term ratings on review for downgrade.

In connection with certain OTC trading agreements and certain other agreements associated with the Institutional Securities business segment, the Company may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit rating downgrade. At March 31, 2012, the following are the amounts of additional collateral, termination payments or other contractual amounts (whether in a net asset or liability position) that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company’s long-term credit rating under various scenarios: $868 million (A3 Moody’s/A- S&P); $5,177 million (Baa1 Moody’s/ BBB+ S&P); and $7,206 million (Baa2 Moody’s/BBB S&P). Also, the Company is required to pledge additional collateral to certain exchanges and clearing organizations in the event of a credit rating downgrade. At March 31, 2012, the increased collateral requirement at certain exchanges and clearing organizations under various scenarios was $160 million (A3 Moody’s/A- S&P); $1,600 million (Baa1 Moody’s/ BBB+ S&P); and $2,400 million (Baa2 Moody’s/BBB S&P).

While certain aspects of a credit ratings downgrade are quantifiable pursuant to contractual provisions, the impact it will have on the Company’s business and results of operation in future periods is inherently uncertain and will depend on a number of inter-related factors, including, among others, the magnitude of the downgrade, individual client behavior and future mitigating actions the Company may take.

The liquidity impact of additional collateral requirements is fully considered for in the Company’s CFP.

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Off-Balance Sheet Arrangements with Unconsolidated Entities.

The Company enters into various arrangements with unconsolidated entities, including VIEs, primarily in connection with its Institutional Securities and Global Wealth Management Group business segments. See “Off-Balance Sheet Arrangements with Unconsolidated Entities” included in Part II, Item 7, of the Form 10-K and Note 6 to the condensed consolidated financial statements for further information.

See Note 11 to the condensed consolidated financial statements for further information on guarantees.

Commitments.

The Company’s commitments associated with outstanding letters of credit and other financial guarantees obtained to satisfy collateral requirements, investment activities, corporate lending and financing arrangements, mortgage lending and margin lending at March 31, 2012 are summarized below by period of expiration. Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

	Years to Maturity
	Less than 1		1-3		3-5		Over 5		Total at March 31, 2012
	(dollars in millions)
Letters of credit and other financial guarantees obtained to satisfy collateral requirements	$	2,068	$	12	$	6	$	—	$	2,086
Investment activities		1,160		238		44		274		1,716
Primary lending commitments—investment grade(1)(2)		10,181		9,854		31,778		1,997		53,810
Primary lending commitments—non-investment grade(2)		2,182		2,789		9,981		897		15,849
Secondary lending commitments(3)		56		203		20		112		391
Commitments for secured lending transactions		1,299		251		198		—		1,748
Forward starting reverse repurchase agreements and securities borrowing agreements(4)		74,317		—		—		—		74,317
Commercial and residential mortgage-related commitments		1,378		26		201		450		2,055
Other commitments		1,262		248		5		1		1,516
Total	$	93,903	$	13,621	$	42,233	$	3,731	$	153,488

(1) This amount includes commitments to asset-backed commercial paper conduits of $275 million at March 31, 2012, of which $138 million have maturities of less than one year and $137 million of which have maturities of one to three years.

(2) This amount includes $12.2 billion of investment grade and $3.5 billion of non-investment grade unfunded commitments accounted for as held for investment and $68 million of investment grade and $191 million of non-investment grade unfunded commitments accounted for as held for sale at March 31, 2012. The remainder of these lending commitments are carried at fair value.

(3) These commitments are recorded at fair value within Financial instruments owned and Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition (see Note 3 to the condensed consolidated financial statements).

(4) The Company enters into forward starting reverse repurchase and securities borrowing agreements (agreements that have a trade date at or prior to March 31, 2012 and settle subsequent to period-end) that are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations. These agreements primarily settle within three business days and of the amount at March 31, 2012, $70.7 billion settled within three business days.

Regulatory Requirements.

Capital.

The Company is a financial holding company under the Bank Holding Company Act of 1956, as amended, and is subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for the Company, including well-capitalized standards, and evaluates the Company’s compliance

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with such capital requirements. The Office of the Comptroller of the Currency establishes similar capital requirements and standards for the Company’s national bank subsidiaries (see “Other Matters—Regulatory Outlook” herein).

The Company calculates its capital ratios and risk-weighted assets (“RWA”) in accordance with the capital adequacy standards for financial holding companies adopted by the Federal Reserve. These standards are based upon a framework described in the “International Convergence of Capital Measurement and Capital Standards,” July 1988, as amended, also referred to as Basel I. In December 2007, the U.S. banking regulators published final regulations incorporating the Basel II Accord, which requires internationally active banking organizations, as well as certain of their U.S. bank subsidiaries, to implement Basel II standards over the next several years. In July 2010, the Company began reporting its capital adequacy standards on a parallel basis to its regulators under Basel I and Basel II as part of a phased implementation of Basel II.

In June 2011, the U.S. banking regulators published final regulations implementing a provision of the Dodd-Frank Act requiring that certain institutions supervised by the Federal Reserve, including the Company, be subject to capital requirements that are not less than the generally applicable risk-based capital requirements. As a result, the generally applicable capital requirements, which are based on Basel I standards, but may themselves change over time, will serve as a permanent floor to minimum capital requirements calculated under the Basel II standards the Company is currently required to implement, as well as future capital standards.

In December 2009, the Basel Committee released proposals on risk-based capital, leverage and liquidity standards, known as “Basel III”. Basel III contains new capital standards that raise the quality of capital and strengthen counterparty credit risk capital requirements and introduce a leverage ratio as a supplemental measure to the risk-based ratio. Basel III includes a new capital conservation buffer, which imposes a common equity requirement above the new minimum that can be depleted under stress, subject to restrictions on capital actions, a new additional loss absorbency capital requirement for global systemically important banks (“GSIB”) such as the Company, and a new countercyclical buffer which regulators can activate during periods of excessive credit growth in their jurisdiction. The Basel III proposals complement an earlier proposal for revisions to the market risk framework. The earlier proposal, also referred to as Basel 2.5, increases capital requirements for securitizations and correlation trading within the Company’s trading book. In 2011, the U.S. regulators issued proposed rules that are intended to implement certain aspects of the market risk framework proposals. While precise dates for the implementation of the new requirements in the U.S. have not been announced, the U.S. regulators will require implementation of Basel III subject to an extended phase-in period.

In December 2011, the Federal Reserve issued final rules on Capital Plans, which require large bank holding companies such as the Company to submit Capital Plans on an annual basis in order for the Federal Reserve to assess the companies’ systems and processes that incorporate forward-looking projections of revenue and losses to monitor and maintain their internal capital adequacy. The rules also require that such companies receive no objection from the Federal Reserve before making a capital action. The Federal Reserve published the results of its 2012 Comprehensive Capital Analysis and Review in March 2012. The Company received no objection to its 2012 capital plan, including the potential acquisition of an additional 14% of MSSB and ongoing payment of current common and preferred dividends.

In accordance with the Federal Reserve’s new Capital Plans final rule, Tier 1 common capital is calculated as Tier 1 capital less non-common elements in Tier 1 capital. Non-common elements include perpetual preferred stock and related surplus, minority interests in subsidiaries, trust preferred securities and mandatory convertible preferred securities. The Federal Reserve will work with the other federal banking agencies to implement Basel III and to propose a Basel III Tier 1 common capital ratio as a new minimum regulatory capital ratio. The existing supervisory definition of Tier 1 common capital will remain in force under the Capital Plans final rule until the Federal Reserve adopts the Basel III Tier 1 common ratio.

Pursuant to provisions of the Dodd-Frank Act, over time, trust preferred securities will no longer qualify as Tier 1 capital but will only qualify as Tier 2 capital. This change in regulatory capital treatment will be phased in

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incrementally during a transition period that will start on January 1, 2013 and end on January 1, 2016. This provision of the Dodd-Frank Act accelerates the phasing in of the disqualification of the trust preferred securities as provided for by Basel III.

At March 31, 2012, the Company was in compliance with Basel I capital requirements with ratios of Tier 1 capital to RWAs of 16.8% and total capital to RWAs of 18.1% (6% and 10% being well-capitalized for regulatory purposes, respectively). Also, the ratio of Tier 1 common capital to RWAs was 13.3% (5% being the minimum under the Federal Reserve’s new capital plan framework). In addition, financial holding companies are also subject to a Tier 1 leverage ratio as defined by the Federal Reserve. The Company calculated its Tier 1 leverage ratio as Tier 1 capital divided by adjusted average total assets (which reflects adjustments for disallowed goodwill, certain intangible assets, deferred tax assets and financial and non-financial equity investments). The adjusted average total assets are derived using weekly balances for the year. At March 31, 2012, the Company was in compliance with this leverage restriction, with a Tier 1 leverage ratio of 7.0% (5% being well-capitalized for regulatory purposes).

The following table reconciles the Company’s total shareholders’ equity to Tier 1 common, Tier 1, Tier 2 and Total allowable capital as defined by the regulations issued by the Federal Reserve and presents the Company’s consolidated capital ratios at March 31, 2012 and December 31, 2011:

	At March 31, 2012			At December 31, 2011
	(dollars in millions)
Allowable capital
Common shareholders’ equity	$	60,816		$	60,541
Less: Goodwill		(6,700	)		(6,686	)
Less: Non-servicing intangible assets		(4,080	)		(4,165	)
Less: Net deferred tax assets(2)		(5,575	)		(6,098	)
Less: After-tax debt valuation adjustment		(842	)		(2,296	)
Other deductions		(1,468	)		(1,511	)
Tier 1 common capital(1)(2)		42,151			39,785
Qualifying preferred stock		1,508			1,508
Qualifying restricted core capital elements		9,868			9,821
Tier 1 capital(2)		53,527			51,114
Qualifying subordinated debt and restricted core capital elements		4,721			4,546
Other qualifying amounts		25			17
Other deductions		(686	)		(721	)
Tier 2 capital		4,060			3,842
Total allowable capital(2)	$	57,587		$	54,956
Total risk weighted assets(2)	$	317,693		$	314,055
Capital ratios
Total capital ratio(2)		18.1	%		17.5	%
Tier 1 common capital ratio(1)(2)		13.3	%		12.7	%
Tier 1 capital ratio(2)		16.8	%		16.3	%
Tier 1 leverage ratio(2)		7.0	%		6.6	%

(1) Tier 1 common capital ratio equals Tier 1 common capital divided by RWAs. On December 30, 2011, the Federal Reserve formalized regulatory definitions for Tier 1 common capital and Tier 1 common capital ratio. The Federal Reserve defined Tier 1 common capital as Tier 1 capital less non-common elements in Tier 1 capital, including perpetual preferred stock and related surplus, minority interest in

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subsidiaries, trust preferred securities and mandatory convertible preferred securities. Previously, the Company’s definition of Tier 1 common capital included all of the items noted in the Federal Reserve’s definition, but it also included an adjustment for the portion of goodwill and non-servicing intangible assets associated with MSSB’s noncontrolling interests (i.e., Citi’s share of MSSB’s goodwill and intangibles). The Company’s conformance to the Federal Reserve’s definition under the final rule reduced its Tier 1 common capital and Tier 1 common ratio by approximately $4.2 billion and 132 basis points, respectively at December 31, 2011.

(2) The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company’s Tier 1 common capital, Tier 1 capital, Total capital and RWAs by such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratio by approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points.

Total allowable capital is composed of Tier 1 capital, which includes Tier 1 common capital, and Tier 2 capital. Tier 1 common capital is defined as Tier 1 capital less non-common elements in Tier 1 capital, including qualifying perpetual stock and qualifying restricted core capital elements, as per the Capital Plans final rule. Tier 1 capital consists predominately of common shareholders’ equity as well as qualifying preferred stock and qualifying restricted core capital elements (trust preferred securities and noncontrolling interests) less goodwill, non-servicing intangible assets (excluding allowable mortgage servicing rights), net deferred tax assets (recoverable in excess of one year), an after-tax debt valuation adjustment and certain other deductions, including equity investments. The debt valuation adjustment in the above table represents the cumulative change in fair value of certain long-term and short-term borrowings that was attributable to the Company’s own instrument-specific credit spreads and is included in retained earnings. For a further discussion of fair value, see Note 3 to the condensed consolidated financial statements.

At March 31, 2012, the Company calculated its RWAs in accordance with the regulatory capital requirements of the Federal Reserve, which is consistent with guidelines described under Basel I. RWAs reflect both on and off-balance sheet risk of the Company. The risk capital calculations will evolve over time as the Company enhances its risk management methodology and incorporates improvements in modeling techniques while maintaining compliance with the regulatory requirements and interpretations.

Market RWAs reflect capital charges attributable to the risk of loss resulting from adverse changes in market prices and other factors. For a further discussion of the Company’s market risks and Value-at-Risk (“VaR”) model, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A, of the Form 10-K and in Part I, Item 3 herein. Market RWAs incorporate two components: systematic risk and specific risk. Systematic and specific risk charges are computed using either the Company’s VaR model or Standardized Approach in accordance with regulatory requirements.

Credit RWAs reflect capital charges attributable to the risk of loss arising from a borrower or counterparty failing to meet its financial obligations. For a further discussion of the Company’s credit risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A, of the Form 10-K and in Part I, Item 3 herein.

Under the Basel Committee’s proposed framework, based on a preliminary analysis of the guidelines published to date and other factors, the Company estimates its pro forma Tier 1 common capital ratio under Basel III will be in a range between 8% and 10% by the end of 2012. This is a preliminary estimate and may change based on guidelines for implementation to be issued by the Federal Reserve. The pro forma Tier 1 common capital ratio under Basel III is a non-GAAP financial measure that the Company considers to be a useful measure to the Company and investors to gauge future regulatory capital requirements. The pro forma Tier 1 common capital ratio estimate is based on shareholders’ equity, Tier 1 common capital and RWAs at March 31, 2012, adjusted for analysts’ consensus of earnings for the remainder of 2012, and various passive mitigation efforts. This preliminary estimate is forward-looking, is subject to risks and uncertainties that may cause actual results to differ materially and should not be taken as a projection of what our capital ratios, RWAs, earnings or other results will actually be at these future dates. For a discussion of risks and uncertainties that may affect the future results of the Company, please see “Risk Factors” in Part I, Item 1A of the Form 10-K.

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Liquidity.

The Basel Committee has developed two standards for supervisors to use in liquidity risk supervision. The first standard’s objective is to promote the short-term resilience of the liquidity risk profile of banks and bank holding companies. The Basel Committee developed the Liquidity Coverage Ratio (“LCR”) to ensure banks have sufficient high-quality liquid assets to cover net outflows arising from significant stress lasting 30 calendar days. The standard requires that the value of the ratio be no lower than 100%. The second standard’s objective is to promote resilience over a longer time horizon. The Net Stable Funding Ratio (“NSFR”) has a time horizon of one year and builds on traditional “net liquid asset” and “cash capital” methodologies used widely by internationally active banking organizations to provide a sustainable maturity structure of assets and liabilities. The NSFR is defined as the amount of available stable funding to the amount of required stable funding. This ratio must be greater than 100%. After an observation period beginning in 2011, the LCR, including any revisions, will be introduced on January 1, 2015. The NSFR, including any revisions, will move to a minimum standard by January 1, 2018. The Company will continue to monitor the development and the potential impact of these standards.

In addition, in December 2011, the Federal Reserve issued proposed rules to implement certain requirements of the systemic risk regime, including with respect to liquidity. The proposed rules would require systemically important financial institutions, such as the Company, to maintain a sufficient quantity of highly liquid assets to survive a projected 30-day liquidity stress event, to conduct regular liquidity stress tests, and to implement various liquidity risk management requirements.

Effects of Inflation and Changes in Foreign Exchange Rates.

The Company’s assets to a large extent are liquid in nature and, therefore, are not significantly affected by inflation, although inflation may result in increases in the Company’s expenses, which may not be readily recoverable in the price of services offered. To the extent inflation results in rising interest rates and has other adverse effects upon the securities markets and upon the value of financial instruments, it may adversely affect the Company’s financial position and profitability.

A significant portion of the Company’s business is conducted in currencies other than the U.S. dollar, and changes in foreign exchange rates relative to the U.S. dollar can therefore affect the value of non-U.S. dollar net assets, revenues and expenses. Potential exposures as a result of these fluctuations in currencies are closely monitored, and, where cost-justified, strategies are adopted that are designed to reduce the impact of these fluctuations on the Company’s financial performance. These strategies may include the financing of non-U.S. dollar assets with direct or swap-based borrowings in the same currency and the use of currency forward contracts or the spot market in various hedging transactions related to net assets, revenues, expenses or cash flows.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market Risk.

Market risk refers to the exposure of the Company to adverse changes in the values of its portfolios and financial instruments due to changes in market prices or rates. Generally, the Company is exposed to market risk as a result of trading, investing and client facilitation activities, mainly within the Institutional Securities business segment where the substantial majority of the Company’s Value-at-Risk (“VaR”) for market risk exposures is generated. In addition, the Company incurs trading related market risk within the Global Wealth Management Group business segment. The Asset Management business segment incurs mainly non-trading market risk primarily from capital investments in real estate funds and investments in private equity vehicles. Regarding sales and trading and related activities, the Company is exposed to concentration risk in certain of its OTC derivatives portfolios related to the additional cost of closing out particularly large risk positions. For a further discussion of the Company’s Market Risk, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management” in Part II, Item 7A of the Form 10-K.

VaR.

The Company uses VaR as one of a range of risk management tools. VaR methodology has various strengths and limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions, and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR. The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures.

The Company’s VaR model evolves over time in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. The Company is 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. As part of regular process improvement, additional systematic and name-specific risk factors may be added to improve the VaR model’s ability to more accurately estimate risks to specific asset classes or industry sectors. Additionally, the Company continues to evaluate enhancements to the VaR model to make it more responsive to recent market conditions, while maintaining a longer-term perspective.

The Company also performs routine stress testing to more comprehensively monitor the risks in the portfolio. The Company utilizes Stress VaR (“S-VaR”), which is a proprietary methodology that seeks to measure both the Company’s market and credit risks, while adjusting for the different liquidity characteristics of the underlying risks (in contrast to traditional VaR measures which are typically calculated using the same liquidity horizon for all risks). S-VaR is an important risk metric used in establishing the Company’s risk tolerance and its capital allocation framework. Further information on S-VaR can be found in “Quantitative and Qualitative Disclosures about Market Risk—Risk Management” in Part II, Item 7A of the Form 10-K.

Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of the Company’s future revenues or financial performance or of its ability to monitor and manage risk. There can be no assurance that the Company’s actual losses on a particular day will not exceed the VaR amounts indicated below or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses which, should they occur, may be significantly greater than the VaR amount.

The Credit Portfolio VaR has been disclosed as a separate category from the Primary Risk Categories. The Credit Portfolio VaR includes the mark-to-market relationship lending exposures and associated hedges as well as counterparty credit valuation adjustments and related hedges.

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The table below presents VaR for the Company’s Trading portfolio, on a quarter-end, quarterly average and quarterly high and low basis (see Table 1 below). The VaR that would result if the Company were to adopt alternative parameters for its calculations, such as a higher confidence level for the VaR statistic (99% rather than 95%) or a shorter historical time series of market data (one year rather than four years), are also disclosed (see Table 2 below).

Trading Risks.

The table below presents the Company’s 95%/one-day Trading VaR:

Table 1: 95% VaR	95%/One-Day VaR for the Quarter Ended March 31, 2012										95%/One-Day VaR for the Quarter Ended December 31, 2011
Market Risk Category	Period End			Average			High		Low		Period End			Average			High		Low
	(dollars in millions)
Interest rate and credit spread	$	56		$	57		$	75	$	46	$	66		$	57		$	71	$	49
Equity price		38			33			42		24		25			29			48		21
Foreign exchange rate		13			16			25		9		18			12			18		8
Commodity price		32			31			36		25		28			28			33		23
Less: Diversification benefit(1)(2)		(70	)		(65	)		N/A		N/A		(67	)		(60	)		N/A		N/A
Primary Risk Categories	$	69		$	72		$	84	$	65	$	70		$	66		$	76	$	60
Credit Portfolio		33			40			52		33		52			103			122		49
Less: Diversification benefit(1)(2)		(24	)		(28	)		N/A		N/A		(35	)		(46	)		N/A		N/A
Total Trading VaR	$	78		$	84		$	93	$	76	$	87		$	123		$	145	$	83

(1) Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component.

(2) N/A—Not Applicable. The minimum and maximum VaR values for the total VaR and each of the component VaRs might have occurred on different days during the quarter and therefore the diversification benefit is not an applicable measure.

The Company’s average VaR for the Primary Risk Categories for the quarter ended March 31, 2012 was $72 million compared with $66 million for the quarter ended December 31, 2011. This increase was driven by elevated risk in equity, foreign exchange and commodity asset classes.

The average Credit Portfolio VaR for the quarter ended March 31, 2012 was $40 million compared with $103 million for the quarter ended December 31, 2011. This reduction primarily reflects the settlement with MBIA in December of 2011.

The average Total Trading VaR for the quarter ended March 31, 2012 was $84 million compared with $123 million for the quarter ended December 31, 2011. This reduction is principally the result of settlement with MBIA.

VaR Statistics under Varying Assumptions.

VaR statistics are not readily comparable across firms because of differences in the breadth of products included in each firm’s VaR model, in the statistical assumptions made when simulating changes in market risk factors, and in the methods used to approximate portfolio revaluations under the simulated market conditions. These differences can result in materially different VaR estimates for similar portfolios. The impact varies depending on the factor history assumptions, the frequency with which the factor history is updated, and the confidence level. As a result, VaR statistics are more reliable and relevant when used as indicators of trends in risk taking rather than as a basis for inferring differences in risk taking across firms.

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Table 2 presents the VaR statistics that would result if the Company were to adopt alternative parameters for its calculations, such as the reported confidence level (95% versus 99%) for the VaR statistic or a shorter historical time series (four-year versus one-year) for market data upon which it bases its simulations. The four-year VaR measure continues to reflect the high market volatilities experienced through 2008, while the one-year VaR is no longer affected by these phenomena.

Table 2: 95% and 99% Average Trading VaR with Four-Year / One-Year Historical Time Series	95% Average One-Day VaR for the Quarter Ended March 31, 2012						99% Average One-Day VaR for the Quarter Ended March 31, 2012
Market Risk Category	Four-Year Risk Factor History			One-Year Risk Factor History			Four-Year Risk Factor History			One-Year Risk Factor History
	(dollars in millions)
Interest rate and credit spread	$	57		$	46		$	99		$	78
Equity price		33			28			48			41
Foreign exchange rate		16			14			26			21
Commodity price		31			29			52			45
Less: Diversification benefit(1)		(65	)		(57	)		(114	)		(97	)
Primary Risk Categories	$	72		$	60		$	111		$	88
Credit Portfolio		40			31			83			53
Less: Diversification benefit(1)		(28	)		(23	)		(55	)		(37	)
Total Trading VaR	$	84		$	68		$	139		$	104

(1) Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component.

Distribution of VaR Statistics and Net Revenues for the quarter ended March 31, 2012.

One method of evaluating the reasonableness of the Company’s VaR model as a measure of the Company’s potential volatility of net revenue is to compare the VaR with actual trading revenue. Assuming no intra-day trading, for a 95%/one-day VaR, the expected number of times that trading losses should exceed VaR during the year is 13, and, in general, if trading losses were to exceed VaR more than 21 times in a year, the adequacy of the VaR model could be questioned. Differences between recent market volatility and the historical volatility used in the VaR model may result in the number of days in which trading losses exceed VaR to be higher or lower than statistically expected. The Company evaluates the reasonableness of its VaR model by comparing the potential declines in portfolio values generated by the model with actual trading results for both the Company as well as individual business units. For days where losses exceed the 95% or 99% VaR statistic, the Company examines the drivers of trading losses to evaluate the VaR model’s accuracy relative to realized trading results.

In line with the enhanced transparency of the Company’s traded market risk displayed in Tables 1 and 2, the distribution of VaR Statistics and Net Revenues will be presented for both the Primary Risk Categories and the Total Trading populations.

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Primary Risk Categories.

As shown in Table 1, the Company’s average 95%/one-day Primary Risk Categories VaR for the quarter ended March 31, 2012 was $72 million. The histogram below presents the distribution of the Company’s daily 95%/one-day Primary Risk Categories VaR for the quarter ended March 31, 2012. The most frequently occurring value was between $70 million and $75 million, while for approximately 75% of trading days during the quarter the Primary Risk Categories VaR ranged between $65 million and $75 million.

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The histogram below shows the distribution of daily net trading revenue for the Company’s businesses that comprise the Primary Risk Categories for the quarter ended March 31, 2012. This excludes non-trading revenues of these businesses and revenue associated with the Company’s own credit risk. During the quarter ended March 31, 2012, the Company’s businesses that comprise the Primary Risk Categories experienced net trading losses on four days, of which zero days were in excess of the 95%/one-day Primary Risk Categories VaR.

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Total Trading—including the Primary Risk Categories and the Credit Portfolio.

As shown in Table 1, the Company’s average 95%/one-day Total Trading VaR, which includes the Primary Risk Categories and the Credit Portfolio, for the quarter ended March 31, 2012 was $84 million. The histogram below presents the distribution of the Company’s daily 95%/one-day Total Trading VaR for the quarter ended March 31, 2012. The most frequently occurring value was between $85 million and $90 million, while for approximately 65% of trading days during the quarter the Total Trading VaR ranged between $80 million and $90 million.

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The histogram below shows the distribution of daily net trading revenue for the Company’s Trading businesses for the quarter ended March 31, 2012. This excludes non-trading revenues of these businesses and revenue associated with the Company’s own credit risk. During the quarter ended March 31, 2012, the Company experienced net trading losses on four days, of which zero days were in excess of the 95%/one-day Trading VaR.

Non-Trading Risks.

The Company believes that sensitivity analysis is an appropriate representation of the Company’s non-trading risks. Reflected below is this analysis, which covers substantially all of the non-trading risk in the Company’s portfolio.

Counterparty Exposure Related to the Company’s Own Spread.

The credit spread risk relating to the Company’s own mark-to-market derivative counterparty exposure is managed separately from VaR. The credit spread risk sensitivity of this exposure corresponds to an increase in value of approximately $6 million for each 1 basis point widening in the Company’s credit spread level for both March 31, 2012 and December 31, 2011.

Funding Liabilities.

The credit spread risk sensitivity of the Company’s mark-to-market funding liabilities corresponded to an increase in value of approximately $12 million for each 1 basis point widening in the Company’s credit spread level for both March 31, 2012 and December 31, 2011.

130

Interest Rate Risk Sensitivity on Income from Continuing Operations.

The Company measures the interest rate risk of certain assets and liabilities by calculating the hypothetical sensitivity of net interest income to potential changes in the level of interest rates over the next twelve months. This sensitivity analysis includes positions that are mark-to-market as well as positions that are accounted for on an accrual basis. For interest rate derivatives that are perfect economic hedges to non-mark-to-market assets or liabilities, the disclosed sensitivities include only the impact of the coupon accrual mismatch. This treatment mitigates the effects caused by the measurement basis differences between the economic hedge and the corresponding hedged instrument.

Given the currently low interest rate environment, the Company uses the following two interest rate scenarios to quantify the Company’s sensitivity: instantaneous parallel shocks of 100 and 200 basis point increases to all points on all yield curves simultaneously.

The hypothetical model does not assume any growth, change in business focus, asset pricing philosophy or asset/liability funding mix and does not capture how the Company would respond to significant changes in market conditions. Furthermore, the model does not reflect the Company’s expectations regarding the movement of interest rates in the near term, nor the actual effect on income from continuing operations before income taxes if such changes were to occur.

	March 31, 2012				December 31, 2011
	+100 Basis Points		+200 Basis Points		+100 Basis Points		+200 Basis Points
	(dollars in millions)
Impact on income from continuing operations before income taxes	$	614	$	1,019	$	600	$	1,080
Impact on income from continuing operations before income taxes excluding Citi’s share of MSSB(1)		384		650		370		672

(1) Reflects the exclusion of the portion of income from continuing operations before taxes associated with MSSB’s noncontrolling interest in the joint venture.

Principal Investments.

The Company makes investments in both public and private companies. These investments are predominantly equity positions with long investment horizons, the majority of which are for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a 10% decline in investment values.

	10% Sensitivity
Investments	March 31, 2012		December 31, 2011
	(dollars in millions)
Investments related to Asset Management activities:
Hedge fund investments	$	134	$	141
Private equity and infrastructure funds		115		108
Real estate funds		132		133
Other investments:
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.		137		144
Other Company investments		292		297

Credit Risk.

For a further discussion of the Company’s credit risks, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Credit Risk” in Part II, Item 7A of the Form 10-K. See Notes 7 and 11 to the condensed consolidated financial statements for additional information about the Company’s financing receivables and lending commitments, respectively.

131

Institutional Securities Activities.

Credit Exposure—Corporate Lending.    In connection with certain of its Institutional Securities business segment activities, the Company provides loans or lending commitments (including bridge financing) to selected corporate clients. Such loans and lending commitments can generally be classified as either “relationship-driven” or “event-driven.” These loans and lending commitments have varying terms, may be senior or subordinated, may be secured or unsecured, are generally contingent upon representations, warranties and contractual conditions applicable to the borrower, and may be syndicated, traded or hedged by the Company.

“Relationship-driven” loans and lending commitments refer to loans and lending commitments used for general corporate purposes, working capital and liquidity purposes. Commitments associated with “relationship-driven” activities may not be indicative of the Company’s actual funding requirements, as the commitment may expire unused or the borrower may not fully utilize the commitment. The Company may hedge its exposures in connection with “relationship-driven” transactions. Additionally, the Company may mitigate credit risk by requiring borrowers to pledge collateral and include financial covenants in lending commitments. The Company’s “relationship-driven” loans and lending commitments typically consist of revolving lines of credit, letter of credit facilities and certain term loans. These loans are carried either at fair value with changes in fair value recorded in earnings or amortized cost in the condensed consolidated statements of financial condition.

“Event-driven” loans and lending commitments refer to activities associated with a particular event or transaction, such as to support client merger, acquisition or recapitalization activities. Commitments associated with these “event-driven” activities may not be indicative of the Company’s actual funding requirements since funding is contingent upon a proposed transaction being completed. In addition, the borrower may not fully utilize the commitment or the Company’s portion of the commitment may be reduced through the syndication or sales process. The “event-driven” loans are typically syndicated or sold to third party institutional investors. The Company may have a custodial relationship with these institutional investors, such as prime brokerage clients. The borrower’s ability to draw on the commitment is also subject to certain terms and conditions, among other factors. The Company risk manages its exposures in connection with “event-driven” transactions through various means, including syndication, distribution and/or hedging. The Company’s “event-driven” loans and lending commitments typically consist of term loans and bridge loans. These loans are carried either at fair value with changes in fair value recorded in earnings or amortized cost in the condensed consolidated statements of financial condition.

During 2011, the Company accounted for certain new “relationship-driven” and “event-driven” loans and lending commitments as held for investment. Effective April 1, 2012, the Company began accounting for all new “relationship-driven” and “event-driven” loans and lending commitments as either held for investment or held for sale.

The table below presents the Company’s credit exposure from its corporate lending positions and lending commitments, which is measured in accordance with the Company’s internal risk management standards at March 31, 2012. The “total corporate lending exposure” column includes both lending commitments and funded loans. Lending commitments represent legally binding obligations to provide funding to clients at March 31, 2012 for both “relationship-driven” and “event-driven” lending transactions. Since commitments associated with these business activities may expire unused, they do not necessarily reflect the actual future cash funding requirements.

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Corporate Lending Commitments and Funded Loans at March 31, 2012

	Years to Maturity								Total Corporate Lending Exposure(2)		Corporate Lending Exposure at Carrying Value		Corporate Lending Commitments(3)
Credit Rating(1)	Less than 1		1-3		3-5		Over 5
	(dollars in millions)
AAA	$	786	$	85	$	140	$	—	$	1,011	$	—	$	1,011
AA		3,883		2,056		4,503		280		10,722		1,008		9,714
A		4,266		5,415		9,492		543		19,716		2,962		16,754
BBB		3,378		6,361		18,989		1,274		30,002		3,671		26,331
Investment grade		12,313		13,917		33,124		2,097		61,451		7,641		53,810
Non-investment grade		3,497		4,194		14,988		1,320		23,999		8,150		15,849
Total	$	15,810	$	18,111	$	48,112	$	3,417	$	85,450	$	15,791	$	69,659

(1) Obligor credit ratings are determined by the Credit Risk Management Department.

(2) Total corporate lending exposure represents the Company’s potential loss assuming the market price of funded loans and lending commitments was zero.

(3) Amounts represent the notional amount of unfunded lending commitments less the amount of commitments reflected in the Company’s condensed consolidated statements of financial condition. For syndications led by the Company, lending commitments accepted by the borrower but not yet closed are net of the amounts agreed to by counterparties that will participate in the syndication. For syndications that the Company participates in and does not lead, lending commitments accepted by the borrower but not yet closed include only the amount that the Company expects it will be allocated from the lead syndicate bank.

At March 31, 2012, the aggregate amount of investment grade loans was $7.6 billion and the aggregate amount of non-investment grade loans was $8.2 billion. In connection with these corporate lending activities (which include corporate funded loans and lending commitments), the Company had hedges (which include “single name,” “sector” and “index” hedges) with a notional amount of $33.8 billion related to the total corporate lending exposure of $85.5 billion at March 31, 2012.

At March 31, 2012, the Company’s corporate lending exposure carried at fair value includes $14.1 billion of funded loans and $0.9 billion of lending commitments recorded in Financial instruments owned and Financial instruments sold, not yet purchased, respectively, in the consolidated statements of financial condition. The Company’s corporate lending exposure accounted for as held for investment includes $2.4 billion of funded loans recorded in Loans, with an allowance for loan losses of $15 million, and $15.7 billion of unfunded commitments with an allowance for credit losses of $12 million recorded in Other liabilities in the consolidated statements of financial condition at March 31, 2012. The Company’s corporate lending exposure accounted for as held for sale includes $235 million of funded loans and $259 million of unfunded commitments at March 31, 2012. See Notes 7 and 11 to the condensed consolidated financial statements for information on corporate loans and corporate lending commitments, respectively.

“Event-Driven” Loans and Lending Commitments at March 31, 2012.

Included in the total corporate lending exposure amounts in the table above at March 31, 2012 were “event-driven” exposure of $6.7 billion composed of funded loans of $1.9 billion and lending commitments of $4.8 billion. Included in the “event-driven” exposure at March 31, 2012 were $3.8 billion of loans and lending commitments to non-investment grade borrowers. The maturity profile of the “event-driven” loans and lending commitments at March 31, 2012 was as follows: 71% will mature in less than 1 year, 5% will mature within 1 to 3 years, 15% will mature within 3 to 5 years, and 9% will mature in over 5 years.

At March 31, 2012, $291 million of the Company’s “event-driven” loans were on a non-accrual basis. These loans primarily are those the Company originated prior to the financial crisis in 2008 and was unable to sell or syndicate. For loans carried at fair value that are on non-accrual status, interest income is recognized on a cash basis.

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Activity associated with the corporate “event-driven” lending exposure for the quarter ended March 31, 2012 was as follows (dollars in millions):

“Event-driven” lending exposures at December 31, 2011	$	7,157
Closed commitments		3,948
Net reductions, primarily through syndication or sales		(4,384	)
Mark-to-market adjustments		(34	)
“Event-driven” lending exposures at March 31, 2012	$	6,687

Other Institutional Securities Lending Activities.

In addition to the primary corporate lending activity described above, the Institutional Securities business segment engages in other lending activity. At March 31, 2012, $8.3 billion of funded loans and $67 million of unfunded lending commitments carried at fair value were recorded in Financial instruments owned and Financial instruments sold, not yet purchased, respectively, in the condensed consolidated statements of financial condition. These loans include corporate loans purchased in the secondary market, commercial and residential mortgage loans, and financing extended to equities and commodities customers. At March 31, 2012, $1.6 billion of funded loans accounted for as held for investment are recorded in Loans with an allowance for loan losses of $6 million in the condensed consolidated statements of financial condition. These loans are primarily asset-backed lending.

Credit Exposure—Derivatives.    For credit exposure information on the Company’s OTC derivative products, see Note 10 to the condensed consolidated financial statements.

Credit Derivatives.

A credit derivative is a contract between a seller (guarantor) and buyer (beneficiary) of protection against the risk of a credit event occurring on a set of debt obligations issued by a specified reference entity. The beneficiary pays a periodic premium (typically quarterly) over the life of the contract and is protected for the period. If a credit event occurs, the guarantor is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation and payment moratorium. Debt restructurings are also considered a credit event in some cases. In certain transactions referenced to a portfolio of referenced entities or asset-backed securities, deductibles and caps may limit the guarantor’s obligations.

The Company trades in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. The Company is an active market maker in the credit derivatives markets. As a market maker, the Company works to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, the Company uses credit derivatives to manage its exposure to residential and commercial mortgage loans and corporate lending exposures during the periods presented.

The Company actively monitors its counterparty credit risk related to credit derivatives. A majority of the Company’s counterparties are banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties do not include ratings-based termination events but do include provisions related to counterparty rating downgrades, which may result in additional collateral being required by the Company. As with all derivative contracts, the Company considers counterparty credit risk in the valuation of its positions and recognizes credit valuation adjustments as appropriate within Principal transactions—Trading.

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The following table summarizes the key characteristics of the Company’s credit derivative portfolio by counterparty at March 31, 2012. The fair values shown are before the application of any counterparty or cash collateral netting.

	At March 31, 2012
	Fair Values(1)						Notionals
	Receivable		Payable		Net		Beneficiary		Guarantor
	(dollars in millions)
Banks and securities firms	$	89,613	$	84,630	$	4,983	$	2,010,818	$	1,951,216
Insurance and other financial institutions		9,297		8,963		334		318,326		395,237
Monolines(2)		191		2		189		17,975		—
Non-financial entities		895		171		724		14,755		5,472
Total	$	99,996	$	93,766	$	6,230	$	2,361,874	$	2,351,925

(1) The Company’s credit default swaps are classified in both Level 2 and Level 3 of the fair value hierarchy. Approximately 10% of receivable fair values and 6% of payable fair values represent Level 3 amounts.

(2) Credit derivatives used to hedge the Company’s credit exposure to Monolines (including derivative counterparty exposure) are included in the table based on the counterparties writing such hedges. None of these hedges are written by other Monolines.

See Note 10 to the condensed consolidated financial statements for further information on credit derivatives.

Country Risk Exposure.    Country risk exposure is the risk that events within a country, such as currency crises, regulatory changes and other political events, will adversely affect the ability of the sovereign government and/or obligors within the country to honor their obligations to the Company. Country risk exposure is measured in accordance with the Company’s internal risk management standards and includes obligations from sovereign governments, corporations, clearinghouses and financial institutions. The Company actively manages country risk exposure through a comprehensive risk management framework that combines credit and market fundamentals as well as scenario analysis, and allows the Company to effectively identify, monitor and limit country risk. Country risk exposure before and after hedges are monitored and managed, with stress testing and scenario analysis conducted on a continuous basis, to identify exposure concentrations, wrong way risk and the impact of idiosyncratic events. In addition, indirect exposures are captured and monitored through regular stress testing and counterparty, market and systemic vulnerability analysis. The Company reduces its country risk exposure through the effect of risk mitigants, such as netting agreements with counterparties that permit the Company to offset receivables and payables with such counterparties, obtaining collateral from counterparties, and by hedging. For a further discussion of the Company’s country risk exposure, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Credit Risk—Country Risk Exposure” in Part II, Item 7A of the Form 10-K.

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The Company’s sovereign exposures consist of financial instruments entered into with sovereign and local governments. Its non-sovereign exposures comprise exposures to corporations and financial institutions. The following table shows the Company’s significant non-U.S. country risk exposure, except for select European countries (see “Country Risk Exposure—Select European Countries” herein), at March 31, 2012.

Country	Net Inventory(1)			Net Counterparty Exposure(2)		Funded Lending		Unfunded Commitments		Exposure Before Hedges			Hedges(3)			Net Exposure(4)
	(dollars in millions)
United Kingdom:
Sovereigns	$	(462	)	$	75	$	—	$	—	$	(387	)	$	(285	)	$	(672	)
Non-sovereigns		663			13,784		3,413		4,505		22,365			(4,005	)		18,360
Sub-total	$	201		$	13,859	$	3,413	$	4,505	$	21,978		$	(4,290	)	$	17,688
Germany:
Sovereigns	$	1,760		$	650	$	—	$	—	$	2,410		$	(1,455	)	$	955
Non-sovereigns		272			3,107		560		4,147		8,086			(3,089	)		4,997
Sub-total	$	2,032		$	3,757	$	560	$	4,147	$	10,496		$	(4,544	)	$	5,952
Brazil:
Sovereigns	$	4,209		$	—	$	—	$	—	$	4,209		$	—		$	4,209
Non-sovereigns		85			322		348		282		1,037			(89	)		948
Sub-total	$	4,294		$	322	$	348	$	282	$	5,246		$	(89	)	$	5,157
Canada:
Sovereigns	$	564		$	243	$	—	$	—	$	807		$	—		$	807
Non-sovereigns		891			1,080		230		1,403		3,604			(584	)		3,020
Sub-total	$	1,455		$	1,323	$	230	$	1,403	$	4,411		$	(584	)	$	3,827
China:
Sovereigns	$	172		$	132	$	—	$	—	$	304		$	—		$	304
Non-sovereigns		1,562			324		425		15		2,326			(88	)		2,238
Sub-total	$	1,734		$	456	$	425	$	15	$	2,630		$	(88	)	$	2,542

(1) Net inventory representing exposure to both long and short single name and index positions (i.e., bonds and equities at fair value and CDS based on notional amount assuming zero recovery adjusted for any fair value receivable or payable).

(2) Net counterparty exposure (i.e., repurchase transactions, securities lending and OTC derivatives) taking into consideration legally enforceable master netting agreements and collateral.

(3) Represents CDS hedges on net counterparty exposure and funded lending. Based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable.

(4) In addition, at March 31, 2012, the Company had exposure to these countries for overnight deposits with banks of approximately $4.9 billion.

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Country Risk Exposure—Select European Countries.    In connection with certain of its Institutional Securities business segment activities, the Company has country risk exposure to many foreign countries. During the quarter ended March 31, 2012, certain European countries, which include Greece, Ireland, Italy, Portugal and Spain (the “European Peripherals”) and France, experienced varying degrees of credit deterioration due to weaknesses in their economic and fiscal situations. The following table shows the Company’s country risk exposure to European Peripherals and France at March 31, 2012. Such country risk exposure is measured in accordance with the Company’s internal risk management standards and includes obligations from sovereign and non-sovereigns, which includes governments, corporations, clearinghouses and financial institutions.

Country	Net Inventory(1)			Net Counterparty Exposure(2)		Funded Lending		Unfunded Commitments		CDS Adjustment(3)		Exposure Before Hedges			Hedges(4)			Net Exposure
	(dollars in millions)
Greece:
Sovereigns	$	18		$	17	$	—	$	—	$	—	$	35		$	—		$	35
Non-sovereigns		40			6		78		—		—		124			(64	)		60
Sub-total	$	58		$	23	$	78	$	—	$	—	$	159		$	(64	)	$	95
Ireland:
Sovereigns	$	33		$	3	$	—	$	—	$	4	$	40		$	(2	)	$	38
Non-sovereigns		130			23		68		8		17		246			(20	)		226
Sub-total	$	163		$	26	$	68	$	8	$	21	$	286		$	(22	)	$	264
Italy:
Sovereigns	$	(829	)	$	521	$	—	$	—	$	470	$	162		$	(338	)	$	(176	)
Non-sovereigns		267			551		336		387		186		1,727			(678	)		1,049
Sub-total	$	(562	)	$	1,072	$	336	$	387	$	656	$	1,889		$	(1,016	)	$	873
Spain:
Sovereigns	$	(653	)	$	5	$	—	$	—	$	509	$	(139	)	$	(16	)	$	(155	)
Non-sovereigns		160			459		68		833		240		1,760			(290	)		1,470
Sub-total	$	(493	)	$	464	$	68	$	833	$	749	$	1,621		$	(306	)	$	1,315
Portugal:
Sovereigns	$	(416	)	$	132	$	—	$	—	$	24	$	(260	)	$	(100	)	$	(360	)
Non-sovereigns		76			52		132		—		55		315			(92	)		223
Sub-total	$	(340	)	$	184	$	132	$	—	$	79	$	55		$	(192	)	$	(137	)
Sovereigns	$	(1,847	)	$	678	$	—	$	—	$	1,007	$	(162	)	$	(456	)	$	(618	)
Non-sovereigns		673			1,091		682		1,228		498		4,172			(1,144	)		3,028
Total
European
Peripherals(5)	$	(1,174	)	$	1,769	$	682	$	1,228	$	1,505	$	4,010		$	(1,600	)	$	2,410
France(5):
Sovereigns	$	555		$	252	$	—	$	—	$	13	$	820		$	(278	)	$	542
Non-sovereigns		(2	)		2,728		457		1,577		410		5,170			(1,571	)		3,599
Sub-total(5)	$	553		$	2,980	$	457	$	1,577	$	423	$	5,990		$	(1,849	)	$	4,141

(1) Net inventory representing exposure to both long and short single name and index positions (i.e., bonds and equities at fair value and CDS based on notional amount assuming zero recovery adjusted for any fair value receivable or payable).

(2) Net counterparty exposure (i.e., repurchase transactions, securities lending and OTC derivatives) taking into consideration legally enforceable master netting agreements and collateral.

(3) CDS adjustment represents credit protection purchased from European peripheral banks on European peripheral sovereign and financial institution risk, or French banks on French sovereign and financial institution risk. Based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable.

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(4) Represents CDS hedges on net counterparty exposure and funded lending. Based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable.

(5) In addition, at March 31, 2012, the Company had European Peripherals and French exposure for overnight deposits with banks of approximately $222 million and $23 million, respectively.

Industry Exposure—Corporate Lending and OTC Derivative Products.    The Company also monitors its credit exposure to individual industries for credit exposure arising from corporate loans and lending commitments as discussed above and current exposure arising from the Company’s OTC derivative contracts.

The following tables show the Company’s credit exposure from its primary corporate loans and lending commitments and OTC derivative products by industry at March 31, 2012:

Industry	Corporate Lending Exposure
	(dollars in millions)
Utilities	$	9,976
Energy		8,969
Funds, exchanges and other financial services(1)		7,692
Telecommunications services		5,547
Chemicals, metals, mining and other materials		5,185
Capital goods		4,288
Food, beverage and tobacco		4,089
Technology software and services		4,069
Media-related entities		3,985
Other		31,650
Total	$	85,450

Industry	OTC Derivative Products(2)
	(dollars in millions)
Banks	$	4,929
Special purpose vehicles		4,857
Funds, exchanges and other financial services(1)		4,652
Utilities		4,294
Regional governments		2,301
Sovereign governments		2,066
Other		3,725
Total	$	26,824

(1) Includes mutual funds, pension funds, private equity and real estate funds, exchanges and clearinghouses and diversified financial services.

(2) For further information on derivative instruments and hedging activities, see Note 10 to the condensed consolidated financial statements.

Global Wealth Management Group Activities.

The principal Global Wealth Management Group activities that result in credit risk to the Company include margin lending, non-purpose lending, and residential mortgage lending. At March 31, 2012, Global Wealth Management Group had $12.3 billion of loans held for investment with an allowance for loan losses of $5 million and $138 million of loans held for sale classified in Loans in the condensed consolidated statements of financial condition. For a further discussion of the Company’s credit risks associated with Global Wealth Management Group, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Credit Risk—Global Wealth Management Group Activities” in Part II, Item 7A of the Form 10-K.

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Item 4. Controls and Procedures.

Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

139

FINANCIAL DATA SUPPLEMENT (Unaudited)

Average Balances and Interest Rates and Net Interest Income

	Three Months Ended March 31, 2012
	Average Weekly     Balance		Interest			Annualized Average     Rate
	(dollars in millions)
Assets
Interest earning assets:
Financial instruments owned(1):
U.S.	$	130,147	$	631			2.0	%
Non-U.S.		88,710		160			0.7
Securities available for sale:
U.S.		31,508		86			1.1
Loans:
U.S.		15,931		112			2.9
Non-U.S.		189		6			12.9
Interest bearing deposits with banks:
U.S.		28,789		5			0.1
Non-U.S.		12,474		22			0.7
Federal funds sold and securities purchased under agreements to resell and Securities borrowed:
U.S.		180,579		(37	)		(0.1	)
Non-U.S.		102,382		150			0.6
Other:
U.S.		50,398		232			1.9
Non-U.S.		14,127		175			5.0
Total	$	655,234	$	1,542			1.0	%
Non-interest earning assets		130,446
Total assets	$	785,680
Liabilities and Equity
Interest bearing liabilities:
Deposits:
U.S.	$	65,638	$	45			0.3	%
Non-U.S.		84		—			—
Commercial paper and other short-term borrowings:
U.S.		629		2			1.3
Non-U.S.		2,377		11			1.9
Long-term debt:
U.S.		173,389		1,240			2.9
Non-U.S.		6,809		14			0.8
Financial instruments sold, not yet purchased(1):
U.S.		28,779		—			—
Non-U.S.		54,457		—			—
Securities sold under agreements to repurchase and Securities loaned:
U.S.		94,878		171			0.7
Non-U.S.		63,601		292			1.9
Other:
U.S.		80,264		(384	)		(1.9	)
Non-U.S.		34,655		210			2.5
Total	$	605,560	$	1,601			1.1
Non-interest bearing liabilities and equity		180,120
Total liabilities and equity	$	785,680
Net interest income and net interest rate spread			$	(59	)		(0.1	)%

(1) Interest expense on Financial instruments sold, not yet purchased is reported as a reduction of Interest income on Financial instruments owned.

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FINANCIAL DATA SUPPLEMENT (Unaudited)—(Continued)

Average Balances and Interest Rates and Net Interest Income

	Three Months Ended March 31, 2011
	Average Weekly     Balance		Interest			Annualized Average     Rate
	(dollars in millions)
Assets
Interest earning assets:
Financial instruments owned(1):
U.S.	$	121,713	$	730			2.4	%
Non-U.S.		120,291		188			0.6
Securities available for sale:
U.S.		27,123		88			1.3
Loans:
U.S.		10,966		100			3.7
Non-U.S.		193		5			10.5
Interest bearing deposits with banks:
U.S.		48,102		12			0.1
Non-U.S.		14,983		23			0.6
Federal funds sold and securities purchased under agreements to resell and Securities borrowed:
U.S.		199,619		55			0.1
Non-U.S.		98,941		222			0.9
Other:
U.S.		40,899		248			2.5
Non-U.S.		17,328		188			4.4
Total	$	700,158	$	1,859			1.1	%
Non-interest earning assets		135,698
Total assets	$	835,856
Liabilities and Equity
Interest bearing liabilities:
Deposits:
U.S.	$	63,216	$	66			0.4	%
Non-U.S.		65		—			—
Commercial paper and other short-term borrowings:
U.S.		1,476		3			0.8
Non-U.S.		1,644		5			1.2
Long-term debt:
U.S.		186,108		1,304			2.8
Non-U.S.		6,676		9			0.5
Financial instruments sold, not yet purchased(1):
U.S.		23,080		—			—
Non-U.S.		62,115		—			—
Securities sold under agreements to repurchase and Securities loaned:
U.S.		105,383		185			0.7
Non-U.S.		93,514		286			1.2
Other:
U.S.		85,962		(182	)		(0.9	)
Non-U.S.		34,037		177			2.1
Total	$	663,276	$	1,853			1.1
Non-interest bearing liabilities and equity		172,580
Total liabilities and equity	$	835,856
Net interest income and net interest rate spread			$	6			—	%

(1) Interest expense on Financial instruments sold, not yet purchased is reported as a reduction of Interest income on Financial instruments owned.

141

FINANCIAL DATA SUPPLEMENT (Unaudited)—(Continued)

Rate/Volume Analysis

The following tables set forth an analysis of the effect on net interest income of volume and rate changes:

	Three Months Ended March 31, 2012 versus Three Months Ended March 31, 2011
	Increase (decrease) due to change in:
	Volume			Rate			Net Change
	(dollars in millions)
Interest earning assets
Financial instruments owned:
U.S.	$	51		$	(150	)	$	(99	)
Non-U.S.		(49	)		21			(28	)
Securities available for sale:
U.S.		14			(16	)		(2	)
Loans:
U.S.		45			(33	)		12
Non-U.S.		—			1			1
Interest bearing deposits with banks:
U.S.		(5	)		(2	)		(7	)
Non-U.S.		(4	)		3			(1	)
Federal funds sold and securities purchased under agreements to resell and Securities borrowed:
U.S.		(5	)		(87	)		(92	)
Non-U.S.		8			(80	)		(72	)
Other:
U.S.		57			(73	)		(16	)
Non-U.S.		(35	)		22			(13	)
Change in interest income	$	77		$	(394	)	$	(317	)
Interest bearing liabilities
Deposits:
U.S.	$	3		$	(24	)	$	(21	)
Commercial paper and other short-term borrowings:
U.S.		(2	)		1			(1	)
Non-U.S.		2			4			6
Long-term debt:
U.S.		(89	)		25			(64	)
Non-U.S.		—			5			5
Securities sold under agreements to repurchase and Securities loaned:
U.S.		(18	)		4			(14	)
Non-U.S.		(91	)		97			6
Other:
U.S.		11			(213	)		(202	)
Non-U.S.		3			30			33
Change in interest expense	$	(181	)	$	(71	)	$	(252	)
Change in net interest income	$	258		$	(323	)	$	(65	)

142

Part II—Other Information.

Item 1. Legal Proceedings.

In addition to the matters described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”), and those 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, including, among other matters, 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 condensed 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.

In many proceedings, 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 will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. 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, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings 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 focused on residential mortgage and credit crisis related matters 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 regarding residential mortgages and related securities in the future 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 residential mortgage claims that have not yet been notified to the Company or are not yet determined to be material.

The following developments have occurred with respect to certain matters previously reported in the Form 10-K or concern new actions that have been filed since December 31, 2011:

Residential Mortgage and Credit Crisis Related Matters.

Class Actions.

On March 26, 2012, defendants filed a renewed motion to dismiss the complaint in In re Morgan Stanley ERISA Litigation.

143

On April 24, 2012, the court presiding in In re Morgan Stanley Pass-Through Certificate Litigation denied defendants’ motion for reconsideration of its denial-in-part of defendants’ motion to dismiss the second amended complaint.

Other Litigation.

On February 29, 2012, U.S. Bank National Association, in its capacity as Trustee (“U.S. Bank”), filed a summons with notice on behalf of Morgan Stanley Mortgage Loan Trust 2006-4SL and Mortgage Pass-Through Certificates, Series 2006-4SL (together, the “Trust”) against the Company. The summons with notice is styled Morgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc. and is pending in New York Supreme Court, New York County. The notice asserts claims for breach of contract and alleges, among other things, that the loans in the Trust, which had an original principal balance of approximately $303 million, breached various representations and warranties. The notice seeks, among other relief, an order requiring the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and interest.

On March 5, 2012, the plaintiff in The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. filed a second amended complaint. On April 10, 2012, the Company filed a demurrer to certain causes of action in the amended complaint.

On March 12, 2012, the court presiding in Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc. et al. denied defendants’ motion to dismiss with respect to plaintiff’s standing to bring suit. Defendants sought interlocutory appeal from that decision on April 11, 2012. On April 26, 2012, defendants filed a second motion to dismiss for failure to state a claim upon which relief can be granted.

On March 9, 2012, in Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al., the United States District Court for the District of Massachusetts denied plaintiff’s motion to remand the case to state court.

On March 20, 2012, the Company filed answers to the complaints in both cases styled Federal Deposit Insurance Corporation, as Receiver for Franklin Bank S.S.B v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc., denying their allegations.

On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court of the State of New Jersey styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1 billion. The complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud and tortious interference with contract and seeks, among other things, compensatory damages, punitive damages, rescission and rescissionary damages associated with plaintiffs’ purchases of such certificates.

On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of the State of New York styled Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $757 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud and negligent misrepresentation and seeks, among other things, rescission, compensatory and/or rescissionary damages, as well as punitive damages, associated with plaintiffs’ purchases of such certificates.

144

On May 1, 2012, Asset Management Fund d/b/a AMF Funds and certain of its affiliated funds filed a summons with notice against the Company in the Supreme Court of the State of New York, styled Asset Management Fund d/b/a AMF Funds et al v. Morgan Stanley et al. The notice alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $122 million. The notice identifies causes of action against the Company for, among other things, common-law fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation. The notice identifies the relief sought to include, among other things, monetary damages, punitive damages and rescission.

Other Matters.

On April 2, 2012, the Company entered into a Consent Order (“Order”) with the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) relating to the servicing of residential mortgage loans. The terms of the Order are substantially similar and, in many respects, identical to the orders entered into with the Federal Reserve Board by other large U.S. financial institutions. The Order, which is available on the Federal Reserve Board’s website, sets forth various allegations of improper conduct in servicing by Saxon, requires that the Company and its affiliates cease and desist such conduct, and requires that the Company, and its Board of Directors and affiliates, take various affirmative steps. The Order requires (i) the Company to engage an independent third-party consultant to conduct a review of certain foreclosure actions or proceedings that occurred or were pending between January 1, 2009 and December 31, 2010; (ii) the adoption of policies and procedures related to management of third parties used to outsource residential mortgage servicing, loss mitigation or foreclosure; (iii) a “validation report” from an independent third-party consultant regarding compliance with the Order for the first year; and (iv) submission of quarterly progress reports as to compliance with the Order by the Company’s the Board of Directors. The Order also provides that the Company will be responsible for the payment of any civil money penalties or compensatory payments assessed by the Federal Reserve Board related to such alleged conduct, which penalties or payments have not yet been determined.

Shareholder Derivative Matter.

On March 22, 2012, the Appellate Division of the Supreme Court of the State of New York affirmed the dismissal of the complaint in Security, Police and Fire Professionals of America Retirement Fund, et al. v. John J. Mack et al.

China Matter.

As disclosed in February 2009, the Company uncovered actions initiated by an employee based in China in an overseas real estate subsidiary that appeared to have violated the Foreign Corrupt Practices Act. The Company terminated the employee, reported the activity to appropriate authorities and cooperated with the investigations by the United States Department of Justice (“DOJ”) and the United States Securities and Exchange Commission (“SEC”). On April 25, 2012, the DOJ announced that the former employee had pled guilty to certain criminal charges, and the SEC announced that it had brought certain civil charges against the former employee, which have been settled. On the same day, the DOJ and SEC announced that they will not take any action against the Company in connection with this matter.

145

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below sets forth the information with respect to purchases made by or on behalf of the Company of its common stock during the quarterly period ended March 31, 2012.

Issuer Purchases of Equity Securities

(dollars in millions, except per share amounts)

Period	Total Number of Shares Purchased		Average Price Paid  Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs(C)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1
(January 1, 2012—January 31, 2012)
Share Repurchase Program(A)		—		—		—	$	1,560
Employee Transactions(B)		9,735,096	$	17.83		—		—
Month #2
(February 1, 2012—February 29, 2012)
Share Repurchase Program(A)		—		—		—	$	1,560
Employee Transactions(B)		363,505	$	19.69		—		—
Month #3
(March 1, 2012—March 31, 2012)
Share Repurchase Program(A)		—		—		—	$	1,560
Employee Transactions(B)		96,101	$	19.06		—		—
Total
Share Repurchase Program(A)		—		—		—	$	1,560
Employee Transactions(B)		10,194,702	$	17.91		—		—

(A) On December 19, 2006, the Company announced that its Board of Directors authorized the repurchase of up to $6 billion of the Company’s outstanding stock under a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date. Share repurchases by the Company are subject to regulatory approval.

(B) Includes: (1) shares delivered or attested in satisfaction of the exercise price and/or tax withholding obligations by holders of employee and director stock options (granted under employee and director stock compensation plans) who exercised options; (2) shares withheld, delivered or attested (under the terms of grants under employee and director stock compensation plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares; (3) shares withheld, delivered and attested (under the terms of grants under employee and director stock compensation plans) to offset tax withholding obligations that occur upon the delivery of outstanding shares underlying restricted stock units, and (4) shares withheld, delivered and attested (under the terms of grants under employee and director stock compensation plans) to offset the cash payment for fractional shares. The Company’s employee and director stock compensation plans provide that the value of the shares withheld, delivered or attested shall be valued using the fair market value of the Company’s common stock on the date the relevant transaction occurs, using a valuation methodology established by the Company.

(C) Share purchases under publicly announced programs are made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions (including with employee benefit plans) as market conditions warrant and at prices the Company deems appropriate.

Item 6. Exhibits.

An exhibit index has been filed as part of this Report on Page E-1.

146

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MORGAN STANLEY (Registrant)
By:	/s/ RUTH PORAT
	Ruth Porat Executive Vice President and Chief Financial Officer
By:	/s/ PAUL C. WIRTH
	Paul C. Wirth Deputy Chief Financial Officer

Date: May 7, 2012

147

EXHIBIT INDEX

MORGAN STANLEY

Quarter Ended March 31, 2012

Exhibit No.		Description
	10.1	Form of Award Certificate for Discretionary Retention Awards of Stock Units.
	10.2	Form of Award Certificate for Discretionary Retention Awards under the Morgan Stanley Compensation Incentive Plan Deferred Bonus Program.
	10.3	Form of Award Certificate for Performance Stock Units.
	10.4	Memorandum to Colm Kelleher Regarding Repatriation to London.
	10.5	Morgan Stanley U.S. Tax Equalization Program.
	10.6	Amendment to Morgan Stanley 401(k) Savings Plan, dated as of February 28, 2012.
	12	Statement Re: Computation of Ratio of Earnings to Fixed Charges and Computation of Earnings to Fixed Charges and Preferred Stock Dividends.
	15	Letter of awareness from Deloitte & Touche LLP, dated May 7, 2012, concerning unaudited interim financial information.
	31.1	Rule 13a-14(a) Certification of Chief Executive Officer.
	31.2	Rule 13a-14(a) Certification of Chief Financial Officer.
	32.1	Section 1350 Certification of Chief Executive Officer.
	32.2	Section 1350 Certification of Chief Financial Officer.
	101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Financial Condition—March 31, 2012 and December 31, 2011, (ii) the Condensed Consolidated Statements of Income—Three Months Ended March 31, 2012 and 2011, (iii) the Condensed Consolidated Statements of Comprehensive Income—Three Months Ended March 31, 2012 and 2011, (iv) the Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2012 and 2011, (v) the Condensed Consolidated Statements of Changes in Total Equity—Three Months Ended March 31, 2012 and 2011, and (vi) Notes to Condensed Consolidated Financial Statements (unaudited)

E-1

EX-10.1

EXHIBIT 10.1

MORGAN STANLEY

2007 EQUITY INCENTIVE COMPENSATION PLAN

[YEAR] DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE FOR STOCK UNITS

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.	Stock units generally.	3
2.	Vesting schedule and conversion.	3
3.	Special provision for certain employees.	4
4.	Dividend equivalent payments.	5
5.	Death, Disability and Full Career Retirement.	5
6.	Involuntary termination by the Firm.	6
7.	Governmental Service.	6
8.	Qualifying Termination.	7
9.	Specified employees.	7
10.	Cancellation of awards under certain circumstances.	8
11.	Tax and other withholding obligations.	10
12.	Obligations you owe to the Firm.	11
13.	Nontransferability.	11
14.	Designation of a beneficiary.	12
15.	Ownership and possession.	12
16.	Securities law compliance matters.	12
17.	Compliance with laws and regulation.	13
18.	No entitlements.	13
19.	Consents under local law.	14
20.	Award modification.	14
21.	Governing law.	14
22.	Defined terms.	15

MORGAN STANLEY

[YEAR]

DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE FOR STOCK UNITS

Morgan Stanley has awarded you retention stock units as part of your discretionary long-term incentive compensation for services provided during [year] and as an incentive for you to remain in Employment and provide services to the Firm through the Scheduled Vesting Dates. This Award Certificate sets forth the general terms and conditions of your [year] stock unit award. The number of stock units in your award has been communicated to you independently.

If you are employed outside the United States, you will also receive an “International Supplement” that contains supplemental terms and conditions for your [year] stock unit award. You should read this Award Certificate in conjunction with the International Supplement, if applicable, in order to understand the terms and conditions of your stock unit award.

Your stock unit award is made pursuant to the Plan. References to “stock units” in this Award Certificate mean only those stock units included in your [year] stock unit award, and the terms and conditions herein apply only to such award. If you receive any other award under the Plan or another equity compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purpose of the stock unit award is, among other things, to align your interests with the interests of the Firm and Morgan Stanley’s stockholders, to reward you for your continued Employment and service to the Firm in the future and your compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. In view of these purposes, you will earn each portion of your [year] stock unit award only if you (1) remain in continuous Employment through the applicable Scheduled Vesting Date (subject to limited exceptions set forth below), (2) do not engage in any activity that is a cancellation event set forth in Section 10(c) below and (3) satisfy obligations you owe to the Firm as set forth in Section 12 below. Even if your award has vested, you will have no right to your award if a cancellation event occurs under the circumstances set forth in Section 10(c) below. As Morgan Stanley deems appropriate, it will require you to provide a written certification or other evidence, from time to time in its sole discretion, to confirm that no cancellation event has occurred, including upon a termination of Employment and/or during a specified period of time prior to each Scheduled Conversion Date. If you fail to timely provide any required certification or other evidence, Morgan Stanley will cancel your award. It is your responsibility to provide the Executive Compensation Department with your up-to-date contact information.

2

Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 22 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 22 below have the meanings set forth in the Plan.

1. Stock units generally.

Each of your stock units corresponds to one share of Morgan Stanley common stock. A stock unit constitutes a contingent and unsecured promise of Morgan Stanley to pay you one share of Morgan Stanley common stock on the conversion date for the stock unit. As the holder of stock units, you have only the rights of a general unsecured creditor of Morgan Stanley. You will not be a stockholder with respect to the shares of Morgan Stanley common stock corresponding to your stock units unless and until your stock units convert to shares.

2. Vesting schedule and conversion.

(a) Vesting schedule. Except as otherwise provided in this Award Certificate, your stock units will vest according to the following schedule: (i) 50% of your stock units will vest on the First Scheduled Vesting Date and (ii) the remaining 50% of your stock units will vest on the Second Scheduled Vesting Date.¹ Any fractional stock units resulting from the application of the vesting schedule will be aggregated and will vest on the Second Scheduled Vesting Date. Except as otherwise provided in this Award Certificate, each portion of your stock units will vest only if you continue to provide future services to the Firm by remaining in continuous Employment through the applicable Scheduled Vesting Date and providing value added services to the Firm during this timeframe. The special vesting terms set forth in Sections 5, 6, 7 and 8 of this Award Certificate apply (i) if your Employment terminates by reason of your death or Disability, (ii) upon your Full Career Retirement, (iii) if the Firm terminates your employment in an involuntary termination under the circumstances described in Section 6, (iv) upon a Governmental Service Termination or (v) upon a Qualifying Termination. Vested stock units remain subject to the cancellation and withholding provisions set forth in this Award Certificate.

(b) Conversion. Except as otherwise provided in this Award Certificate, (i) 50% of your stock units will, to the extent vested, convert to shares of Morgan Stanley common stock on the First Scheduled Conversion Date and (ii) the remaining 50% of your stock units will, to the extent vested, convert to shares of Morgan Stanley common stock on the Second Scheduled Conversion Date.² The special conversion provisions set forth in Sections 5(a), 5(b), 7 and 8 of this Award Certificate apply (i) if your

¹  The vesting schedule presented in this form of Award Certificate is indicative. The vesting schedule applicable to awards may vary.

²  The conversion schedule presented in this form of Award Certificate is indicative. The conversion schedule applicable to awards may vary.

3

Employment terminates by reason of your death or you die after termination of your Employment, (ii) upon your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 7(b) or (iii) upon a Qualifying Termination.

The shares delivered upon conversion of stock units pursuant to this Section 2(b) will not be subject to any transfer restrictions, other than those that may arise under the securities laws, the Firm’s policies or Section 12 below, or to cancellation under the circumstances set forth in Section 10(c).³

(c) Accelerated conversion. Morgan Stanley shall have no right to accelerate the conversion of any of your stock units, except to the extent that such acceleration is not prohibited by Section 409A and would not result in your being required to recognize income for United States federal income tax purposes before your stock units convert to shares of Morgan Stanley common stock or your incurring additional tax or interest under Section 409A. If any stock units are converted to shares of Morgan Stanley common stock prior to the applicable Scheduled Conversion Date pursuant to this Section 2(c), these shares may not be transferable and may remain subject to applicable vesting, cancellation and withholding provisions, as determined by Morgan Stanley.

(d) Rule of construction for timing of conversion. Whenever this Award Certificate provides for your stock units to convert to shares on the First Scheduled Conversion Date or the Second Scheduled Conversion Date or upon a different specified event or date, such conversion or payment will be considered to have been timely made, and neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages based on a delay in conversion of your stock units (or delivery of Morgan Stanley shares following conversion) and the Firm shall have no liability to you (or to any of your beneficiaries or your estate) in respect of any such delay, as long as conversion is made by December 31 of the year in which occurs the applicable Scheduled Conversion Date or such other specified event or date or, if later, by the 15th day of the third calendar month following such specified event or date. Similarly, neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages, and the Firm shall have no liability to you (or to any of your beneficiaries or your estate), based on any acceleration of the conversion of your stock units pursuant to Section 2(c), as applicable.

3. Special provision for certain employees.

Notwithstanding the other provisions of this Award Certificate, if Morgan Stanley considers you to be one of its executive officers at the time provided for the conversion of your vested stock units and determines that your compensation may not be fully deductible by virtue of Section 162(m) of the Internal Revenue Code, Morgan Stanley shall delay payment of the

³  Certain long-term incentive awards granted to UK Code Staff may include transfer restrictions for a six-month period following the applicable Scheduled Conversion Date.

4

nondeductible portion of your compensation, including delaying, to the extent nondeductible, conversion of the stock units, unless the Committee, in its sole discretion, determines not to delay such conversion. This delay will continue until your Separation from Service or, to the extent permitted under Section 409A, the end of the first earlier taxable year of the Firm as of the last day of which you are no longer an executive officer (subject to earlier conversion in the event of your death as described below).

4. Dividend equivalent payments.

Until your stock units convert to shares, if Morgan Stanley pays a regular or ordinary dividend on its common stock, a dividend equivalent will be credited with respect to your vested and unvested stock units and reinvested in the form of additional stock units. The additional number of stock units credited to you as a result of this dividend reinvestment shall equal:

(i) the cash dividend paid on one share of Morgan Stanley common stock, multiplied by

(ii) the number of stock units subject to your [year] stock unit award on the applicable dividend record date; with the product of (i) and (ii), divided by

(iii) the fair market value of a share of Morgan Stanley common stock on the dividend payment date, as determined by Morgan Stanley in its sole discretion.

Morgan Stanley will credit the dividend equivalents when it pays the corresponding dividend on its common stock. The additional stock units credited to you as a result of the reinvestment of dividend equivalents will vest and convert at the same time as, and be subject to the same vesting and cancellation provisions set forth in this Award Certificate with respect to the corresponding stock units, and references to “stock units” in this Award Certificate shall include such additional stock units credited to you as a result of the reinvestment of dividend equivalents described in this Section 4. The decision to pay a dividend and, if so, the amount of any such dividend, is determined by Morgan Stanley in its sole discretion. No dividend equivalents will be paid to you on any canceled stock units.

5. Death, Disability and Full Career Retirement.

The following special vesting and payment terms apply to your stock units:

(a) Death during Employment. If your Employment terminates due to death, all of your unvested stock units will vest on the date of your death. Your stock units will convert to shares of Morgan Stanley common stock and be delivered to the beneficiary you have designated pursuant to Section 14 or the legal representative of your estate, as applicable, upon your death, provided that your estate or beneficiary notifies the Firm of your death within 60 days following your death.

5

After your death, the cancellation provisions set forth in Section 10(c) will no longer apply, and the shares delivered upon conversion of stock units pursuant to this Section 5(a) will not be subject to any transfer restrictions (other than those that may arise under the securities laws or the Firm’s policies).

(b) Death after termination of Employment. If you die after the termination of your Employment but prior to the applicable Scheduled Conversion Date, any vested stock units that you held at the time of your death will convert to shares of Morgan Stanley common stock and be delivered to the beneficiary you have designated pursuant to Section 14 or the legal representative of your estate, as applicable, upon your death, provided that your estate or beneficiary notifies the Firm of your death within 60 days following your death.

After your death, the cancellation provisions set forth in Section 10(c) will no longer apply, and the shares delivered upon conversion of stock units pursuant to this Section 5(b) will not be subject to any transfer restrictions (other than those that may arise under the securities laws or the Firm’s policies).

(c) Disability or Full Career Retirement. If your Employment terminates due to Disability or in a Full Career Retirement, all of your unvested stock units will vest on the date your Employment terminates. Your stock units will convert to shares of Morgan Stanley common stock on the applicable Scheduled Conversion Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Conversion Date.

6. Involuntary termination by the Firm.

If the Firm terminates your employment under circumstances not involving any cancellation event set forth in Section 10(c), your unvested stock units will vest on the date your employment with the Firm terminates and your stock units will convert to shares of Morgan Stanley common stock on the applicable Scheduled Conversion Date, provided that you sign an agreement and release satisfactory to the Firm. If you do not sign such an agreement and release satisfactory to the Firm within the timeframe set by the Firm in connection with your involuntary termination as described in this Section 6, any stock units that were unvested immediately prior to your termination shall be canceled. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Conversion Date.

7. Governmental Service.

(a) General treatment of awards upon Governmental Service Termination. If your Employment terminates in a Governmental Service Termination and not involving a cancellation event set forth in Section 10(c), then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 7(c), all of your unvested stock units will vest on the date of your Governmental Service Termination. Your vested stock units will convert to shares of Morgan Stanley common stock on the date of your Governmental Service Termination.

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(b) General treatment of vested awards upon acceptance of employment at a Governmental Employer following termination of Employment. If your Employment terminates other than in a Governmental Service Termination and not involving a cancellation event set forth in Section 10(c) and, following your termination of Employment, you accept employment with a Governmental Employer, then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 7(c), all of your outstanding vested stock units will convert to shares of Morgan Stanley common stock upon your commencement of such employment, provided you present the Firm with satisfactory evidence demonstrating that as a result of such employment the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

(c) Repayment obligation. If any activity or event constituting a cancellation event set forth in Section 10(c) occurs within the applicable period of time that would have resulted in cancellation of all or a portion of your stock units had they not converted to shares pursuant to Sections 7(a) or 7(b) above (disregarding, for purposes of determining whether a cancellation event has occurred, any Full Career Retirement condition set forth in Section 10(c)(1)), you will be required to pay to Morgan Stanley an amount equal to:

(1) the number of stock units that would have been canceled upon the occurrence of such cancellation event multiplied by the fair market value, determined using a valuation methodology established by Morgan Stanley, of Morgan Stanley common stock on the date your stock units converted to shares of Morgan Stanley common stock; plus

(2) interest on the amount described in clause (1) above at the average rate of interest Morgan Stanley paid to borrow money from financial institutions during the period from the date of such conversion through the date preceding the payment date.

8. Qualifying Termination.

If your employment terminates in a Qualifying Termination, all of your unvested stock units will vest, cancellation provisions will lapse, and, subject to Section 9, your stock units will convert to shares of Morgan Stanley common stock upon your Qualifying Termination.⁴

9. Specified employees.

Notwithstanding any other terms of this Award Certificate, if Morgan Stanley considers you to be one of its “specified employees” as defined in Section 409A at the time of your Separation from Service, any conversion of your stock units that otherwise would occur upon your Separation from Service (including, without limitation, stock units whose conversion

⁴  For certain awards granted to UK Code Staff, the cancellation provisions may lapse on the applicable Scheduled Conversion Date.

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was delayed due to Section 162(m) of the Internal Revenue Code, as provided in Section 3, and stock units payable upon your Qualifying Termination, as provided in Section 8) will be delayed until the first business day following the date that is six months after your Separation from Service; provided, however, that in the event that your death, your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 7(b) occurs at any time after the Date of the Award, conversion and payment will be made in accordance with Section 5(a), 5(b) or 7, as applicable.

10. Cancellation of awards under certain circumstances.

(a) Cancellation of unvested awards. Your unvested stock units will be canceled if your Employment terminates for any reason other than death, Disability, a Full Career Retirement, an involuntary termination by the Firm described in Section 6, a Governmental Service Termination or a Qualifying Termination.

(b) General treatment of vested awards. Except as otherwise provided in this Award Certificate, your vested stock units will convert to shares of Morgan Stanley common stock on the applicable Scheduled Conversion Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Conversion Date.

(c) Cancellation of awards under certain circumstances. The cancellation events set forth in this Section 10(c) are designed, among other things, to incentivize compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. This Section 10(c) shall apply notwithstanding any other terms of this Award Certificate (except where sections in this Award Certificate specifically provide that the cancellation events set forth in this Section 10(c) no longer apply).

Your stock units, even if vested, are not earned until the applicable Scheduled Conversion Date (and until you satisfy all obligations you owe to the Firm as set forth in Section 12 below) and, unless prohibited by applicable law, will be canceled prior to the applicable Scheduled Conversion Date in any of the circumstances set forth below in Section 10(c)(1), (2) or (3). Although you will become the beneficial owner of shares underlying your stock units following conversion of your stock units, the Firm may retain custody of your shares following conversion of your stock units pending any investigation or other review that impacts the determination as to whether the stock units are cancellable under the circumstances set forth below and, in such an instance, the shares underlying such stock units shall be forfeited in the event the Firm determines that the stock units were cancellable under the circumstances set forth below.

(1) Competitive Activity. If you resign and the resulting termination satisfies the definition of a Full Career Retirement, or if you resign (whether in a Full Career Retirement or otherwise) following the applicable Scheduled Vesting Date, but prior to the applicable Scheduled Conversion Date, and in either case you engage in Competitive Activity, the following shall apply, subject to applicable law:

(i) If your Competitive Activity occurs before the First Scheduled Conversion Date, then all of your stock units will be canceled immediately.

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(ii) If your Competitive Activity occurs on or after the First Scheduled Conversion Date but prior to the Second Scheduled Conversion Date, then the 50% of your stock units that are scheduled to convert on the Second Scheduled Conversion Date will be canceled immediately.⁵

(2) Other Events. If any of the following events occur at any time before the applicable Scheduled Conversion Date, all of your stock units (whether or not vested), will be canceled immediately, subject to applicable law:

(i) Your Employment is terminated for Cause or you engage in conduct constituting Cause (either during or following Employment and whether or not your Employment has been terminated as of the applicable Scheduled Conversion Date);

(ii) Following the termination of your Employment, the Firm determines that your Employment could have been terminated for Cause (for these purposes, “Cause” will be determined without giving consideration to any “cure” period included in the definition of “Cause”);

(iii) You disclose Confidential and Proprietary Information to any unauthorized person outside the Firm, or use or attempt to use Confidential and Proprietary Information other than in connection with the business of the Firm; or you fail to comply with your obligations (either during or after your Employment) under the Firm’s Code of Conduct (and any applicable supplements) or otherwise existing between you and the Firm, relating to Confidential and Proprietary Information or an assignment, procurement or enforcement of rights in Confidential and Proprietary Information;

(iv) You engage in a Wrongful Solicitation;

(v) You make any Unauthorized Comments;

(vi) You fail or refuse, following your termination of Employment, to cooperate with or assist the Firm in a timely manner in connection with any investigation, regulatory matter, lawsuit or arbitration in which the Firm is a subject, target or party and as to which you may have pertinent information; or

⁵  In the event the terms of the award provide for other than two scheduled conversion dates, this provision will be adjusted accordingly.

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(vii) You resign from your employment with the Firm without having provided the Firm prior written notice of your resignation consistent with the notice period requirements undertaken by you in connection with your employment offer letter, Sign-On or Notice & Non-Solicitation Agreement or any other contractual obligation in connection with the terms and conditions of your employment, or, in the event no such prior contractual notice period requirements exist, you resign from your employment with the Firm without having provided the Firm prior written notice of your resignation of at least thirty (30) days.

(3) Clawback Cancellation Event. All of your stock units (whether or not vested) will be cancelled immediately, subject to applicable law, if, before the applicable Scheduled Conversion Date, you take any action, or omit to take any action (including with respect to supervisory responsibilities), where such action or omission: (i) causes a restatement of the Firm’s consolidated financial results or (ii) constitutes a violation by you of the Firm’s risk policies and standards (where prior authorization and approval of appropriate senior management was not obtained) whether such action results in a favorable or unfavorable impact to the Firm’s consolidated financial results.⁶

11. Tax and other withholding obligations.

Any vesting, whether on a Scheduled Vesting Date or some other date, of a stock unit award and any conversion of a stock unit award or crediting of dividend equivalents, shall be subject to the Firm’s withholding of all required United States federal, state, local and foreign income and employment/payroll taxes (including Federal Insurance Contributions Act taxes). You authorize the Firm to withhold such taxes from any payroll or other payment or compensation to you, including by canceling or accelerating payment of a portion of this award in an amount not to exceed such taxes imposed upon such vesting, conversion or crediting and any additional taxes imposed as a result of such cancellation or acceleration, and to take such other action as the Firm may deem advisable to enable it and you to satisfy obligations for the payment of withholding taxes and other tax obligations, assessments, or other governmental charges, whether of the United States or any other jurisdiction, relating to the vesting or conversion of your stock units or the crediting of dividend equivalents. However, the Firm may not deduct or withhold such sum from any payroll or any other payment or compensation (including from your award), except to the extent it is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your stock units convert to shares of Morgan Stanley common stock or to incur interest or additional tax under Section 409A.

⁶  Certain long-term incentive awards granted to UK Code staff may also provide that all of a participant’s stock units (whether vested or unvested) will be cancelled immediately, subject to applicable law, if, before the applicable Scheduled Conversion Date, (i) the participant takes any action, or omits to take any action (including with respect to supervisory responsibilities), where such act or omission causes, or is reasonably expected to cause, a substantial financial loss on a trading strategy, investment, commitment or other holding originating either in the current year or in any prior year (without the prior understanding of the possibility and magnitude of such loss by appropriate senior management) and such trading strategy, investment, commitment or other holding was a factor in the participant’s award determination and (ii) the Firm and/or relevant business unit subsequently suffers a material downturn in its financial performance or the Firm and/or relevant business unit suffers a material failure of risk management.

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Pursuant to rules and procedures that Morgan Stanley establishes, you may elect to satisfy the tax or other withholding obligations arising upon conversion of your stock units by having Morgan Stanley withhold shares of Morgan Stanley common stock in an amount sufficient to satisfy the tax or other withholding obligations. Shares withheld will be valued using the fair market value of Morgan Stanley common stock on the date your stock units convert (or such other appropriate date determined by Morgan Stanley based on local legal, tax or accounting rules and practices) using a valuation methodology established by Morgan Stanley. In order to comply with applicable accounting standards or the Firm’s policies in effect from time to time, Morgan Stanley may limit the amount of shares that you may have withheld.

12. Obligations you owe to the Firm.

As a condition to the earning, conversion or distribution of your award, the Firm may require you to pay such sum to the Firm as may be necessary to satisfy any obligation that you owe to the Firm. Notwithstanding any other provision of this Award Certificate, your award, even if vested or converted, is not earned until after such obligations and any tax withholdings or other deductions required by law are satisfied. Notwithstanding the foregoing, Morgan Stanley may not reduce the number of shares to be delivered upon conversion of your stock units or delay the payment of your award to satisfy obligations that you owe to the Firm except (i) to the extent authorized under Section 11, relating to tax and other withholding obligations or (ii) to the extent such reduction or delay is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your stock units convert to shares of Morgan Stanley common stock or to incur additional tax or interest under Section 409A.

Morgan Stanley’s determination of any amount that you owe the Firm shall be conclusive. The fair market value of Morgan Stanley common stock for purposes of the foregoing provisions shall be determined using a valuation methodology established by Morgan Stanley.

13. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your award, other than as provided in Section 14 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to your award will be made only to you.

Your personal representatives, heirs, legatees, beneficiaries, successors and assigns, and those of Morgan Stanley, shall all be bound by, and shall benefit from, the terms and conditions of your award.

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14. Designation of a beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of your award to be delivered or paid under this Award Certificate in the event of your death. To make a beneficiary designation, you must complete and submit the Beneficiary Designation form on the Executive Compensation website at [website redacted].

Any shares that become deliverable upon your death, and as to which a designation of beneficiary is not in effect, will be distributed to your estate.

If you previously filed a designation of beneficiary form for your equity awards with the Executive Compensation Department, such form will also apply to all of your equity awards, including this award. You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive shares or payments under this award, Morgan Stanley may determine in its sole discretion to deliver the shares or make the payments in question to your estate. Morgan Stanley’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to this award.

15. Ownership and possession.

(a) Before conversion. Generally, you will not have any rights as a stockholder in the shares of Morgan Stanley common stock corresponding to your stock units unless and until your stock units convert to shares.

If Morgan Stanley contributes shares of Morgan Stanley common stock corresponding to your stock units to a grantor trust it has established, you may be permitted to direct the trustee how to vote the shares in the trust corresponding to your stock units. Voting rights, if any, are governed by the terms of the grantor trust and Morgan Stanley may amend any such voting rights, in its sole discretion, at any time. Morgan Stanley is under no obligation to contribute shares corresponding to stock units to a trust. If Morgan Stanley elects not to contribute shares corresponding to your stock units to a trust, you will not have voting rights with respect to shares corresponding to your stock units until your stock units convert to shares.

(b) Following conversion. Subject to Section 10(c), following conversion of your stock units you will be the beneficial owner of the shares of Morgan Stanley common stock issued to you, and you will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on the shares.

(c) Custody of shares. Morgan Stanley may maintain possession of the shares subject to your award until such time as your shares are no longer subject to restrictions on transfer.

16. Securities law compliance matters.

Morgan Stanley may affix a legend to any stock certificates representing shares of Morgan Stanley common stock issued upon conversion of your stock units (and any stock certificates that may subsequently be issued in substitution for the original certificates). The legend will read substantially as follows:

THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE WERE ISSUED PURSUANT TO THE MORGAN STANLEY 2007 EQUITY INCENTIVE COMPENSATION PLAN AND ARE SUBJECT TO THE TERMS AND CONDITIONS THEREOF AND OF AN AWARD CERTIFICATE FOR STOCK UNITS AND ANY SUPPLEMENT THERETO.

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THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE MAY BE SUBJECT TO RESTRICTIONS ON TRANSFER BY VIRTUE OF THE SECURITIES ACT OF 1933.

COPIES OF THE PLAN, THE AWARD CERTIFICATE FOR STOCK UNITS AND ANY SUPPLEMENT THERETO ARE AVAILABLE THROUGH THE EXECUTIVE COMPENSATION DEPARTMENT.

Morgan Stanley may advise the transfer agent to place a stop order against such shares if it determines that such an order is necessary or advisable.

17. Compliance with laws and regulation.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other disposition of shares issued upon conversion of your stock units (whether directly or indirectly, whether or not for value, and whether or not voluntary) must be made in compliance with any applicable constitution, rule, regulation or policy of any of the exchanges or associations or other institutions with which the Firm or a Related Employer has membership or other privileges, and any applicable law or applicable rule or regulation of any governmental agency, self-regulatory organization or state or federal regulatory body.

18. No entitlements.

(a) No right to continued Employment. This award is not an employment agreement, and nothing in this Award Certificate, the International Supplement, if applicable, or the Plan shall alter your status as an “at-will” employee of the Firm or your employment status at a Related Employer. None of this Award Certificate, the International Supplement, if applicable, or the Plan shall be construed as guaranteeing your employment by the Firm or a Related Employer, or as giving you any right to continue in the employ of the Firm or a Related Employer, during any period (including without limitation the period between the Date of the Award and any of the First Scheduled Vesting Date, the Second Scheduled Vesting Date, the First Scheduled Conversion Date, the Second Scheduled Conversion Date, or any portion of any of these periods), nor shall they be construed as giving you any right to be reemployed by the Firm or a Related Employer following any termination of Employment.

(b) No right to future awards. This award, and all other awards of stock units and other equity-based awards, are discretionary. This award does not confer on you any right or entitlement to receive another award of stock units or any other equity-based award at any time in the future or in respect of any future period.

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(c) No effect on future employment compensation. Morgan Stanley has made this award to you in its sole discretion. This award does not confer on you any right or entitlement to receive compensation in any specific amount for any future year, and does not diminish in any way the Firm’s discretion to determine the amount, if any, of your compensation. This award is not part of your base salary or wages and will not be taken into account in determining any other employment-related rights you may have, such as rights to pension or severance pay.

19. Consents under local law.

Your award is conditioned upon the making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

20. Award modification.

Morgan Stanley reserves the right to modify or amend unilaterally the terms and conditions of your award, without first asking your consent, or to waive any terms and conditions that operate in favor of Morgan Stanley. These amendments may include (but are not limited to) changes that Morgan Stanley considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. Morgan Stanley may not modify your award in a manner that would materially impair your rights in your award without your consent; provided, however, that Morgan Stanley may, but is not required to, without your consent, amend or modify your award in any manner that Morgan Stanley considers necessary or advisable to (i) comply with any Legal Requirement, (ii) ensure that your award does not result in an excise or other supplemental tax on the Firm under any Legal Requirement, or (iii) ensure that your award is not subject to United States federal, state or local income tax or any equivalent taxes in territories outside the United States prior to conversion of your stock units to shares or delivery of such shares following conversion. Morgan Stanley will notify you of any amendment of your award that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by the Global Head of Human Resources or the Chief Operating Officer (or if such positions no longer exist, by the holder of an equivalent position) to be effective.

21. Governing law.

This Award Certificate and the related legal relations between you and Morgan Stanley will be governed by and construed in accordance with the laws of the State of New York, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the award to the substantive law of another jurisdiction.

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22. Defined terms.

For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

(a) “Access Person” means an individual designated by the Firm’s Compliance Department as an “access employee” or “access person”, which, for example, currently includes all Managing Directors of the Firm.

(b) “Board” means the Board of Directors of Morgan Stanley.

(c) “Cause” means:

(1) any act or omission which constitutes a breach of your obligations to the Firm, including, without limitation, (A) your failure to comply with any notice or non-solicitation restrictions that may be applicable to you or (B) your failure to comply with the Firm’s compliance, ethics or risk management standards, or your failure or refusal to perform satisfactorily any duties reasonably required of you, which breach, failure or refusal (if susceptible to cure) is not corrected (other than failure to correct by reason of your incapacity due to physical or mental illness) within ten (10) business days after written notification thereof to you by the Firm;

(2) your commission of any dishonest or fraudulent act, or any other act or omission, which has caused or may reasonably be expected to cause injury to the interest or business reputation of the Firm; or

(3) your violation of any securities, commodities or banking laws, any rules or regulations issued pursuant to such laws, or rules or regulations of any securities or commodities exchange or association of which the Firm is a member or of any policy of the Firm relating to compliance with any of the foregoing.

(d) A “Change in Control” shall be deemed to have occurred if any of the following conditions shall have been satisfied:

(1) any one person or more than one person acting as a group (as determined under Section 409A), other than (A) any employee plan established by Morgan Stanley or any of its Subsidiaries, (B) Morgan Stanley or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by stockholders of Morgan Stanley in substantially the same proportions as their ownership of Morgan Stanley, is or becomes, during any 12-month period, the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person(s) any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of the total voting power of the stock of Morgan Stanley; provided, however, that the provisions of this subsection (1) are not intended to apply to or include as a Change in Control any transaction that is specifically excepted from the definition of Change in Control under subsection (3) below;

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(2) a change in the composition of the Board such that, during any 12-month period, the individuals who, as of the beginning of such period, constitute the Board (the “Existing Board”) cease for any reason to constitute at least 50% of the Board; provided, however, that any individual becoming a member of the Board subsequent to the beginning of such period whose election, or nomination for election by Morgan Stanley’s stockholders, was approved by a vote of at least a majority of the directors immediately prior to the date of such appointment or election shall be considered as though such individual were a member of the Existing Board;

(3) the consummation of a merger or consolidation of Morgan Stanley with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of Morgan Stanley (or any direct or indirect subsidiary of Morgan Stanley) pursuant to applicable stock exchange requirements; provided that immediately following such merger or consolidation the voting securities of Morgan Stanley outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of such merger or consolidation or parent entity thereof) 50% or more of the total voting power of Morgan Stanley stock (or if Morgan Stanley is not the surviving entity of such merger or consolidation, 50% or more of the total voting power of the stock of such surviving entity or parent entity thereof); and provided further that a merger or consolidation effected to implement a recapitalization of Morgan Stanley (or similar transaction) in which no person (as determined under Section 409A) is or becomes the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of either the then outstanding shares of Morgan Stanley common stock or the combined voting power of Morgan Stanley’s then outstanding voting securities shall not be considered a Change in Control; or

(4) the complete liquidation of Morgan Stanley or the sale or disposition by Morgan Stanley of all or substantially all of Morgan Stanley’s assets in which any one person or more than one person acting as a group (as determined under Section 409A) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Morgan Stanley that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of Morgan Stanley immediately prior to such acquisition or acquisitions.

Notwithstanding the foregoing, (x) no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of Morgan Stanley common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of Morgan Stanley immediately

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prior to such transaction or series of transactions and (y) no event or circumstances described in any of clauses (1) through (4) above shall constitute a Change in Control unless such event or circumstances also constitute a change in the ownership or effective control of Morgan Stanley, or in the ownership of a substantial portion of Morgan Stanley’s assets, as defined in Section 409A. In addition, no Change in Control shall be deemed to have occurred upon the acquisition of additional control of Morgan Stanley by any one person or more than one person acting as a group that is considered to effectively control Morgan Stanley.

For purposes of the provisions of this Award Certificate, terms used in the definition of a Change in Control shall be as defined or interpreted pursuant to Section 409A.

(e) “Committee” means the Compensation, Management Development and Succession Committee of the Board, any successor committee thereto or any other committee of the Board appointed by the Board with the powers of the Committee under the Plan, or any subcommittee appointed by such Committee.

(f) “Competitive Activity” means:

(1) becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director, independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where you will be responsible for providing, or managing or supervising others who are providing, services (x) that are similar or substantially related to the services that you provided to the Firm, or (y) that you had direct or indirect managerial or supervisory responsibility for at the Firm, or (z) that call for the application of the same or similar specialized knowledge or skills as those utilized by you in your services for the Firm, in each such case, at any time during the year preceding the termination of your employment with the Firm; or

(2) either alone or in concert with others, forming, or acquiring a 5% or greater equity ownership, voting interest or profit participation in, a Competitor.

(g) “Competitor” means any corporation, partnership or other entity that competes, or that owns a significant interest in any corporation, partnership or other entity that competes, with any business activity the Firm engages in, or that you reasonably knew or should have known that the Firm was planning to engage in, at the time of the termination of your Employment.

(h) “Confidential and Proprietary Information” means any information that is classified as confidential in the Firm’s Global Policy on Confidential Information or that may have intrinsic value to the Firm, the Firm’s clients or other parties with which the Firm has a relationship, or that may provide the Firm with a competitive advantage, including, without limitation, any trade secrets; inventions (whether or not patentable); formulas; flow charts; computer programs; access codes or other systems information; algorithms; technology and business processes; business, product or marketing plans; sales and other forecasts; financial information; client lists or other intellectual property; information relating to compensation and benefits; and public information that becomes proprietary as a result of the Firm’s compilation of

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that information for use in its business, provided that such Confidential and Proprietary Information does not include any information which is available for use by the general public or is generally available for use within the relevant business or industry other than as a result of your action. Confidential and Proprietary Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, electronic communications, videotapes, audiotapes, and oral communications.

(i) “Date of the Award” means [insert grant date, which typically will coincide approximately with the end of the year in respect of which the award is made].

(j) “Disability” means any condition that would qualify for a benefit under any group long-term disability plan maintained by the Firm and applicable to you.

(k) “Employed” and “Employment” refer to employment with the Firm and/or Related Employment.

(l) The “Firm” means Morgan Stanley (including any successor thereto) together with its subsidiaries and affiliates. For purposes of the definitions of “Cause,” “Confidential and Proprietary Information,” “Unauthorized Comments” and “Wrongful Solicitation” set forth in this Award Certificate and Section 10(c)(2)(vi) of this Award Certificate, references to the “Firm” shall refer severally to the Firm as defined in the preceding sentence and your Related Employer, if any. For purposes of the cancellation provisions set forth in this Award Certificate relating to disclosure or use of Confidential and Proprietary Information, references to the “Firm” shall refer to the Firm as defined in the second preceding sentence or your Related Employer, as applicable.

(m) “First Scheduled Conversion Date” means [second anniversary of February 2 following the Date of the Award], provided, however, that if you remain employed by the Firm on such date and the date does not occur during an Access Person trading window period, then pursuant to Section 2(d), the First Scheduled Conversion Date will be delayed until the first day of the next Access Person trading window period following [second anniversary of February 2 following the Date of the Award] (but in no event beyond [December 31 of the second year following the Date of the Award]).

(n) “First Scheduled Vesting Date” means [second anniversary of February 2 following the Date of the Award].

(o) “Full Career Retirement” means the termination of your Employment by you or by the Firm for any reason other than under circumstances involving any cancellation event described in Section 10(c), and other than due to your death or Disability, a Governmental Service Termination or pursuant to a Qualifying Termination, on or after the date on which:

(1) you have attained age 50 and completed at least 12 years of service as a [    ]⁷ of the Firm or equivalent officer title; or

⁷  Specified officer title(s) in one or more specified business units.

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(2) you have attained age 50 and completed at least 15 years of service as an officer of the Firm at the level of [    ]⁸ or above; or

(3) you have completed at least 20 years of service with the Firm; or

(4) you have attained age 55 and have completed at least 5 years of service with the Firm and the sum of your age and years of service equals or exceeds 65.⁹

For the purposes of the foregoing definition, service with the Firm will include any period of service with the following entities and any of their predecessors:

(i) AB Asesores (“ABS”) prior to its acquisition by the Firm (provided that only years of service as a partner of ABS shall count towards years of service as an officer);

(ii) Morgan Stanley Group Inc. and its subsidiaries (“MS Group”) prior to the merger with and into Dean Witter, Discover & Co.;

(iii) Miller Anderson & Sherrerd, L.L.P. prior to its acquisition by MS Group;

(iv) Van Kampen Investments Inc. and its subsidiaries prior to its acquisition by MS Group;

(v) FrontPoint Partners LLC and its subsidiaries prior to its acquisition by the Firm; and

(vi) Dean Witter, Discover & Co. and its subsidiaries (“DWD”) prior to the merger of Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co.;

provided that, in the case of an employee who has transferred employment from DWD to MS Group or vice versa, a former employee of DWD will receive credit for employment with DWD only if he or she transferred directly from DWD to Morgan Stanley & Co. Incorporated or its affiliates subsequent to February 5, 1997, and a former employee of MS Group will receive credit for employment with MS Group only if he or she transferred directly from MS Group to Morgan Stanley DW Inc. or its affiliates subsequent to February 5, 1997.

⁸  Specified officer title(s) in one or more specified business units.

⁹  Age and service conditions specified in clauses (1) through (4) may vary from year to year.

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(p) “Governmental Employer” means a governmental department or agency, self-regulatory agency or other public service employer.

(q) “Governmental Service Termination” means the termination of your Employment due to your commencement of employment at a Governmental Employer; provided that you have presented the Firm with satisfactory evidence demonstrating that as a result of such new employment, the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

(r) “Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

(s) “Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement.

(t) “Management Committee” means the Morgan Stanley Management Committee and any successor or equivalent committee.

(u) “Plan” means the 2007 Equity Incentive Compensation Plan, as amended.

(v) “Qualifying Termination” means your Separation from Service within eighteen (18) months following a Change in Control under either of the following circumstances: (a) the Firm terminates your employment under circumstances not involving any cancellation event; or (b) you resign from the Firm due to (i) a materially adverse alteration in your position or in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control, as determined by the Committee or its delegees, or (ii) the Firm requiring your principal place of employment to be located more than 75 miles from the location where you were principally employed at the time of the Change in Control (except for required travel on the Firm’s business to an extent substantially consistent with your business travel obligations in the ordinary course of business prior to the Change in Control).

(w) “Related Employment” means your employment with an employer other than the Firm (such employer, herein referred to as a “Related Employer”), provided that: (i) you undertake such employment at the written request or with the written consent of Morgan Stanley’s Global Head of Human Resources (or if such position no longer exists, the holder of an equivalent position); (ii) immediately prior to undertaking such employment you were an employee of the Firm or were engaged in Related Employment (as defined herein); and (iii) such employment is recognized by the Firm in its discretion as Related Employment; and, provided further that the Firm may (1) determine at any time in its sole discretion that employment that was recognized by the Firm as Related Employment no longer qualifies as Related Employment, and (2) condition the designation and benefits of Related Employment on such terms and conditions as the Firm may determine in its sole discretion; and provided further, the Firm will not provide for Related Employment except to the extent such treatment is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your stock units convert to shares or to incur additional tax or interest under

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Section 409A. The designation of employment as Related Employment does not give rise to an employment relationship between you and the Firm, or otherwise modify your and the Firm’s respective rights and obligations.

(x) “Scheduled Conversion Date” means the First Scheduled Conversion Date and/or the Second Scheduled Conversion Date, as the context requires.

(y) “Scheduled Vesting Date” means the First Scheduled Vesting Date and/or the Second Scheduled Vesting Date, as the context requires.

(z) “Second Scheduled Conversion Date” means [third anniversary of February 2 following the Date of the Award], provided, however, that if you remain employed by the Firm on such date and the date does not occur during an Access Person trading window period, then pursuant to Section 2(d), the Second Scheduled Conversion Date will be delayed until the first day of the next Access Person trading window period following [third anniversary of February 2 following the Date of the Award] (but in no event beyond [December 31 of the third year following the Date of the Award]).

(aa) “Second Scheduled Vesting Date” means [third anniversary of February 2 following the Date of the Award].

(bb) “Section 409A” means Section 409A of the Internal Revenue Code and any regulations thereunder.

(cc) “Separation from Service” means a separation from service with the Firm for purposes of Section 409A determined using the default provisions set forth in Treasury Regulation §1.409A-1(h) or any successor regulation thereto. For purposes of this definition, Morgan Stanley’s subsidiaries and affiliates include (and are limited to) any corporation that is in the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as Morgan Stanley and any trade or business that is under common control with Morgan Stanley (within the meaning of Section 414(c) of the Internal Revenue Code), determined in each case in accordance with the default provisions set forth in Treasury Regulation §1.409A-1(h)(3).

(dd) You will be deemed to have made “Unauthorized Comments” about the Firm if, while Employed or following the termination of your Employment, you make, directly or indirectly, any negative, derogatory, disparaging or defamatory comment, whether written, oral or in electronic format, to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/Internet format or any other medium) that concerns directly or indirectly the Firm, its business or operations, or any of its current or former agents, employees, officers, directors, customers or clients.

(ee) A “Wrongful Solicitation” occurs upon either of the following events:

(1) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 180 days after the

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termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you hire or solicit, recruit, induce, entice, influence or encourage any Firm employee to leave the Firm or become hired or engaged by another firm; provided, however, that this clause shall apply only to employees with whom you worked or had professional or business contact, or who worked in or with your business unit, during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment; or

(2) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 90 days (180 days if you are a member of the Management Committee at the time of notice of termination) after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you solicit or entice away or in any manner attempt to persuade any client or customer, or prospective client or customer, of the Firm (i) to discontinue or diminish his, her or its relationship or prospective relationship with the Firm or (ii) to otherwise provide his, her or its business to any person, corporation, partnership or other business entity which engages in any line of business in which the Firm is engaged (other than the Firm); provided, however, that this clause shall apply only to clients or customers, or prospective clients or customers, that you worked for on an actual or prospective project or assignment during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Morgan Stanley has duly executed and delivered this Award Certificate as of the Date of the Award.

MORGAN STANLEY

/s/

[Name]

[Title]

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EX-10.2

EXHIBIT 10.2

MORGAN STANLEY

MORGAN STANLEY COMPENSATION INCENTIVE PLAN

DEFERRED BONUS PROGRAM

[YEAR] DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.	Your award generally.	3
2.	Vesting schedule and payment.	3
3.	Special provision for certain employees.	5
4.	Death and Disability.	5
5.	Involuntary termination by the Firm.	6
6.	Governmental Service.	7
7.	Qualifying Termination.	8
8.	Specified employees.	8
9.	Cancellation of Applicable Account Value under certain circumstances.	8
10.	Tax and other withholding obligations.	10
11.	Obligations you owe to the Firm.	11
12.	Nontransferability.	11
13.	Designation of a beneficiary.	11
14.	No entitlements.	12
15.	Consents under local law.	12
16.	Award modification.	12
17.	Governing law.	13
18.	Defined terms.	13

MORGAN STANLEY

MORGAN STALEY COMPENSATION INCENTIVE PLAN

DEFERRED BONUS PROGRAM

[YEAR] DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE

Morgan Stanley has granted you an award under the [year] Deferred Bonus Program¹ (“DBP Award”) of the Morgan Stanley Compensation Incentive Plan (the “Plan”) as part of your discretionary incentive compensation for services provided during [year] and as an incentive for you to remain in Employment and provide services to the Firm through the Scheduled Vesting Dates. This Award Certificate sets forth the general terms and conditions of your [year] DBP Award under the Plan. The initial value of your [year] DBP Award has been communicated to you independently.

If you are employed outside the United States, you will also receive an “International Supplement” that contains supplemental terms and conditions for your [year] DBP Award. You should read this Award Certificate in conjunction with the International Supplement, if applicable, and the Plan in order to understand the terms and conditions of your [year] DBP Award.

Your [year] DBP Award is made pursuant to the Plan. References to Applicable Account Value in this Award Certificate mean only the Applicable Account Value related to your [year] DBP Award, and the terms and conditions herein apply only to such award. If you receive any other award under the Plan or another incentive compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purposes of the [year] DBP Award are, among other things, to facilitate the allocation of a portion of your discretionary above-base compensation for [year] to the notional investment opportunities afforded by the Plan, to reward you for your continued Employment and service to the Firm in the future and your compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. In view of these purposes, you will earn each portion of your [year] DBP Award only if you (1) remain in continuous Employment through the applicable Scheduled Vesting Date (subject to limited exceptions set

¹  Certain awards granted under the Plan to UK Code Staff may not have been granted under the Deferred Bonus Program. For those awards, references to “DBP Award” herein will instead refer to the participant’s award under the Plan.

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forth below), (2) do not engage in any activity that is a cancellation event set forth in Section 9(c) below and (3) satisfy obligations you owe to the Firm as set forth in Section 11 below. Even if your award has vested, you will have no right to your award if a cancellation event occurs under the circumstances set forth in Section 9(c) below. As Morgan Stanley deems appropriate, Morgan Stanley will require you to provide a written certification or other evidence, from time to time in its sole discretion, to confirm that no cancellation event has occurred, including upon a termination of Employment and/or during a specified period of time prior to each Scheduled Distribution Date thereafter. If you fail to provide any required certification or other evidence, Morgan Stanley will cancel your award. It is your responsibility to provide the Executive Compensation Department with your up-to-date contact information.

Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 18 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 18 below have the meanings set forth in the Plan.

1. Your award generally.

(a) Applicable Account Value. This Award Certificate uses the term “Applicable Account Value” to refer to your [year] DBP Award under the Plan and the notional return (positive or negative) thereon based on the performance of the Notional Investments to which your Account is notionally allocated. If you receive another award under the Plan (for example, an award for a future year), your total Account Value under the Plan will include the Applicable Account Value of your [year] DBP Award and the applicable Account Value of such other award(s).

(b) Notional allocation of Account. The notional allocation of your Applicable Account Value is subject to the ultimate discretion of the Firm and is made exclusively for the purpose of determining your Applicable Account Value from time to time in accordance with the Plan. You may notionally allocate your Applicable Account Value to any one fund, or any combination of funds, offered as Notional Investments under the Plan.

2. Vesting schedule and payment.

(a) Vesting schedule. Except as otherwise provided in this Award Certificate, your Applicable Account Value will vest according to the following schedule: 50% of your Applicable Account Value will vest on the First Scheduled Vesting Date and (ii) the remaining portion of your Applicable Account Value will vest on the Second Scheduled Vesting Date.² Except as otherwise provided in this Award Certificate, each portion of your Applicable Account Value will vest only if you continue to provide future services to the Firm by remaining in continuous Employment through the applicable Scheduled Vesting Date and providing value added services to the Firm during this timeframe. The special vesting terms set forth in Sections

²  The vesting schedule presented in this form of Award Certificate is indicative. The vesting schedule applicable to awards may vary.

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4, 5, 6 and 7 of this Award Certificate apply (i) if your Employment terminates by reason of your death or Disability, (ii) if the Firm terminates your employment in an involuntary termination under the circumstances described in Section 5, (iii) upon a Governmental Service Termination or (iv) upon a Qualifying Termination. The vested portion of your Applicable Account Value remains subject to the cancellation and withholding provisions set forth in this Award Certificate.

(b) Payment. Except as otherwise provided in this Award Certificate, (i) 50% of your Applicable Account Value will, to the extent vested, be paid in cash (minus applicable tax and other withholding liabilities) on the First Scheduled Distribution Date and (ii) the remaining portion of your Applicable Account Value will, to the extent vested, be paid in cash (minus applicable tax and other withholding liabilities) on the Second Scheduled Distribution Date; provided that, subject to Section 2(d), your Applicable Account Value may be paid to you following the applicable Scheduled Distribution Date on the next administratively practicable payroll date.³ The special payment provisions set forth in Sections 4(a), 4(a), 6 and 7 of this Award Certificate apply (i) if your Employment terminates by reason of your death or you die after termination of your Employment, (ii) upon your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 6(b) or (iii) upon a Qualifying Termination.

The portion of your Applicable Account Value scheduled to be paid on the First Scheduled Distribution Date or the Second Scheduled Distribution Date, as applicable, is deemed to be a separate payment for all purposes, including for purposes of Section 409A, and the portion of your Applicable Account Value scheduled to be paid on the First Scheduled Distribution Date is not “nonqualified deferred compensation” for purposes of Section 409A.⁴

(c) Accelerated payment. Morgan Stanley shall have no right to accelerate the payment of any portion of your Applicable Account Value, except to the extent that such acceleration is not prohibited by Section 409A and would not result in your being required to recognize income for United States federal income tax purposes prior to the distribution of your Applicable Account Value or your incurring additional tax or interest under Section 409A. If any portion of your Applicable Account Value is paid prior to the applicable Scheduled Distribution Date pursuant to this Section 2(c), Morgan Stanley may condition such payment on your agreement that if you engage in any activity constituting a cancellation event set forth in Section 9(c) within the applicable period of time that would have resulted in cancellation of all or a portion of your Applicable Account Value (had it not been paid pursuant to this Section 2(c)), you will be required to repay to Morgan Stanley an amount equal to the payment you received (before taking account of any withholding) in respect of the portion of your Applicable Account Value that would have been canceled upon the occurrence of such cancellation event, plus interest on such amount at the average rate of interest Morgan Stanley paid to borrow money from financial institutions during the period from the date such portion of your Applicable Account Value was paid through the date preceding the repayment date.

³  The payment schedule presented in this form of Award Certificate is indicative. The payment schedule applicable to awards may vary.

⁴  Provision may not be applicable to the awards granted to UK Code Staff.

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(d) Rule of construction for timing of payment. Whenever this Award Certificate provides for all or a portion of your Applicable Account Value to be paid on the First Scheduled Distribution Date or the Second Scheduled Distribution Date or upon a different specified event or date, such payment will be considered to have been timely made, and neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages based on a delay in the payment of your Applicable Account Value, and the Firm shall have no liability to you (or to any of your beneficiaries or your estate) in respect of any such delay, as long as payment is made by December 31 of the year in which occurs the applicable Scheduled Distribution Date or such other specified event or date or, if later, by the 15th day of the third calendar month following such specified event or date. Similarly, neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages, and the Firm shall have no liability to you (or to any of your beneficiaries or your estate), based on any acceleration of the payment of your Applicable Account Value pursuant to Section 2(c).

3. Special provision for certain employees.

Notwithstanding the other provisions of this Award Certificate, if Morgan Stanley considers you to be one of its executive officers at the time provided for the payment of the vested portion of your Applicable Account Value and determines that your compensation may not be fully deductible by virtue of Section 162(m) of the Internal Revenue Code, Morgan Stanley shall delay payment of the nondeductible portion of your compensation, including delaying payment of your Applicable Account Value to the extent nondeductible, unless the Administrator, in its sole discretion, determines not to delay such payment. This delay will continue until your Separation from Service or, to the extent permitted under Section 409A, the end of the first earlier taxable year of the Firm as of the last day of which you are no longer an executive officer (subject to earlier payment in the event of your death as described below).

4. Death and Disability.

The following special vesting and payment terms apply to your award:

(a) Death during Employment. If your Employment terminates due to death, any unvested portion of your Applicable Account Value will vest on the date of your death. Your Applicable Account Value will be paid to the beneficiary you have designated pursuant to Section 12 or the legal representative of your estate, as applicable, upon your death, provided that your estate or beneficiary notifies the Firm of your death within 60 days following your death. After your death, the cancellation provisions set forth in Section 9(c) will no longer apply.

(b) Death after termination of Employment. If you die after the termination of your Employment but prior to the applicable Scheduled Distribution Date, the vested portion of your Applicable Account Value that you held at the time of your death will be paid to the beneficiary you have designated pursuant to Section 12 or the legal representative of your estate, as applicable, upon your death, provided that your estate or beneficiary notifies the Firm of your death within 60 days following your death. After your death, the cancellation provisions set forth in Section 9(c) will no longer apply.

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(c) Disability. If your Employment terminates due to Disability, any unvested portion of your Applicable Account Value will vest on the date your Employment terminates. Your Applicable Account Value will be paid on the applicable Scheduled Distribution Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Distribution Date.⁵

5. Involuntary termination by the Firm.

If the Firm terminates your employment under circumstances not involving any cancellation event set forth in Section 9(c), the unvested portion of your Applicable Account Value will vest on the date your employment with the Firm terminates and your Applicable

⁵  This treatment may also apply to awards granted to UK Code Staff upon such participant’s Full Career Retirement. For these purposes, Full Career Retirement means the termination of the participant’s Employment by the participant or by the Firm for any reason other than under circumstances involving any cancellation event, and other than due to the participant’s death or Disability, a Governmental Service Termination or pursuant to a Qualifying Termination, on or after the date on which:

(1) the participant has attained age 50 and completed at least 12 years of service as a [specified officer title(s) in one or more specified business units] of the Firm or equivalent officer title; or

(2) the participant has attained age 50 and completed at least 15 years of service as an officer of the Firm at the level of [specified officer title(s) in one or more specified business units] or above; or

(3) the participant has completed at least 20 years of service with the Firm; or

(4) the participant has attained age 55 and have completed at least 5 years of service with the Firm and the sum of the participant’s age and years of service equals or exceeds 65. (Age and service conditions specified in clauses (1) through (4) may vary from year to year.)

For the purposes of the foregoing definition, service with the Firm will include any period of service with the following entities and any of their predecessors: AB Asesores (“ABS”) prior to its acquisition by the Firm (provided that only years of service as a partner of ABS shall count towards years of service as an officer); Morgan Stanley Group Inc. and its subsidiaries (“MS Group”) prior to the merger with and into Dean Witter, Discover & Co.; Miller Anderson & Sherrerd, L.L.P. prior to its acquisition by MS Group; Van Kampen Investments Inc. and its subsidiaries prior to its acquisition by MS Group; FrontPoint Partners LLC and its subsidiaries prior to its acquisition by the Firm; and Dean Witter, Discover & Co. and its subsidiaries (“DWD”) prior to the merger of Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co.; provided that, in the case of an employee who has transferred employment from DWD to MS Group or vice versa, a former employee of DWD will receive credit for employment with DWD only if he or she transferred directly from DWD to Morgan Stanley & Co. Incorporated or its affiliates subsequent to February 5, 1997, and a former employee of MS Group will receive credit for employment with MS Group only if he or she transferred directly from MS Group to Morgan Stanley DW Inc. or its affiliates subsequent to February 5, 1997.

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Account Value will be paid on the applicable Scheduled Distribution Date, provided that you sign an agreement and release satisfactory to the Firm. If you do not sign such an agreement and release satisfactory to the Firm within the timeframe set by the Firm in connection with your involuntary termination as described in this Section 5, any portion of your Applicable Account Value that was unvested immediately prior to your termination shall be canceled. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Distribution Date.

6. Governmental Service.

(a) General treatment of awards upon Governmental Service Termination. If your Employment terminates in a Governmental Service Termination and not involving a cancellation event set forth in Section 9(c), then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 6(c), any unvested portion of your Applicable Account Value will vest on the date of your Governmental Service Termination. Your vested Applicable Account Value will be paid on the date of your Governmental Service Termination.

(b) General treatment of vested awards upon acceptance of employment at a Governmental Employer following termination of Employment. If your Employment terminates other than in a Governmental Service Termination and not involving a cancellation event set forth in Section 9(c) and, following your termination of Employment, you accept employment with a Governmental Employer, then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 6(c), the vested portion of your Applicable Account Value will be paid upon your commencement of such employment, provided you present the Firm with satisfactory evidence demonstrating that as a result of such employment the divestiture of your continued interest in your Applicable Account Value is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

(c) Repayment obligation. If any activity or event constituting a cancellation event set forth in Section 9(c) occurs within the applicable period of time that would have resulted in cancellation of all or a portion of your Applicable Account Value had it not been paid pursuant to Sections 6(a) or 6(b) above, you will be required to repay to Morgan Stanley the amount distributed to you pursuant to Sections 6(a) or 6(b) above that would have been canceled upon the occurrence of such cancellation event (before taking account of any withholding), plus interest on such amount at the average rate of interest Morgan Stanley paid to borrow money from financial institutions during the period from the date of such payment through the date preceding the repayment date.

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7. Qualifying Termination.

If your employment terminates in a Qualifying Termination, any unvested portion of your Applicable Account Value will vest, cancellation provisions will lapse, and, subject to Section 8, your Applicable Account Value will be paid upon your Qualifying Termination.

8. Specified employees.

Notwithstanding any other terms of this Award Certificate, if Morgan Stanley considers you to be one of its “specified employees” as defined in Section 409A at the time of your Separation from Service, payment of the portion of your Applicable Account Value that is “nonqualified deferred compensation” for purposes of Section 409A that would otherwise be made upon your Separation from Service (including, without limitation, any payments that were delayed due to Section 162(m) of the Internal Revenue Code, as provided in Section 3, and any portion of your Applicable Account Value payable upon your Qualifying Termination, as provided in Section 7) will be delayed until the first business day following the date that is six months after your Separation from Service; provided, however, that in the event that your death, your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 6(b) occurs at any time after the Date of the Award, payment will be made in accordance with Section 4(a), 4(a) or 6, as applicable.

9. Cancellation of Applicable Account Value under certain circumstances.

(a) Cancellation of unvested Applicable Account Value. Any unvested portion of your Applicable Account Value will be canceled if your Employment terminates for any reason other than death, Disability, an involuntary termination by the Firm described in Section 5, a Governmental Service Termination or a Qualifying Termination.

(b) General treatment of vested Applicable Account Value. Except as otherwise provided in this Award Certificate, the vested portion of your Applicable Account Value will be paid on the applicable Scheduled Distribution Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the applicable Scheduled Distribution Date.

(c) Cancellation of Applicable Account Value under certain circumstances. The cancellation events set forth in this Section 9(c) are designed, among other things, to incentivize compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. This Section 9(c) shall apply notwithstanding any other terms of this Award Certificate (except where sections in this Award Certificate specifically provide that the cancellation events set forth in this Section 9(c) no longer apply).

Your Applicable Account Value, even if vested, is not earned until the applicable Scheduled Distribution Date (and until you satisfy all obligations you owe to the Firm as set forth in Section 11 below) and, unless prohibited by applicable law, will be canceled prior to the

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applicable Scheduled Distribution Date in any of the circumstances set forth below in this Section 9(c). The Firm may retain custody of your Applicable Account Value following a Scheduled Distribution Date pending any investigation or other review that impacts the determination as to whether your Applicable Account Value is cancellable under the circumstances set forth below and, in such an instance, your Applicable Account Value shall be forfeited in the event the Firm determines that the Applicable Account Value was cancellable under the circumstances set forth below.

(1) If any of the following events occur at any time before the applicable Scheduled Distribution Date, your entire Applicable Account Value (whether or not vested), will be canceled immediately, subject to applicable law:

(i) You engage in Competitive Activity in connection with or following your resignation of Employment;⁶

(ii) Your Employment is terminated for Cause or you engage in conduct constituting Cause (either during or following Employment and whether or not your Employment has been terminated as of the applicable Scheduled Distribution Date);

(iii) Following the termination of your Employment, the Firm determines that your Employment could have been terminated for Cause (for these purposes, “Cause” will be determined without giving consideration to any “cure” period included in the definition of “Cause”);

(iv) You disclose Confidential and Proprietary Information to any unauthorized person outside the Firm, or use or attempt to use Confidential and Proprietary Information other than in connection with the business of the Firm; or you fail to comply with your obligations (either during or after your Employment) under the Firm’s Code of Conduct (and any applicable supplements), or otherwise existing between you and the Firm, relating to Confidential and Proprietary Information or an assignment, procurement or enforcement of rights in Confidential and Proprietary Information;

(v) You engage in a Wrongful Solicitation;

(vi) You make any Unauthorized Comments;

(vii) You fail or refuse, following your termination of Employment, to cooperate with or assist the Firm in a timely manner in connection with any investigation, regulatory matter, lawsuit or arbitration in which the Firm is a subject, target or party and as to which you may have pertinent information; or

⁶  In addition, the awards granted to UK Code Staff may be cancelled through the applicable Scheduled Distribution Date in the event the participant engages in Competitive Activity following his or her resignation that satisfies the definition of Full Career Retirement.

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(viii) You resign from your employment with the Firm without having provided the Firm prior written notice of your resignation consistent with the notice period requirements undertaken by you in connection with your employment offer letter, Sign-On or Notice & Non-Solicitation Agreement or any other contractual obligation in connection with the terms and conditions of your employment, or, in the event no such prior contractual notice period requirements exist, you resign from your employment with the Firm without having provided the Firm prior written notice of your resignation of at least thirty (30) days.

(2) Clawback Cancellation Event. Your entire Applicable Account Value (whether or not vested) will be cancelled immediately, subject to applicable law, if, before the applicable Scheduled Distribution Date, you take any action, or omit to take any action (including with respect to supervisory responsibilities), where such action or omission: (i) causes a restatement of the Firm’s consolidated financial results; (ii) constitutes a violation by you of the Firm’s risk policies and standards (where prior authorization and approval of appropriate senior management was not obtained) whether such action results in a favorable or unfavorable impact to the Firm’s consolidated financial results or (iii) causes, or is reasonably expected to cause, a substantial financial loss on a trading strategy, investment, commitment or other holding originating either in the current year or in any prior year (without the prior understanding of the possibility and magnitude of such loss by appropriate senior management) and such trading strategy, investment, commitment or other holding was a factor in your award determination.⁷

10. Tax and other withholding obligations.

Any vesting, whether on a Scheduled Vesting Date or some other date, of all or a portion of your Applicable Account Value, and any payment of all or a portion of your Applicable Account Value shall be subject to the Firm’s withholding of all required United States federal, state, local and foreign income and employment/payroll taxes (including Federal Insurance Contributions Act taxes). You authorize the Firm to withhold such taxes from any payroll or other payment or compensation to you, including by canceling or accelerating payment of a portion of your Applicable Account Value in an amount not to exceed such taxes imposed upon such vesting or distribution and any additional taxes imposed as a result of such cancellation or acceleration, and to take such other action as the Firm may deem advisable to enable it and you to satisfy obligations for the payment of withholding taxes and other tax obligations, assessments, or other governmental charges, whether of the United States or any other jurisdiction, relating to the vesting or payment of your Applicable Account Value.

⁷  For certain awards granted to UK Code Staff, this provision may also apply in the event the Firm and/or relevant business unit subsequently suffers a material downturn in its financial performance or the Firm and/or relevant business unit suffers a material failure of risk management.

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However, the Firm may not deduct or withhold such sum from any payroll or any other payment or compensation (including from your Applicable Account Value), except to the extent it is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes prior to the distribution of your Applicable Account Value or to incur interest or additional tax under Section 409A.

11. Obligations you owe to the Firm.

As a condition to the earning, payment or distribution of your award, the Firm may require you to pay such sum to the Firm as may be necessary to satisfy any obligation that you owe to the Firm. Notwithstanding any other provision of this Award Certificate, your award, even if vested, is not earned until after such obligations and any tax withholdings or other deductions required by law are satisfied. Notwithstanding the foregoing, Morgan Stanley may not reduce the amount of your Applicable Account Value to be distributed to satisfy obligations that you owe to the Firm except (i) to the extent authorized under Section 10, relating to tax and other withholding obligations or, otherwise, (ii) to the extent such reduction is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes prior to the distribution of your Applicable Account Value or to incur additional tax or interest under Section 409A. Morgan Stanley’s determination of any amount that you owe the Firm shall be conclusive.

12. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your Applicable Account Value, other than as provided in Section 13 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to your Applicable Account Value will be made only to you.

Your personal representatives, heirs, legatees, beneficiaries, successors and assigns, and those of Morgan Stanley, shall all be bound by, and shall benefit from, the terms and conditions of your award.

13. Designation of a beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of the amounts to be distributed in respect of your Applicable Account Value in the event of your death. To make a beneficiary designation, you must complete and submit the Beneficiary Designation form on the Executive Compensation website at [website redacted].

Any portion of your Applicable Account Value that becomes payable upon your death, and as to which a designation of beneficiary is not in effect, will be distributed to your estate.

If you previously filed a designation of beneficiary form for your award(s) under the Plan with the Executive Compensation Department, such form will also apply to all of your

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awards under the Plan, including this [year] award. You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive your Applicable Account Value, Morgan Stanley may determine in its sole discretion to distribute the amounts in question to your estate. Morgan Stanley’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to such amounts.

14. No entitlements.

(a) No right to continued Employment. This [year] DPB Award is not an employment agreement, and nothing in this Award Certificate, the International Supplement, if applicable, or the Plan shall alter your status as an “at-will” employee of the Firm or your employment status at a Related Employer. None of this Award Certificate, the International Supplement, if applicable, or the Plan shall be construed as guaranteeing your employment by the Firm or a Related Employer, or as giving you any right to continue in the employ of the Firm or a Related Employer, during any period (including without limitation the period between the Date of the Award and any Scheduled Vesting Date or Scheduled Distribution Date, or any portion of any of these periods), nor shall they be construed as giving you any right to be reemployed by the Firm or a Related Employer following any termination of Employment.

(b) No right to future awards. This award, and all other awards under the Plan, are discretionary. This award does not confer on you any right or entitlement to receive another award under the Plan or any other award under any other incentive compensation plan of Morgan Stanley at any time in the future or in respect of any future period.

(c) No effect on future employment compensation. Morgan Stanley has made this award to you in its sole discretion. This award does not confer on you any right or entitlement to receive compensation in any specific amount for any future year, and does not diminish in any way the Firm’s discretion to determine the amount, if any, of your compensation. This award is not part of your base salary or wages and will not be taken into account in determining any other employment-related rights you may have, such as rights to pension or severance pay.

15. Consents under local law.

Your award is conditioned upon the making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

16. Award modification.

Morgan Stanley reserves the right to modify or amend unilaterally the terms and conditions of your award, without first asking your consent, or to waive any terms and conditions that operate in favor of Morgan Stanley. These amendments may include (but are not limited to) changes that Morgan Stanley considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. Morgan Stanley may not modify your award in a manner that would materially impair your rights in your award without your consent; provided,

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however, that Morgan Stanley may, but is not required to, without your consent, amend or modify your award in any manner that Morgan Stanley considers necessary or advisable to (i) comply with any Legal Requirement, (ii) ensure that your award does not result in an excise or other supplemental tax on the Firm under any Legal Requirement, or (iii) ensure that your award is not subject to United States federal, state or local income tax or any equivalent taxes in territories outside the United States prior to payment or distribution. Morgan Stanley will notify you of any amendment of your award that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by the Global Head of Human Resources or the Chief Operating Officer (or if such positions no longer exist, by the holder of an equivalent position) to be effective.

17. Governing law.

This Award Certificate and the related legal relations between you and Morgan Stanley will be governed by and construed in accordance with the laws of the State of New York, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the award to the substantive law of another jurisdiction.

18. Defined terms.

For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

(a) “Board” means the Board of Directors of Morgan Stanley.

(b) “Cause” means:

(1) any act or omission which constitutes a breach of your obligations to the Firm, including, without limitation, (A) your failure to comply with any notice or non-solicitation restrictions that may be applicable to you or (B) your failure to comply with the Firm’s compliance, ethics or risk management standards, or your failure or refusal to perform satisfactorily any duties reasonably required of you, which breach, failure or refusal (if susceptible to cure) is not corrected (other than failure to correct by reason of your incapacity due to physical or mental illness) within ten (10) business days after written notification thereof to you by the Firm;

(2) your commission of any dishonest or fraudulent act, or any other act or omission, which has caused or may reasonably be expected to cause injury to the interest or business reputation of the Firm; or

(3) your violation of any securities, commodities or banking laws, any rules or regulations issued pursuant to such laws, or rules or regulations of any securities or commodities exchange or association of which the Firm is a member or of any policy of the Firm relating to compliance with any of the foregoing.

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(c) A “Change in Control” shall be deemed to have occurred if any of the following conditions shall have been satisfied:

(1) any one person or more than one person acting as a group (as determined under Section 409A), other than (A) any employee plan established by Morgan Stanley or any of its Subsidiaries, (B) Morgan Stanley or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by stockholders of Morgan Stanley in substantially the same proportions as their ownership of Morgan Stanley, is or becomes, during any 12-month period, the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person(s) any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of the total voting power of the stock of Morgan Stanley; provided, however, that the provisions of this subsection (1) are not intended to apply to or include as a Change in Control any transaction that is specifically excepted from the definition of Change in Control under subsection (3) below;

(2) a change in the composition of the Board such that, during any 12-month period, the individuals who, as of the beginning of such period, constitute the Board (the “Existing Board”) cease for any reason to constitute at least 50% of the Board; provided, however, that any individual becoming a member of the Board subsequent to the beginning of such period whose election, or nomination for election by Morgan Stanley’s stockholders, was approved by a vote of at least a majority of the directors immediately prior to the date of such appointment or election shall be considered as though such individual were a member of the Existing Board;

(3) the consummation of a merger or consolidation of Morgan Stanley with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of Morgan Stanley (or any direct or indirect subsidiary of Morgan Stanley) pursuant to applicable stock exchange requirements; provided that immediately following such merger or consolidation the voting securities of Morgan Stanley outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of such merger or consolidation or parent entity thereof) 50% or more of the total voting power of Morgan Stanley stock (or if Morgan Stanley is not the surviving entity of such merger or consolidation, 50% or more of the total voting power of the stock of such surviving entity or parent entity thereof); and provided further that a merger or consolidation effected to implement a recapitalization of Morgan Stanley (or similar transaction) in which no person (as determined under Section 409A) is or becomes the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of either the then outstanding shares of Morgan Stanley common stock or the combined voting power of Morgan Stanley’s then outstanding voting securities shall not be considered a Change in Control; or

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(4) the complete liquidation of Morgan Stanley or the sale or disposition by Morgan Stanley of all or substantially all of Morgan Stanley’s assets in which any one person or more than one person acting as a group (as determined under Section 409A) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Morgan Stanley that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of Morgan Stanley immediately prior to such acquisition or acquisitions.

Notwithstanding the foregoing, (x) no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of Morgan Stanley common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of Morgan Stanley immediately prior to such transaction or series of transactions and (y) no event or circumstances described in any of clauses (1) through (4) above shall constitute a Change in Control unless such event or circumstances also constitute a change in the ownership or effective control of Morgan Stanley, or in the ownership of a substantial portion of Morgan Stanley’s assets, as defined in Section 409A. In addition, no Change in Control shall be deemed to have occurred upon the acquisition of additional control of Morgan Stanley by any one person or more than one person acting as a group that is considered to effectively control Morgan Stanley.

For purposes of the provisions of this Award Certificate, terms used in the definition of a Change in Control shall be as defined or interpreted pursuant to Section 409A.

(d) “Competitive Activity” means:

(1) becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director, independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where you will be responsible for providing, or managing or supervising others who are providing, services (x) that are similar or substantially related to the services that you provided to the Firm, or (y) that you had direct or indirect managerial or supervisory responsibility for at the Firm, or (z) that call for the application of the same or similar specialized knowledge or skills as those utilized by you in your services for the Firm, in each such case, at any time during the year preceding the termination of your employment with the Firm; or

(2) either alone or in concert with others, forming, or acquiring a 5% or greater equity ownership, voting interest or profit participation in, a Competitor.

(e) “Competitor” means any corporation, partnership or other entity that competes, or that owns a significant interest in any corporation, partnership or other entity that competes, with any business activity the Firm engages in, or that you reasonably knew or should have known that the Firm was planning to engage in, at the time of the termination of your Employment.

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(f) “Confidential and Proprietary Information” means any information that is classified as confidential in the Firm’s Global Policy on Confidential Information or that may have intrinsic value to the Firm, the Firm’s clients or other parties with which the Firm has a relationship, or that may provide the Firm with a competitive advantage, including, without limitation, any trade secrets; inventions (whether or not patentable); formulas; flow charts; computer programs; access codes or other systems information; algorithms; technology and business processes; business, product or marketing plans; sales and other forecasts; financial information; client lists or other intellectual property; information relating to compensation and benefits; and public information that becomes proprietary as a result of the Firm’s compilation of that information for use in its business, provided that such Confidential and Proprietary Information does not include any information which is available for use by the general public or is generally available for use within the relevant business or industry other than as a result of your action. Confidential and Proprietary Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, electronic communications, videotapes, audiotapes, and oral communications.

(g) “Date of the Award” means [insert grant date, which typically will coincide approximately with the end of the year in respect of which the award is made].

(h) “Disability” means any condition that would qualify for a benefit under any group long-term disability plan maintained by the Firm and applicable to you.

(i) “Employed” and “Employment” refer to employment with the Firm and/or Related Employment.

(j) The “Firm” means Morgan Stanley (including any successor thereto) together with its subsidiaries and affiliates. For purposes of the definitions of “Cause,” “Confidential and Proprietary Information,” “Unauthorized Comments” and “Wrongful Solicitation” set forth in this Award Certificate and Section 9(c)(1)(vii) of this Award Certificate, references to the “Firm” shall refer severally to the Firm as defined in the preceding sentence and your Related Employer, if any. For purposes of the cancellation provisions set forth in this Award Certificate relating to disclosure or use of Confidential and Proprietary Information, references to the “Firm” shall refer to the Firm as defined in the second preceding sentence or your Related Employer, as applicable.

(k) “First Scheduled Distribution Date” means [November 30 following the Date of the Award].

(l) “First Scheduled Vesting Date” means [November 30 following the Date of the Award].

(m) “Governmental Employer” means a governmental department or agency, self-regulatory agency or other public service employer.

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(n) “Governmental Service Termination” means the termination of your Employment due to your commencement of employment at a Governmental Employer; provided that you have presented the Firm with satisfactory evidence demonstrating that as a result of such new employment, the divestiture of your continued interest in your Applicable Account Value is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

(o) “Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

(p) “Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement.

(q) “Management Committee” means the Morgan Stanley Management Committee and any successor or equivalent committee.

(r) “Qualifying Termination” means your Separation from Service within eighteen (18) months following a Change in Control under either of the following circumstances: (a) the Firm terminates your employment under circumstances not involving any cancellation event; or (b) you resign from the Firm due to (i) a materially adverse alteration in your position or in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control, as determined by the Administrator, or (ii) the Firm requiring your principal place of employment to be located more than 75 miles from the location where you were principally employed at the time of the Change in Control (except for required travel on the Firm’s business to an extent substantially consistent with your business travel obligations in the ordinary course of business prior to the Change in Control).

(s) “Related Employment” means your employment with an employer other than the Firm (such employer, herein referred to as a “Related Employer”), provided that: (i) you undertake such employment at the written request or with the written consent of Morgan Stanley’s Global Head of Human Resources (or if such position no longer exists, the holder of an equivalent position); (ii) immediately prior to undertaking such employment you were an employee of the Firm or were engaged in Related Employment (as defined herein); and (iii) such employment is recognized by the Firm in its discretion as Related Employment; and, provided further that the Firm may (1) determine at any time in its sole discretion that employment that was recognized by the Firm as Related Employment no longer qualifies as Related Employment, and (2) condition the designation and benefits of Related Employment on such terms and conditions as the Firm may determine in its sole discretion; and provided further, the Firm will not provide for Related Employment except to the extent such treatment is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes prior to the distribution of your Applicable Account Value or to incur interest or additional tax under Section 409A. The designation of employment as Related Employment does not give rise to an employment relationship between you and the Firm, or otherwise modify your and the Firm’s respective rights and obligations.

(t) “Scheduled Distribution Date” means the First Scheduled Distribution Date and/or the Second Scheduled Distribution Date, as the context requires.

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(u) “Scheduled Vesting Date” means the First Scheduled Vesting Date and/or the Second Scheduled Vesting Date, as the context requires.

(v) “Second Scheduled Distribution Date” means [first anniversary of November 30 following the Date of the Award].

(w) “Second Scheduled Vesting Date” means [first anniversary of November 30 following the Date of the Award].

(x) “Section 409A” means Section 409A of the Internal Revenue Code and any regulations thereunder.

(y) “Separation from Service” means a separation from service with the Firm for purposes of Section 409A determined using the default provisions set forth in Treasury Regulation §1.409A-1(h) or any successor regulation thereto. For purposes of this definition, Morgan Stanley’s subsidiaries and affiliates include (and are limited to) any corporation that is in the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as Morgan Stanley and any trade or business that is under common control with Morgan Stanley (within the meaning of Section 414(c) of the Internal Revenue Code), determined in each case in accordance with the default provisions set forth in Treasury Regulation §1.409A-1(h)(3).

(z) You will be deemed to have made “Unauthorized Comments” about the Firm if, while Employed or following the termination of your Employment, you make, directly or indirectly, any negative, derogatory, disparaging or defamatory comment, whether written, oral or in electronic format, to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/Internet format or any other medium) that concerns directly or indirectly the Firm, its business or operations, or any of its current or former agents, employees, officers, directors, customers or clients.

(aa) A “Wrongful Solicitation” occurs upon either of the following events:

(1) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 180 days after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you hire or solicit, recruit, induce, entice, influence or encourage any Firm employee to leave the Firm or become hired or engaged by another firm; provided, however, that this clause shall apply only to employees with whom you worked or had professional or business contact, or who worked in or with your business unit, during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment; or

(2) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 90 days (180 days if you are a member of the Management Committee at the time of notice of termination)

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after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you solicit or entice away or in any manner attempt to persuade any client or customer, or prospective client or customer, of the Firm (i) to discontinue or diminish his, her or its relationship or prospective relationship with the Firm or (ii) to otherwise provide his, her or its business to any person, corporation, partnership or other business entity which engages in any line of business in which the Firm is engaged (other than the Firm); provided, however, that this clause shall apply only to clients or customers, or prospective clients or customers, that you worked for on an actual or prospective project or assignment during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Morgan Stanley has duly executed and delivered this Award Certificate as of the Date of the Award.

MORGAN STANLEY

/s/

[Name]

[Title]

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EX-10.3

EXHIBIT 10.3

MORGAN STANLEY

2007 EQUITY INCENTIVE COMPENSATION PLAN

AWARD CERTIFICATE FOR

[YEAR] PERFORMANCE STOCK UNITS

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.	Performance stock units generally.	3
2.	Performance measures.	3
3.	Vesting and conversion.	4
4.	Special provision for certain employees.	6
5.	Dividend equivalent payments.	6
6.	Death, Disability and Full Career Retirement.	7
7.	Involuntary termination by the Firm.	9
8.	Governmental Service.	9
9.	Change in Control.	11
10.	Specified employees.	11
11.	Cancellation of awards under certain circumstances.	11
12.	Tax and other withholding obligations.	13
13.	Obligations you owe to the Firm.	14
14.	Nontransferability.	15
15.	Designation of a beneficiary.	15
16.	Ownership and possession.	15
17.	Securities law compliance matters.	16
18.	Compliance with laws and regulation.	16
19.	No entitlements.	16
20.	Consents under local law.	17
21.	Award modification.	17
22.	Governing law.	18
23.	Defined terms.	18

MORGAN STANLEY

[YEAR]

DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE FOR PERFORMANCE STOCK UNITS

Morgan Stanley has awarded you performance stock units (PSUs) as part of your discretionary long-term incentive compensation for services provided during [year] and as an incentive for you to remain in Employment and provide services to the Firm. This Award Certificate sets forth the general terms and conditions of your [year] performance stock unit award. The number of PSUs in your Target Award has been communicated to you independently.

If you are employed outside the United States, you will also receive an “International Supplement” that contains supplemental terms and conditions for your [year] PSU award. You should read this Award Certificate in conjunction with the International Supplement, if applicable, in order to understand the terms and conditions of your performance stock unit award.

Your PSU award is made pursuant to the Plan. References to “performance stock units” or “PSUs” (which terms are used interchangeably) in this Award Certificate mean only those performance stock units included in your [year] PSU award, and the terms and conditions herein apply only to such award. If you receive any other award under the Plan or another equity compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purpose of your PSU award is, among other things, to align your interests with the interests of the Firm and Morgan Stanley’s stockholders, to reward you for your continued Employment and service to the Firm in the future and your compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. In view of these purposes, the number of PSUs that you earn will depend on the Company’s performance during the Performance Period. Moreover, you will earn PSUs included in your [year] PSU award only if you (1) remain in continuous Employment through the Scheduled Vesting Date (subject to limited exceptions set forth below), (2) do not engage in any activity that is a cancellation event set forth in Section 11(c) below and (3) satisfy obligations you owe to the Firm as set forth in Section 13 below. Even if your PSUs have vested, you will have no right to your award if a cancellation event occurs under the circumstances set forth in Section 11(c) below. As Morgan Stanley deems appropriate, Morgan Stanley will require you to provide a written certification or other evidence, from time to time in its sole discretion, to confirm that no cancellation event has occurred, including upon a termination of Employment and/or during a

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specified period of time prior to the Scheduled Conversion Date. If you fail to timely provide any required certification or other evidence, Morgan Stanley will cancel your award. It is your responsibility to provide the Executive Compensation Department with your up-to-date contact information.

Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 23 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 23 below have the meanings set forth in the Plan.

1. Performance stock units generally.

Each PSU corresponds to one share of Morgan Stanley common stock. A PSU constitutes a contingent and unsecured promise of Morgan Stanley to pay you one share of Morgan Stanley common stock on the conversion date for the PSU. As the holder of PSUs, you have only the rights of a general unsecured creditor of Morgan Stanley. You will not be a stockholder with respect to the shares of Morgan Stanley common stock corresponding to your PSUs unless and until your PSUs convert to shares.

2. Performance measures.

The portion, if any, of your Target Award that you earn will be based on Morgan Stanley performance against the performance measures set forth in this Section 2 and the other terms and conditions of this Award Certificate, and may vary from zero to 1.5 times the number of PSUs included in your Target Award.

(a) Morgan Stanley’s Return on Equity. One-half of your Target Award will be earned based on MS ROE. The number of PSUs that you earn based on MS ROE (subject to vesting and the other terms and conditions of your award) will be determined by multiplying the number of PSUs representing one-half of the Target Award by a multiplier determined as follows:

MS ROE	Multiplier
12% or more	1.50
10%	1.00
6%	0.50
Less than 6%	0.00

If MS ROE is between two thresholds, then the multiplier will be obtained by straight-line interpolation between the two thresholds. For example, if MS ROE is 11%, the multiplier would be 1.25. If MS ROE is less than 6%, you will not earn any PSUs as a result of the MS ROE measure, and one-half of your [year] PSU award will be canceled.

(b) Relative Total Shareholder Return. One-half of your Target Award will be earned based on Morgan Stanley’s Total Shareholder Return as compared to the Total Shareholder Return of each member of the Index Group. The number of PSUs that you earn based on Morgan Stanley’s TSR as compared to the TSR of the Index Group (subject to

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vesting and the other terms and conditions of your award) will be determined by (i) subtracting the Index Group TSR from Morgan Stanley’s TSR (“Relative TSR”) and (ii) multiplying the number of PSUs representing one-half of your Target Award by a multiplier determined as follows:

Relative TSR	Multiplier
50% or more	1.50
0%	1.00
- 75%	0.25
Equal to or less than -100%	0.00

For example, if Morgan Stanley’s TSR is 20% and the Index Group TSR is 10%, the Relative TSR would be 10%. If the Relative TSR is between the thresholds, then the multiplier will be obtained by straight-line interpolation between the two points. For example, if Relative TSR is 10%, the multiplier would 1.10.

(c) Adjustments. If an event occurs with respect to Morgan Stanley that renders, in the sole determination of the Committee, any of the performance measures set forth in Section 2(a) or Section 2(b) to no longer be appropriate, then the Committee may adjust such measures, as it deems appropriate in its sole discretion, to carry out the intent of the original terms of this award.

3. Vesting and conversion.

(a) Vesting schedule. Except as otherwise provided in this Award Certificate, you will vest in any PSUs that are earned in accordance with Section 2 on the Scheduled Vesting Date.¹ Except as otherwise provided in this Award Certificate, PSUs will vest only if you continue to provide future services to the Firm by remaining in continuous Employment through the Scheduled Vesting Date and providing value added services to the Firm during this timeframe. The special vesting terms set forth in Sections 6, 7 and 8 of this Award Certificate apply (i) if your Employment terminates by reason of your death or Disability, (ii) upon your Full Career Retirement, (iii) if the Firm terminates your employment in an involuntary termination under the circumstances described in Section 7 or (iv) upon a Governmental Service Termination. Vested PSUs remain subject to the cancellation and withholding provisions set forth in this Award Certificate.

(b) Conversion. Except as otherwise provided in this Award Certificate, your PSUs, to the extent earned and vested, will convert to shares of Morgan Stanley common stock on the Scheduled Conversion Date, with any fractional shares to be distributed in cash.²

¹  The vesting schedule presented in this form of Award Certificate is indicative. The vesting schedule applicable to awards may vary.

²  The conversion schedule presented in this form of Award Certificate is indicative. The conversion schedule applicable to awards may vary.

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The special conversion provisions set forth in Sections 6(a), 6(b) and 8 of this Award Certificate apply (i) if your Employment terminates by reason of your death or you die after termination of your Employment or (ii) upon your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 8(b).

No PSUs will convert to shares of Morgan Stanley common stock following the end of the Performance Period until the Committee certifies the extent to which the performance criteria set forth in Section 2 have been satisfied.

The shares delivered upon conversion of PSUs pursuant to this Section 3(b) will not be subject to any transfer restrictions, other than those that may arise under the securities laws, the Firm’s policies or Section 13 below, or to cancellation under the circumstances set forth in Section 11(c), but will be subject to repayment as set forth in Section 3(c).³

(c) Repayment/Recapture. In the event and to the extent the Committee reasonably determines that the performance certified by the Committee, and on the basis of which PSUs were converted to shares of Morgan Stanley common stock, was based on materially inaccurate financial statements or other performance metric criteria, you will be obligated to repay to the Firm:

(1) the number of shares that were delivered upon conversion of your PSUs, less the number of shares that would have been delivered had your PSUs converted to shares based on accurate financial statements or other performance metric criteria (such number of shares determined in each case by the Committee and before satisfaction of tax or other withholding obligations pursuant to Section 12) (the “Repayment Shares”); provided, however, that to the extent that any of the Repayment Shares have been transferred, you shall repay to the Firm an amount equal to the number of Repayment Shares so transferred multiplied by the fair market value, determined using a valuation methodology established by Morgan Stanley, of Morgan Stanley common stock on the date your PSUs converted to shares of Morgan Stanley common stock; plus

(2) any dividend equivalents that were paid on the Repayment Shares when your PSUs converted to shares; plus

(3) interest on the amounts described in the preceding clauses (1) and (2) at the average rate of interest Morgan Stanley paid to borrow money from financial institutions during the period from the date of such conversion through the date preceding the repayment date.

For the avoidance of doubt, your PSUs will not be deemed “earned” if payment of such award is based on materially inaccurate financial statements or other performance metric criteria.

³  Certain PSUs granted to UK Code Staff may include transfer restrictions for a six-month period following the applicable Scheduled Conversion Date.

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(d) Accelerated conversion. Morgan Stanley shall have no right to accelerate the conversion of any of your PSUs or the payment of any of your dividend equivalents, except to the extent that such acceleration is not prohibited by Section 409A and would not result in your being required to recognize income for United States federal income tax purposes before your PSUs convert to shares of Morgan Stanley common stock or your dividend equivalents are paid or your incurring additional tax or interest under Section 409A. If any PSUs are converted to shares of Morgan Stanley common stock or any dividend equivalents are paid prior to the Scheduled Conversion Date pursuant to this Section 2(d), these shares or dividend equivalents may not be transferable and may remain subject to applicable vesting, cancellation and withholding provisions, as determined by Morgan Stanley.

(e) Rule of construction for timing of conversion. Whenever this Award Certificate provides for your PSUs to convert to shares, or your dividend equivalents to be paid, on the Scheduled Conversion Date or upon a different specified event or date, such conversion or payment will be considered to have been timely made, and neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages based on a delay in conversion of your PSUs (or delivery of Morgan Stanley shares following conversion) or payment of your dividend equivalents, as applicable, and the Firm shall have no liability to you (or to any of your beneficiaries or your estate) in respect of any such delay, as long as conversion or payment, as applicable, is made by December 31 of the year in which occurs the Scheduled Conversion Date or such other specified event or date or, if later, by the 15th day of the third calendar month following such specified event or date. Similarly, neither you nor any of your beneficiaries or your estate shall have any claim against the Firm for damages, and the Firm shall have no liability to you (or to any of your beneficiaries or your estate), based on any acceleration of the conversion of your PSUs or payment of your dividend equivalents pursuant to Section 3(d), as applicable.

4. Special provision for certain employees.

Notwithstanding the other provisions of this Award Certificate, if Morgan Stanley considers you to be one of its executive officers at the time provided for the conversion of your vested PSUs and determines that your compensation may not be fully deductible by virtue of Section 162(m) of the Internal Revenue Code, Morgan Stanley shall delay payment of the nondeductible portion of your compensation, including delaying, to the extent nondeductible, conversion of your vested PSUs and payment of the dividend equivalents, unless the Committee, in its sole discretion, determines not to delay such conversion and payment. This delay will continue until your Separation from Service or, to the extent permitted under Section 409A, the end of the first earlier taxable year of the Firm as of the last day of which you are no longer an executive officer (subject to earlier conversion in the event of your death as described below).

5. Dividend equivalent payments.

If Morgan Stanley pays a regular or ordinary dividend on its common stock, you will be credited with a dividend equivalent with respect to your PSU award in an amount equal to the amount of the dividend that would have been paid on a number of shares of Morgan Stanley common stock corresponding to your Target Award. Morgan Stanley will credit the

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dividend equivalents when it pays the corresponding dividend on its common stock. Your dividend equivalents will vest and be paid in cash at the same time as, and subject to the same vesting and cancellation provisions set forth in this Award Certificate with respect to, your PSUs (provided that, subject to Section 3(e), the dividend equivalents may be paid following the date on which the PSUs convert to shares of Morgan Stanley common stock on the next administratively practicable payroll date). The amount of dividend equivalents paid to you will be based on the number of PSUs that actually convert to shares (and will be paid only if your PSUs convert to shares), provided that such dividend equivalents will be reduced to the extent that application of the performance measures set forth in Section 2 results in your earning less than the Target Award and will be increased to the extent that application of those performance measures results in your earning more than the Target Award. (For example, if you earn 80% of the Target Award based on the performance measures, 20% of the dividend equivalents credited in respect of regular or ordinary dividends will be canceled.) If your PSU award is subject to a pro rata reduction upon the termination of your Employment (as described below) and your award is to be paid on a date following such termination, the amount of dividend equivalents credited to you in respect of regular or ordinary dividends paid on Morgan Stanley common stock following your termination shall continue to be based on the number of shares of Morgan Stanley common stock corresponding to your Target Award, and the amount paid to you (subject to the other terms and conditions of this Award Certificate) shall be the amount calculated as provided above in this Section 5, in each case multiplied by the Pro Ration Fraction. If your PSU award is subject to a pro rata reduction upon the termination of your Employment and is paid out on such termination (as described below), the amount of dividend equivalents paid to you shall be calculated based on the number of shares of Morgan Stanley common stock corresponding to your Target Award (adjusted, if applicable, as provided in this Section 5) multiplied by the Pro Ration Fraction. In the event of a Change in Control, the Committee in its discretion may provide that any dividend equivalents credited in respect of your [year] PSU award following the Change in Control will be based on the number of shares of Morgan Stanley common stock earned as provided in Section 9 (rather than on the number of shares corresponding to your Target Award), it being understood that the amount of dividend equivalents actually paid to you on the Scheduled Conversion Date (or earlier as provided in this Award Certificate in the event of certain terminations of employment) will be calculated as provided in this Section 5.

Notwithstanding the foregoing, in the event your PSU award is canceled in full on or before the Scheduled Conversion Date, all dividend equivalents credited to you in respect of regular or ordinary dividends will be canceled.

The decision to pay a dividend and, if so, the amount of any such dividend, is determined by Morgan Stanley in its sole discretion. No dividend equivalents will be paid to you on any canceled PSUs.

6. Death, Disability and Full Career Retirement.

The following special earning, vesting and payment terms apply to your PSUs:

(a) Death during Employment. If you die while Employed, then the number of PSUs that will vest, and the number of shares of Morgan Stanley common stock the

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beneficiary you have designated pursuant to Section 15 or the legal representative of your estate, as applicable, will receive as of the date of your death, will be determined by multiplying (i) the number of shares earned based on the performance measures set forth in Section 2 but applied as though the Performance Period ended with the last Morgan Stanley quarter ending simultaneously with or before the date of your death, for which earnings information for Morgan Stanley has been released as of the date of your death by (ii) the Pro Ration Fraction, provided that your beneficiary or estate notifies the Firm of your death within 60 days following your death; provided further, that if your death occurs on or following the Scheduled Vesting Date, then your beneficiary or estate, as applicable, will receive shares (if any) in an amount and at such time that you would have received such shares had your death not occurred. For example, if your death occurs following the end of Morgan Stanley’s third quarter (but prior to the end of the fourth quarter) and earnings information has not been released by Morgan Stanley for such quarter, the performance measures will be applied as though the Performance Period ended with Morgan Stanley’s second quarter (provided Morgan Stanley has released earning information for such quarter).

After your death, the cancellation provisions set forth in Section 11(c) will no longer apply. The shares delivered upon conversion of PSUs pursuant to this Section 6(a) will not be subject to any transfer restrictions (other than those that may arise under the securities laws or the Firm’s policies) but will be subject to repayment as set forth in Section 3(c).

(b) Death after termination of Employment. If you die following your termination of Employment as a result of your Disability, Full Career Retirement or an involuntary termination not involving any cancellation event and your [year] PSU award was not canceled in connection with your termination or thereafter, then the number of PSUs that will vest, and the number of shares of Morgan Stanley common stock the beneficiary you have designated pursuant to Section 15 or the legal representative of your estate, as applicable, will receive as of the date of your death, will be determined by multiplying (i) the number of shares that would have been delivered to you based on applying the performance measures set forth in Section 2 as though the Performance Period ended with the last Morgan Stanley quarter ending simultaneously with or before the date of your death for which earnings information for Morgan Stanley has been released as of the date of your death by (ii) the Pro Ration Fraction determined upon your termination of Employment, provided that your beneficiary or estate notifies the Firm of your death within 60 days following your death; provided further, that if your death occurs on or following the Scheduled Vested Date, then your beneficiary or estate, as applicable, will receive shares (if any) in an amount and at such time that you would have received such shares had your death not occurred.

After your death, the cancellation provisions set forth in Section 11(c) will no longer apply. The shares delivered upon conversion of PSUs pursuant to this Section 6(b) will not be subject to any transfer restrictions (other than those that may arise under the securities laws or the Firm’s policies) but will be subject to repayment as set forth in Section 3(c).

(c) Disability. If your Employment terminates due to Disability, then, subject to any transfer restrictions and the cancellation provisions described herein, you will vest in a number of PSUs, and receive a number of shares of Morgan Stanley common stock on the Scheduled Conversion Date, determined by multiplying (i) the number of shares that would

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have been delivered to you, based on the performance measures described in Section 2, had you remained in Employment through the Scheduled Conversion Date, by (ii) the Pro Ration Fraction. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the Scheduled Conversion Date.

(d) Full Career Retirement. If your employment terminates in a termination that satisfies the definition of Full Career Retirement, then, subject to any transfer restrictions and the cancellation provisions described herein, you will vest in a number of PSUs, and receive a number of shares of Morgan Stanley common stock on the Scheduled Conversion Date, equal to: (A) if your Full Career Retirement termination occurs on or before [January 1 of the year following the Date of the Award], the amount determined by multiplying (i) the number of shares that would have been delivered to you, based on the performance measures set forth in Section 2, had you remained in Employment through the Scheduled Conversion Date, by (ii) the Pro Ration Fraction, and (B) if your Full Career Retirement termination occurs following [January 1 of the year following the Date of the Award], the number of shares that would have been delivered to you, based on the performance measures set forth in Section 2, had you remained in Employment through the Scheduled Conversion Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the Scheduled Conversion Date.

7. Involuntary termination by the Firm.

If the Firm terminates your employment under circumstances not involving any cancellation event set forth in Section 11(c) and you sign an agreement and release satisfactory to the Firm, then, subject to any transfer restrictions and the cancellation provisions described herein, you will vest in a number of PSUs, and receive a number of shares of Morgan Stanley common stock on the Scheduled Conversion Date, determined by multiplying (i) the number of shares that would have been delivered to you, based on the performance measures set forth in Section 2, had you remained in Employment through the Scheduled Conversion Date, by (ii) the Pro Ration Fraction. If you do not sign such an agreement and release satisfactory to the Firm within the timeframe set by the Firm in connection with your involuntary termination as described in this Section 7, any PSUs that were unvested immediately prior to your termination shall be canceled. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the Scheduled Conversion Date.

8. Governmental Service.

(a) General treatment of awards upon Governmental Service Termination. If your Employment terminates in a Governmental Service Termination and not involving a cancellation event set forth in Section 11(c), then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 8(c), you will vest in a number of PSUs, and receive as of the date of your Governmental Service Termination a number of shares of Morgan Stanley common stock, determined by multiplying (i) the number of shares earned based on the performance measures set forth in Section 2 but applied as though the Performance Period ended with the last Morgan Stanley quarter ending simultaneously with or before the effective date of your Governmental Service Termination, for which earnings information for Morgan Stanley has been released as of the date of your Governmental Service Termination by (ii) the Pro Ration Fraction.

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(b) General treatment of vested awards upon acceptance of employment at a Governmental Employer following termination of Employment. If (i) your Employment terminates other than in a Governmental Service Termination and not involving a cancellation event set forth in Section 11(c), (ii) your [year] PSU award was not canceled in connection with your termination or thereafter, (iii) following your termination of Employment, you accept employment with a Governmental Employer, and (iv) you present the Firm with satisfactory evidence demonstrating that as a result of such employment the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer, then, provided that you sign an agreement satisfactory to the Firm relating to your obligations pursuant to Section 8(c), you will receive, upon your commencement of employment with such Governmental Employer, the number of shares determined by multiplying (x) the number of shares of Morgan Stanley common stock earned based on the performance measures set forth in Section 2 but applied as though the Performance Period ended with the last Morgan Stanley quarter ending simultaneously with or before your acceptance of employment at a Governmental Employer, for which earnings information for Morgan Stanley has been released as of such date by (y) the Pro Ration Fraction.

(c) Repayment obligation. Shares delivered upon conversion of PSUs pursuant to Section 8(a) or 8(b) will not be subject to any transfer restrictions (other than those that may arise under the securities laws or the Firm’s policies) but will be subject to repayment as set forth in Section 3(c). Moreover, if any activity or event constituting a cancellation event set forth in Section 11(c) occurs within the applicable period of time that would have resulted in cancellation of all or a portion of your PSUs had they not converted to shares pursuant to Section 8(a) or 8(b), you will be required to pay to Morgan Stanley an amount equal to:

(1) the number of PSUs that would have been canceled upon the occurrence of such cancellation event multiplied by the fair market value, determined using a valuation methodology established by Morgan Stanley, of Morgan Stanley common stock on the date your PSUs converted to shares of Morgan Stanley common stock; plus

(2) any dividend equivalents that were paid to you on the number of PSUs described in the foregoing clause (1) when your PSUs converted to shares pursuant to Section 8(a) or 8(b); plus

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(3) interest on the amounts described in the preceding clauses (1) and (2) at the average rate of interest Morgan Stanley paid to borrow money from financial institutions during the period from the date of such conversion through the date preceding the payment date.

9. Change in Control.

In the event of a Change in Control, you will receive on the Scheduled Conversion Date (subject to earlier payment as described in Section 6 upon death and in Section 8 in connection with “Governmental Service” and subject to any transfer restrictions and the cancellation provisions set forth herein) the number of shares earned based on the performance measures in Section 2 but applied as though the Performance Period ended with the last quarter of Morgan Stanley ending simultaneously with or before the effective date of the Change in Control; provided, however, that no such payment shall be made if your Employment terminates following the Change in Control, but prior to the Scheduled Vesting Date, for any reason other than for death, Disability, Full Career Retirement, Governmental Service Termination or an involuntary termination not involving any cancellation event. For the avoidance of doubt, following a Change in Control, the provisions of this Award Certificate setting forth the consequences of a termination of employment shall continue to apply (including all provisions governing the timing of payment), except that whenever this Award Certificate provides for you to receive upon or following a termination of employment a number of shares determined by applying the Pro Ration Fraction, the Pro Ration Fraction shall be applied to the number of shares calculated pursuant to the immediately preceding sentence (e.g., applying the performance measures described herein as though the Performance Period ended with the last quarter of Morgan Stanley ending simultaneously with or before the effective date of the Change in Control).

10. Specified employees.

Notwithstanding any other terms of this Award Certificate, if Morgan Stanley considers you to be one of its “specified employees” as defined in Section 409A at the time of your Separation from Service, any conversion of your PSUs and payment of your accrued dividend equivalents that otherwise would occur upon your Separation from Service (including, without limitation, PSUs whose conversion was delayed due to Section 162(m) of the Internal Revenue Code, as provided in Section 4) will be delayed until the first business day following the date that is six months after your Separation from Service; provided, however, that in the event that your death, your Governmental Service Termination or your employment at a Governmental Employer following your termination of employment with the Firm under circumstances set forth in Section 8(b) occurs at any time after the Date of the Award, conversion and payment will be made in accordance with Section 6 or 8, as applicable.

11. Cancellation of awards under certain circumstances.

(a) Cancellation of unvested awards. Your unvested PSUs, including any dividend equivalents credited on your PSUs, will be canceled if your Employment terminates for any reason other than death, Disability, a Full Career Retirement, an involuntary termination by the Firm described in Section 7 or a Governmental Service Termination.

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(b) General treatment of vested awards. Except as otherwise provided in this Award Certificate, your PSUs, to the extent earned and vested, including any dividend equivalents credited on your PSUs, will convert to shares of Morgan Stanley common stock or be paid, as applicable, on the Scheduled Conversion Date. The cancellation and withholding provisions set forth in this Award Certificate will continue to apply until the Scheduled Conversion Date.

(c) Cancellation of awards under certain circumstances. The cancellation events set forth in this Section 11(c) are designed, among other things, to incentivize compliance with the Firm’s policies (including the Code of Conduct), to protect the Firm’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. This Section 11(c) shall apply notwithstanding any other terms of this Award Certificate (except where sections in this Award Certificate specifically provide that the cancellation events set forth in this Section 11(c) no longer apply).

Notwithstanding Morgan Stanley’s performance based on the measures set forth in Section 2 or your satisfaction of the vesting conditions of this Award Certificate, PSUs (and any dividend equivalents credited thereon) are not earned until the Scheduled Conversion Date (and until you satisfy all obligations you owe to the Firm as set forth in Section 13 below) and, unless prohibited by applicable law, will be canceled prior to the Scheduled Conversion Date in any of the circumstances set forth below in Section 11(c)(1), (2) or (2). Although you will become the beneficial owner of shares of Morgan Stanley common stock following conversion of your PSUs, the Firm may retain custody of your shares following conversion of your PSUs (and any dividend equivalents credited thereon) pending any investigation or other review that impacts the determination as to whether the PSUs (and any dividend equivalents credited thereon) are cancellable under the circumstances set forth below and, in such an instance, the shares underlying such PSUs (and any dividend equivalents credited thereon) shall be forfeited in the event the Firm determines that the PSUs (and any dividend equivalents credited thereon) were cancellable under the circumstances set forth below.

(1) Competitive Activity. If you resign Employment and engage in Competitive Activity prior to the Scheduled Conversion Date, your [year] PSU award, whether or not vested and irrespective of Morgan Stanley’s performance based on the measures set forth in Section 2, including any dividend equivalents credited on your PSUs, will be canceled immediately, subject to applicable law.

(2) Other Events. If any of the following events occur at any time before the Scheduled Conversion Date, your [year] PSU award, whether or not vested and irrespective of Morgan Stanley’s performance based on the measures set forth in Section 2, including any dividend equivalents credited on your PSUs, will be canceled immediately, subject to applicable law:

(i) Your Employment is terminated for Cause or you engage in conduct constituting Cause (either during or following Employment and whether or not your Employment has been terminated as of the Scheduled Conversion Date);

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(ii) Following the termination of your Employment, the Firm determines that your Employment could have been terminated for Cause (for these purposes, “Cause” will be determined without giving consideration to any “cure” period included in the definition of “Cause”);

(iii) You disclose Confidential and Proprietary Information to any unauthorized person outside the Firm, or use or attempt to use Confidential and Proprietary Information other than in connection with the business of the Firm; or you fail to comply with your obligations (either during or after your Employment) under the Firm’s Code of Conduct (and any applicable supplements) or otherwise existing between you and the Firm, relating to Confidential and Proprietary Information or an assignment, procurement or enforcement of rights in Confidential and Proprietary Information;

(iv) You engage in a Wrongful Solicitation;

(v) You make any Unauthorized Comments;

(vi) You fail or refuse, following your termination of Employment, to cooperate with or assist the Firm in a timely manner in connection with any investigation, regulatory matter, lawsuit or arbitration in which the Firm is a subject, target or party and as to which you may have pertinent information; or

(vii) You resign from your employment with the Firm without having provided the Firm prior written notice of your resignation consistent with the notice period requirements undertaken by you in connection with your employment offer letter, Sign-On or Notice & Non-Solicitation Agreement or any other contractual obligation in connection with the terms and conditions of your employment, or, in the event no such prior contractual notice period requirements exist, you resign from your employment with the Firm without having provided the Firm prior written notice of your resignation of at least thirty (30) days.

(3) Clawback Cancellation Event. Your [year] PSU award, whether or not vested and irrespective of Morgan Stanley’s performance based on the measures set forth in Section 2, including any dividend equivalents credited on your PSUs, will be cancelled immediately, subject to applicable law, if, before the Scheduled Conversion Date, you take any action, or omit to take any action (including with respect to supervisory responsibilities), where such action or omission: (i) causes a restatement of the Firm’s consolidated financial results or (ii) constitutes a violation by you of the Firm’s risk policies and standards (where prior authorization and approval of appropriate senior management was not obtained) whether such action results in a favorable or unfavorable impact to the Firm’s consolidated financial results.

12. Tax and other withholding obligations.

Any vesting, whether on a Scheduled Vesting Date or some other date, of your PSU award (including dividend equivalents that have been credited in respect of your PSUs), and

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any conversion of PSUs or crediting or payment of dividend equivalents, shall be subject to the Firm’s withholding of all required United States federal, state, local and foreign income and employment/payroll taxes (including Federal Insurance Contributions Act taxes). You authorize the Firm to withhold such taxes from any payroll or other payment or compensation to you, including by canceling or accelerating payment of a portion of this award (including any dividend equivalents that have been credited on your PSUs) in an amount not to exceed such taxes imposed upon such vesting, conversion, crediting or payment and any additional taxes imposed as a result of such cancellation or acceleration, and to take such other action as the Firm may deem advisable to enable it and you to satisfy obligations for the payment of withholding taxes and other tax obligations, assessments, or other governmental charges, whether of the United States or any other jurisdiction, relating to the vesting or conversion of your PSUs or the crediting, vesting or payment of dividend equivalents. However, the Firm may not deduct or withhold such sum from any payroll or any other payment or compensation (including from your PSU award), except to the extent it is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your PSUs convert to shares of Morgan Stanley common stock (or your dividend equivalents are paid) or to incur interest or additional tax under Section 409A.

Pursuant to rules and procedures that Morgan Stanley establishes, you may elect to satisfy the tax or other withholding obligations arising upon conversion of your PSUs by having Morgan Stanley withhold shares of Morgan Stanley common stock in an amount sufficient to satisfy the tax or other withholding obligations. Shares withheld will be valued using the fair market value of Morgan Stanley common stock on the date your PSUs convert (or such other appropriate date determined by Morgan Stanley based on local legal, tax or accounting rules and practices) using a valuation methodology established by Morgan Stanley. In order to comply with applicable accounting standards or the Firm’s policies in effect from time to time, Morgan Stanley may limit the amount of shares that you may have withheld.

13. Obligations you owe to the Firm.

As a condition to the earning, payment, conversion or distribution of your award, the Firm may require you to pay such sum to the Firm as may be necessary to satisfy any obligation that you owe to the Firm. Notwithstanding any other provision of this Award Certificate, your award, even if vested, converted or paid, is not earned until after such obligations and any tax withholdings or other deductions required by law are satisfied. Notwithstanding the foregoing, Morgan Stanley may not reduce the number of shares to be delivered upon conversion of your PSUs or the amount of dividend equivalents to be paid in respect of your award or delay the payment of your award to satisfy obligations that you owe to the Firm except (i) to the extent authorized under Section 12, relating to tax and other withholding obligations or (ii) to the extent such reduction or delay is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your PSUs convert to shares of Morgan Stanley common stock (or your dividend equivalents are paid) or to incur additional tax or interest under Section 409A.

Morgan Stanley’s determination of any amount that you owe the Firm shall be conclusive. The fair market value of Morgan Stanley common stock for purposes of the foregoing provisions shall be determined using a valuation methodology established by Morgan Stanley.

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14. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your award, other than as provided in Section 15 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to your award will be made only to you.

Your personal representatives, heirs, legatees, beneficiaries, successors and assigns, and those of Morgan Stanley, shall all be bound by, and shall benefit from, the terms and conditions of your award.

15. Designation of a beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of your award to be delivered or paid under this Award Certificate in the event of your death. To make a beneficiary designation, you must complete and submit the Beneficiary Designation form on the Executive Compensation website at [website redacted].

Any shares or dividend equivalents that become deliverable upon your death, and as to which a designation of beneficiary is not in effect, will be distributed to your estate.

If you previously filed a designation of beneficiary form for your equity awards with the Executive Compensation Department, such form will also apply to all of your equity awards, including this award. You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive shares or payments under this award, Morgan Stanley may determine in its sole discretion to deliver the shares or make the payments in question to your estate. Morgan Stanley’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to this award.

16. Ownership and possession.

(a) Before conversion. Generally, you will not have any rights as a stockholder in the shares of Morgan Stanley common stock corresponding to your [year] PSU award unless and until your PSUs convert to shares. Without limiting the generality of the preceding sentence, you will not have any voting rights with respect to shares corresponding to your PSU award until PSUs convert to shares.

(b) Following conversion. Subject to Sections 3(c) and 11(c), following conversion of your PSUs you will be the beneficial owner of the shares of Morgan Stanley common stock issued to you, and you will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on the shares.

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(c) Custody of shares. Morgan Stanley may maintain possession of the shares subject to your award until such time as your shares are no longer subject to restrictions on transfer.

17. Securities law compliance matters.

Morgan Stanley may affix a legend to any stock certificates representing shares of Morgan Stanley common stock issued upon conversion of your PSUs (and any stock certificates that may subsequently be issued in substitution for the original certificates). The legend will read substantially as follows:

THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE WERE ISSUED PURSUANT TO THE MORGAN STANLEY 2007 EQUITY INCENTIVE COMPENSATION PLAN AND ARE SUBJECT TO THE TERMS AND CONDITIONS THEREOF AND OF AN AWARD CERTIFICATE FOR PERFORMANCE STOCK UNITS AND ANY SUPPLEMENT THERETO.

THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE MAY BE SUBJECT TO RESTRICTIONS ON TRANSFER BY VIRTUE OF THE SECURITIES ACT OF 1933.

COPIES OF THE PLAN, THE AWARD CERTIFICATE FOR PERFORMANCE STOCK UNITS AND ANY SUPPLEMENT THERETO ARE AVAILABLE THROUGH THE EXECUTIVE COMPENSATION DEPARTMENT.

Morgan Stanley may advise the transfer agent to place a stop order against such shares if it determines that such an order is necessary or advisable.

18. Compliance with laws and regulation.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other disposition of shares issued upon conversion of your PSUs (whether directly or indirectly, whether or not for value, and whether or not voluntary) must be made in compliance with any applicable constitution, rule, regulation or policy of any of the exchanges or associations or other institutions with which the Firm or a Related Employer has membership or other privileges, and any applicable law or applicable rule or regulation of any governmental agency, self-regulatory organization or state or federal regulatory body.

19. No entitlements.

(a) No right to continued Employment. This award is not an employment agreement, and nothing in this Award Certificate, the International Supplement, if applicable, or the Plan shall alter your status as an “at-will” employee of the Firm or your employment status at a Related Employer. None of this Award Certificate, the International Supplement, if applicable, or the Plan shall be construed as guaranteeing your employment by the Firm or a

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Related Employer, or as giving you any right to continue in the employ of the Firm or a Related Employer, during any period (including without limitation the period between the Date of the Award and any of the Scheduled Vesting Date, the Scheduled Conversion Date, or any portion of any of these periods), nor shall they be construed as giving you any right to be reemployed by the Firm or a Related Employer following any termination of Employment.

(b) No right to future awards. This award, and all other awards of PSUs and other equity-based awards, are discretionary. This award does not confer on you any right or entitlement to receive another award of PSUs or any other equity-based award at any time in the future or in respect of any future period.

(c) No effect on future employment compensation. Morgan Stanley has made this award to you in its sole discretion. This award does not confer on you any right or entitlement to receive compensation in any specific amount for any future year, and does not diminish in any way the Firm’s discretion to determine the amount, if any, of your compensation. This award is not part of your base salary or wages and will not be taken into account in determining any other employment-related rights you may have, such as rights to pension or severance pay.

(d) Award terms control. In the event of any conflict between any terms applicable to equity awards in any employment agreement, offer letter or other arrangement that you have entered into with the Firm and the terms set forth in this Award Certificate, the latter shall control.

20. Consents under local law.

Your award is conditioned upon the making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

21. Award modification.

Morgan Stanley reserves the right to modify or amend unilaterally the terms and conditions of your award, without first asking your consent, or to waive any terms and conditions that operate in favor of Morgan Stanley. These amendments may include (but are not limited to) changes that Morgan Stanley considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. Morgan Stanley may not modify your award in a manner that would materially impair your rights in your award without your consent; provided, however, that Morgan Stanley may, but is not required to, without your consent, amend or modify your award in any manner that Morgan Stanley considers necessary or advisable to (i) comply with any Legal Requirement, (ii) ensure that your award does not result in an excise or other supplemental tax on the Firm under any Legal Requirement, or (iii) ensure that your award is not subject to United States federal, state or local income tax or any equivalent taxes in territories outside the United States prior to conversion of your PSUs to shares or delivery of such shares following conversion or the crediting or payment of dividend equivalents. Morgan Stanley will notify you of any amendment of your award that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or

17

waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by the Global Head of Human Resources or the Chief Operating Officer (or if such positions no longer exist, by the holder of an equivalent position) to be effective.

22. Governing law.

This Award Certificate and the related legal relations between you and Morgan Stanley will be governed by and construed in accordance with the laws of the State of New York, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the award to the substantive law of another jurisdiction.

23. Defined terms.

For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

(a) “Board” means the Board of Directors of Morgan Stanley.

(b) “Cause” means:

(1) any act or omission which constitutes a breach of your obligations to the Firm, including, without limitation, (A) your failure to comply with any notice or non-solicitation restrictions that may be applicable to you or (B) your failure to comply with the Firm’s compliance, ethics or risk management standards, or your failure or refusal to perform satisfactorily any duties reasonably required of you, which breach, failure or refusal (if susceptible to cure) is not corrected (other than failure to correct by reason of your incapacity due to physical or mental illness) within ten (10) business days after written notification thereof to you by the Firm;

(2) your commission of any dishonest or fraudulent act, or any other act or omission, which has caused or may reasonably be expected to cause injury to the interest or business reputation of the Firm; or

(3) your violation of any securities, commodities or banking laws, any rules or regulations issued pursuant to such laws, or rules or regulations of any securities or commodities exchange or association of which the Firm is a member or of any policy of the Firm relating to compliance with any of the foregoing.

(c) A “Change in Control” shall be deemed to have occurred if any of the following conditions shall have been satisfied:

(1) any one person or more than one person acting as a group (as determined under Section 409A), other than (A) any employee plan established by Morgan Stanley or any of its Subsidiaries, (B) Morgan Stanley or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by stockholders of Morgan Stanley in

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substantially the same proportions as their ownership of Morgan Stanley, is or becomes, during any 12-month period, the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person(s) any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of the total voting power of the stock of Morgan Stanley; provided, however, that the provisions of this subsection (1) are not intended to apply to or include as a Change in Control any transaction that is specifically excepted from the definition of Change in Control under subsection (3) below;

(2) a change in the composition of the Board such that, during any 12-month period, the individuals who, as of the beginning of such period, constitute the Board (the “Existing Board”) cease for any reason to constitute at least 50% of the Board; provided, however, that any individual becoming a member of the Board subsequent to the beginning of such period whose election, or nomination for election by Morgan Stanley’s stockholders, was approved by a vote of at least a majority of the directors immediately prior to the date of such appointment or election shall be considered as though such individual were a member of the Existing Board;

(3) the consummation of a merger or consolidation of Morgan Stanley with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of Morgan Stanley (or any direct or indirect subsidiary of Morgan Stanley) pursuant to applicable stock exchange requirements; provided that immediately following such merger or consolidation the voting securities of Morgan Stanley outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of such merger or consolidation or parent entity thereof) 50% or more of the total voting power of Morgan Stanley stock (or if Morgan Stanley is not the surviving entity of such merger or consolidation, 50% or more of the total voting power of the stock of such surviving entity or parent entity thereof); and provided further that a merger or consolidation effected to implement a recapitalization of Morgan Stanley (or similar transaction) in which no person (as determined under Section 409A) is or becomes the beneficial owner, directly or indirectly, of securities of Morgan Stanley (not including in the securities beneficially owned by such person any securities acquired directly from Morgan Stanley or its affiliates other than in connection with the acquisition by Morgan Stanley or its affiliates of a business) representing 50% or more of either the then outstanding shares of Morgan Stanley common stock or the combined voting power of Morgan Stanley’s then outstanding voting securities shall not be considered a Change in Control; or

(4) the complete liquidation of Morgan Stanley or the sale or disposition by Morgan Stanley of all or substantially all of Morgan Stanley’s assets in which any one person or more than one person acting as a group (as determined under Section 409A) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Morgan Stanley that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of Morgan Stanley immediately prior to such acquisition or acquisitions.

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Notwithstanding the foregoing, (x) no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of Morgan Stanley common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of Morgan Stanley immediately prior to such transaction or series of transactions and (y) no event or circumstances described in any of clauses (1) through (4) above shall constitute a Change in Control unless such event or circumstances also constitute a change in the ownership or effective control of Morgan Stanley, or in the ownership of a substantial portion of Morgan Stanley’s assets, as defined in Section 409A. In addition, no Change in Control shall be deemed to have occurred upon the acquisition of additional control of Morgan Stanley by any one person or more than one person acting as a group that is considered to effectively control Morgan Stanley.

For purposes of the provisions of this Award Certificate, terms used in the definition of a Change in Control shall be as defined or interpreted pursuant to Section 409A.

(d) “Committee” means the Compensation, Management Development and Succession Committee of the Board, any successor committee thereto or any other committee of the Board appointed by the Board with the powers of the Committee under the Plan, or any subcommittee appointed by such Committee.

(e) “Competitive Activity” means:

(1) becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director, independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where you will be responsible for providing, or managing or supervising others who are providing, services (x) that are similar or substantially related to the services that you provided to the Firm, or (y) that you had direct or indirect managerial or supervisory responsibility for at the Firm, or (z) that call for the application of the same or similar specialized knowledge or skills as those utilized by you in your services for the Firm, in each such case, at any time during the year preceding the termination of your employment with the Firm; or

(2) either alone or in concert with others, forming, or acquiring a 5% or greater equity ownership, voting interest or profit participation in, a Competitor.

(f) “Competitor” means any corporation, partnership or other entity that competes, or that owns a significant interest in any corporation, partnership or other entity that competes, with any business activity the Firm engages in, or that you reasonably knew or should have known that the Firm was planning to engage in, at the time of the termination of your Employment.

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(g) “Confidential and Proprietary Information” means any information that is classified as confidential in the Firm’s Global Policy on Confidential Information or that may have intrinsic value to the Firm, the Firm’s clients or other parties with which the Firm has a relationship, or that may provide the Firm with a competitive advantage, including, without limitation, any trade secrets; inventions (whether or not patentable); formulas; flow charts; computer programs; access codes or other systems information; algorithms; technology and business processes; business, product or marketing plans; sales and other forecasts; financial information; client lists or other intellectual property; information relating to compensation and benefits; and public information that becomes proprietary as a result of the Firm’s compilation of that information for use in its business, provided that such Confidential and Proprietary Information does not include any information which is available for use by the general public or is generally available for use within the relevant business or industry other than as a result of your action. Confidential and Proprietary Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, electronic communications, videotapes, audiotapes, and oral communications.

(h) “Date of the Award” means [insert grant date, which typically will coincide approximately with the end of the year in respect of which the award is made].

(i) “Disability” means any condition that would qualify for a benefit under any group long-term disability plan maintained by the Firm and applicable to you.

(j) “Employed” and “Employment” refer to employment with the Firm and/or Related Employment.

(k) The “Firm” means Morgan Stanley (including any successor thereto) together with its subsidiaries and affiliates. For purposes of the definitions of “Cause,” “Confidential and Proprietary Information,” “Unauthorized Comments” and “Wrongful Solicitation” set forth in this Award Certificate and Section 11(c)(2)(vi) of this Award Certificate, references to the “Firm” shall refer severally to the Firm as defined in the preceding sentence and your Related Employer, if any. For purposes of the cancellation provisions set forth in this Award Certificate relating to disclosure or use of Confidential and Proprietary Information, references to the “Firm” shall refer to the Firm as defined in the second preceding sentence or your Related Employer, as applicable.

(l) “Full Career Retirement” has the meaning attributed to such term in your employment agreement or offer letter with the Firm or, if you are not party to an employment agreement or offer letter with the Firm (or if such agreement or letter does not include a definition of “Full Career Retirement”), means the termination of your Employment by you or by the Firm for any reason other than under circumstances involving any cancellation event described in Section 11(c), and other than due to your death or Governmental Service Termination, on or after the date on which:

(1) you have attained age 50 and completed at least 12 years of service as a [    ]⁴ of the Firm or equivalent officer title; or

⁴  Specified officer title(s) in one or more specified business units.

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(2) you have attained age 50 and completed at least 15 years of service as an officer of the Firm at the level of [    ]⁵ or above; or

(3) you have completed at least 20 years of service with the Firm; or

(4) you have attained age 55 and have completed at least 5 years of service with the Firm and the sum of your age and years of service equals or exceeds 65.⁶

For the purposes of the foregoing definition, service with the Firm will include any period of service with the following entities and any of their predecessors:

(i) AB Asesores (“ABS”) prior to its acquisition by the Firm (provided that only years of service as a partner of ABS shall count towards years of service as an officer);

(ii) Morgan Stanley Group Inc. and its subsidiaries (“MS Group”) prior to the merger with and into Dean Witter, Discover & Co.;

(iii) Miller Anderson & Sherrerd, L.L.P. prior to its acquisition by MS Group;

(iv) Van Kampen Investments Inc. and its subsidiaries prior to its acquisition by MS Group;

(v) FrontPoint Partners LLC and its subsidiaries prior to its acquisition by the Firm; and

(vi) Dean Witter, Discover & Co. and its subsidiaries (“DWD”) prior to the merger of Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co.;

provided that, in the case of an employee who has transferred employment from DWD to MS Group or vice versa, a former employee of DWD will receive credit for employment with DWD only if he or she transferred directly from DWD to Morgan Stanley & Co. Incorporated or its affiliates subsequent to February 5, 1997, and a former employee of MS Group will receive credit for employment with MS Group only if he or she transferred directly from MS Group to Morgan Stanley DW Inc. or its affiliates subsequent to February 5, 1997.

(m) “Governmental Employer” means a governmental department or agency, self-regulatory agency or other public service employer.

⁵  Specified officer title(s) in one or more specified business units.

⁶  Age and service conditions specified in clauses (1) through (4) may vary from year to year.

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(n) “Governmental Service Termination” means the termination of your Employment due to your commencement of employment at a Governmental Employer; provided that you have presented the Firm with satisfactory evidence demonstrating that as a result of such new employment, the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

(o) “Index Group” means the S&P 500 Financial Sectors Index.

(p) “Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

(q) “Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement.

(r) “Management Committee” means the Morgan Stanley Management Committee and any successor or equivalent committee.

(s) “MS ROE” means Morgan Stanley’s return on average common shareholders’ equity, including discontinued operations and extraordinary items, for each fiscal year during the Performance Period, adjusted to eliminate the impact of the following items with respect to each such fiscal year: (a) debt valuation adjustments, (b) any gain or loss associated with the sale of any Disposal Group at the time of, or subsequent to, it being classified as Held for Sale, (c) any goodwill impairment recognized in a fiscal year within a Reporting Unit if an acquisition by Morgan Stanley (or a subsidiary) of a Non-Controlling Interest in an entity in which Morgan Stanley (or a subsidiary) already has a Controlling Interest is made within the same period and same Reporting Unit, (d) any gain or loss associated with legal settlements and/or accruals related to legal settlements recognized in the fiscal year and relating to business activities conducted prior to January 1, 2011 and (e) any impacts for changes in accounting principles that are not applied on a full retrospective basis in the year of adoption and result in a cumulative catch-up adjustment (recorded either as a gain or a loss, or as an adjustment to equity) in the applicable fiscal year. For purposes of clauses (b) through (e) above, adjustments shall only be made to MS ROE if the pre-tax amounts equal or exceed $100 million during the applicable fiscal year;

• For purposes of clauses (b) and (c) above, “Disposal Group,” “Held for Sale,” “Controlling Interest,” “Non-Controlling Interest,” and “Reporting Unit” shall be defined in accordance with US generally accepted accounting principles;

• For purposes of clause (b) above, any gain or loss associated with the sale of a Disposal Group shall include any transaction costs, severance costs, and/or acceleration of unvested deferred compensation awards; and

• For purposes of clause (d) above, such gain or loss shall include any expense (or reversal of expense) recognized during the fiscal year associated with legal proceedings and/or legal settlements.

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(t) “Performance Period” means the three-year period consisting of the reporting years of Morgan Stanley of [year of the Date of the Award, first year following the Date of the Award and second year following the Date of the Award].

(u) “Plan” means the 2007 Equity Incentive Compensation Plan, as amended.

(v) “Pro Ration Fraction” means a fraction, the numerator of which is the number of days starting with and inclusive of [January 1 immediately preceding the Date of the Award] and ending on the effective date of your termination of Employment and the denominator of which is the number of days in the period beginning on [January 1 immediately preceding the Date of the Award] and ending on the Scheduled Vesting Date.

(w) “Related Employment” means your employment with an employer other than the Firm (such employer, herein referred to as a “Related Employer”), provided that: (i) you undertake such employment at the written request or with the written consent of Morgan Stanley’s Global Head of Human Resources (or if such position no longer exists, the holder of an equivalent position); (ii) immediately prior to undertaking such employment you were an employee of the Firm or were engaged in Related Employment (as defined herein); and (iii) such employment is recognized by the Firm in its discretion as Related Employment; and, provided further that the Firm may (1) determine at any time in its sole discretion that employment that was recognized by the Firm as Related Employment no longer qualifies as Related Employment, and (2) condition the designation and benefits of Related Employment on such terms and conditions as the Firm may determine in its sole discretion; provided further, the Firm will not provide for Related Employment except to the extent such treatment is not prohibited by Section 409A and would not cause you to recognize income for United States federal income tax purposes before your performance stock units convert to shares (or your dividend equivalents are paid) or to incur additional tax or interest under Section 409A. The designation of employment as Related Employment does not give rise to an employment relationship between you and the Firm, or otherwise modify your and the Firm’s respective rights and obligations.

(x) “Scheduled Conversion Date” means a date during [third year following the Date of the Award] determined by the Committee.

(y) “Scheduled Vesting Date” means [January 1 of the third year following the Date of the Award].

(z) “Section 409A” means Section 409A of the Internal Revenue Code and any regulations thereunder.

(aa) “Separation from Service” means a separation from service with the Firm for purposes of Section 409A determined using the default provisions set forth in Treasury Regulation §1.409A-1(h) or any successor regulation thereto. For purposes of this definition, Morgan Stanley’s subsidiaries and affiliates include (and are limited to) any corporation that is in the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as Morgan Stanley and any trade or business that is under common control with Morgan Stanley (within the meaning of Section 414(c) of the Internal Revenue Code), determined in each case in accordance with the default provisions set forth in Treasury Regulation §1.409A-1(h)(3).

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(bb) “Target Award” means the number of PSUs that has been communicated to you separately and that will be earned, subject to the other terms and conditions of this Award Certificate, if each of the multipliers set forth in Section 2(a) and 2(b) equals 1.

(cc) “Total Shareholder Return” or “TSR”, as it applies to

(1) Morgan Stanley’s common stock, means the percentage change in value (positive or negative) over the Performance Period as measured by dividing (i) the sum of (A) the cumulative value of dividends and other distributions in respect of the common stock for the Performance Period, assuming dividend reinvestment, and (B) the difference (positive or negative) between the common stock price on the first and last days of the Performance Period (calculated on the basis of the average of the adjusted closing prices over the 30-day trading period immediately prior to the first day of the Performance Period and the average of the adjusted closing prices over the 30-day trading period ending on the last day of the Performance Period), by (ii) the common stock price on the first day of the Performance Period, calculated on the basis of the average of the adjusted closing prices over the 30-day trading period immediately prior to the first day of the Performance Period; and

(2) the Index Group, means the percentage change in value (positive or negative) over the Performance Period as measured by dividing (i) the difference (positive or negative) between the closing price of the Index Group on the first and last days of the Performance Period (calculated on the basis of the average of the adjusted closing prices over the 30-day trading period immediately prior to the first day of the Performance Period and the average of the adjusted closing prices over the 30-day trading period ending on the last day of the Performance Period), by (ii) the closing price of the Index Group on the first day of the Performance Period, calculated on the basis of the average of the adjusted closing prices over the 30-day trading period immediately prior to the first day of the Performance Period. The adjusted closing price of the Index Group on any given date shall be the closing price of the S&P 500 Financial Sectors Index as reported by the Bloomberg Professional Service.

(dd) You will be deemed to have made “Unauthorized Comments” about the Firm if, while Employed or following the termination of your Employment, you make, directly or indirectly, any negative, derogatory, disparaging or defamatory comment, whether written, oral or in electronic format, to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/Internet format or any other medium) that concerns directly or indirectly the Firm, its business or operations, or any of its current or former agents, employees, officers, directors, customers or clients.

(ee) A “Wrongful Solicitation” occurs upon either of the following events:

(1) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 180 days after the termination of your Employment, directly or indirectly in any capacity (including through

25

any person, corporation, partnership or other business entity of any kind), you hire or solicit, recruit, induce, entice, influence or encourage any Firm employee to leave the Firm or become hired or engaged by another firm; provided, however, that this clause shall apply only to employees with whom you worked or had professional or business contact, or who worked in or with your business unit, during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment; or

(2) while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within 90 days (180 days if you are a member of the Management Committee at the time of notice of termination) after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you solicit or entice away or in any manner attempt to persuade any client or customer, or prospective client or customer, of the Firm (i) to discontinue or diminish his, her or its relationship or prospective relationship with the Firm or (ii) to otherwise provide his, her or its business to any person, corporation, partnership or other business entity which engages in any line of business in which the Firm is engaged (other than the Firm); provided, however, that this clause shall apply only to clients or customers, or prospective clients or customers, that you worked for on an actual or prospective project or assignment during any notice period applicable to you in connection with the termination of your Employment or during the 180 days preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Morgan Stanley has duly executed and delivered this Award Certificate as of the Date of the Award.

MORGAN STANLEY

/s/

[Name]

[Title]

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EX-10.4

EXHIBIT 10.4

TO:	Colm Kelleher
FROM:	[Names redacted]	DEPT:	Human Resources
SUBJECT:	Repatriation to London1

As you complete your expatriate assignment there are a number of items that will impact your relocation to London.

Your International Services contact in the assignment location is [name, telephone number and email address redacted].

Your International Services contact in the UK is [name, telephone number and email address redacted].

Your repatriation arrangements are as follows:

• Base Salary: During the time that you remain in New York you will continue to be paid as an expatriate. Upon returning to the London office your annual base salary will continue to be £490,000. You will continue to have your monthly salary deposited into your UK bank account. You must, however, sign and return to London Payroll (LN-CW/08) a Form P46 to ensure that you pay the correct UK tax. A copy of the form is enclosed.

• Compliance: The Financial Services Authority (FSA) is the Firm’s lead Regulator in the United Kingdom. All employees of Morgan Stanley UK Limited who, as part of their duties, advise clients, commit the Firm’s capital in transactions, engage in corporate finance activities or work in related business areas (such as Research) are required to be registered with the FSA and must agree in writing to be bound by and be subject to such of the FSA’s Rules as the FSA may prescribe. Please ensure that you familiarise yourself with the accompanying documentation by reviewing the FSA Memorandum and completing the FSA Registration Questionnaire. The questionnaire must be returned to [name and address redacted].

• Tax Equalisation/Taxes: Tax equalisation continues for the tax year of repatriation and may extend to the following tax year, with the exception of executive compensation payouts. A further copy of the tax equalisation policy is enclosed for your information. Please contact [email address redacted] if you have any questions in this regard.

The Firm has engaged PricewaterhouseCoopers (PwC) on a worldwide basis to prepare the expatriate’s foreign individual income tax returns and tax equalisation calculation. Reasonable fees associated with these services will be borne by the Firm.

¹  In addition to the items described herein, in connection with Mr. Kelleher’s repatriation from New York to London and given the global nature of his position, Morgan Stanley agreed to provide Mr. Kelleher with a monthly housing allowance of $15,000 beginning in May 2011 (subject to a 5% increase each April) to maintain a residence in New York City and the right to continue participation in one of the Company’s international medical insurance plans.

[Name, telephone number and email address redacted] will be in contact in due course to arrange a meeting.

• Relocation Allowance: Upon your arrival in London, you will receive an after-tax miscellaneous relocation allowance of one half of one month’s base salary to a maximum of £1,650, plus 25% of one half of one month’s capped base salary for each accompanying family member to an overall maximum of £3,300. Miscellaneous expenses would include the purchase of small household appliances, curtain and carpet refitting, etc.

The relocation allowance is considered taxable income in most countries however, the Firm will protect you from any tax liability on the relocation allowance through the tax equalisation process.

Your miscellaneous relocation allowance based on a family size of two will be £2,062.50.

[Name redacted] will arrange payment of the allowance when you arrive in the UK. The allowance will be paid approximately 14 working days after it has been requested.

• Assignment Accommodation: The Firm will reimburse you for any customary lease breakage fees incurred as a result of your relocation. Please contact your local International Services representative to make arrangements for terminating the lease. If it becomes necessary for you to live in temporary accommodation in the assignment location due to the expiration of your current lease, this will be arranged by your International Services contact. Please note that you will continue to receive your cost of living allowance and therefore no personal expenses incurred whilst in temporary accommodation will be reimbursed.

• Schooling: Morgan Stanley will cover school fees relating to the current academic year. With effect from the start of the next academic year you will be personally responsible for all school fees.

• Shipment and Storage of Household Goods: Morgan Stanley will also pay for one air shipment of urgently required personal effects to a maximum of 500 lbs plus an additional 100 lbs for each accompanying family member. If you rented furniture whilst on assignment, you will not be entitled to a sea shipment. If you did not rent furniture, you will be entitled to one surface shipment of household goods to the maximum capacity of a 40 foot container (approx 10,000 - 12,000 lbs). Please contact [name, telephone number and email address redacted]. You will also be entitled to storage of household goods in London for the time you are in temporary living. Please refer to the Worldwide Expatriate Staff Policy for details of the Firm’s shipping policy.

• Transfer from Assignment Location: The Firm will provide you and your family with flights to London in business class and transportation to and from airports.

Please use job number [redacted] and your new location cost centre when booking your flight.

• House Hunting Trip: Since you have maintained a vacant home in the UK, you will not be entitled to a home search trip.

• Sale of Car: If you have bought a private car in your assignment location, Morgan Stanley will reimburse the loss on sale of up to 2 cars per household. The loss is

calculated as the differential between the sale price obtainable by a car dealer (retail sale value as determined using an independent car trade publication and, the amount actually received on disposal of the car(s) to an independent third party. The maximum amount reimbursable is USD 4,000 or 25% of the retail sale value, whichever is the lower amount.

• Benefits: You will continue to be enrolled in the UK Benefits Programmes and international medical cover will continue until your return to the UK. You should submit any outstanding medical expenses from your assignment period as quickly as possible on your return to the UK. Any medical treatment required on return to the UK should be claimed via the domestic medical insurance policy. Should you prefer to retain international medical cover, then please contact [name, telephone number and email address redacted].

• Relocation Expenses: All relocation expenses must be submitted on a properly completed relocation expense form, copies of which are enclosed. Completed forms should be submitted to [name redacted] for authorisation. Expenses are reimbursed in sterling by Accounts Payable by direct deposit to your UK bank account within approximately 14 working days of receipt (bank account notification form enclosed which should be sent directly to Accounts Payable).

Incomplete expense forms will be returned and employees are expected to retain copies of the form and receipts. Expenses should be submitted within 60 days or you will need to obtain Managing Director sign-off in addition to Human Resources authorisation.

Corporate credit cards may not be used for relocation expenses. Relocation expenses charged on corporate cards will not be processed.

Please refer all questions regarding the UK elements of the relocation package to [name redacted].

cc: [Names redacted]

Enc: Form P46 & Guidelines

FSA Registration & Memo

European Tax Equalisation Policy

Worldwide Expat Policy

Relocation Expense Forms

Bank details for AP Form

EX-10.5

EXHIBIT 10.5

MORGAN STANLEY

EUROPEAN TAX EQUALISATION POLICY

CONTENTS
I.	GENERAL STATEMENTS
II.	PROCEDURES
	A.	Exit/Entrance Interviews		3
	B.	Social Security Coverage		3
	C.	Actual Home and Host Country Individual Income Tax Returns		3
	D.	Non Home/Host Country Individual Income Tax Returns		4
	E.	Tax Equalisation Calculation and Settlement		4
	F.	Annual Advisory Allowance		5
III.	TAX EQUALISATION CALCULATION
	A.	Hypothetical Tax Withholding		6
	B.	Income and Capital Subject to Tax Equalisation		6
	C.	Assumptions used in Tax Equalisation Calculations		7
		1.	Income Tax	7
		2.	Filing Status	7
		3.	Spousal Income	7
		4.	Joiners	7
		5.	Leavers	7
		6.	Joiners/Leavers Outside Income	7
		7.	International Medical Cover	7
		8.	Rental Income	8
		9.	Executive Compensation	8
		10.	US Citizens/Greencard holders	8
IV.	APPENDIX: UK SPECIFIC INFORMATION
	A.	UK National Insurance		9
	B.	UK Hypothetical Tax Withholding		9
	C.	Dual Contracts of Employment		10
	D.	Relief for Overseas Workdays		10
	E.	Remittance Basis		10
	F.	Allowances and Deductions		11
	G.	Child Benefit		11
	H.	Pension Contributions		11
	I.	Restricted Investments		12
	J.	“Cycle2Work”, “Computers@Home” and “Gym Salary Sacrifice”		12
	K.	Share Ownership Plan		12

MORGAN STANLEY

EUROPEAN TAX EQUALISATION POLICY

I. GENERAL STATEMENTS

A. Employees of Morgan Stanley entities in Europe with Expatriate Assignment status are covered by the European Tax Equalisation Policy. Short-term Assignees are covered in cases where the assignment results in a tax impact.

• An “expatriate” is an employee temporarily assigned from his home country to a host location for a period of more than one year. The assignment period is reviewed on an annual basis and in general does not exceed three years.

• A “short-term assignee” is an employee temporarily assigned from his home country to a host location for up to one year (see Section I C).

• The “home country” is defined as the Morgan Stanley office location which management has determined will be the career base for the employee and is determined without regard to citizenship.

B. The tax equalisation programme is designed to ensure that the home country tax positions of employees on temporary foreign assignments will be neither advantageous or disadvantageous. The Firm is responsible for actual home country and host country taxes with the exception of inheritance tax, estate tax, wealth tax and taxes related to extraordinary income such as sweepstakes or gambling winnings. In return, expatriates pay a hypothetical tax to the Firm. The expatriate has the responsibility of paying hypothetical tax to the Firm even though no actual home country tax liability may exist. Hypothetical tax is assessed on the compensation the expatriate would have received had he/she remained in the home country, and personal income including, but not limited to, interest, dividends, and proceeds from sales of stock and other chargeable capital gains. Hypothetical tax is not assessed on assignment related items such as COLA, housing, utilities or home leave. Expatriates effectively receive these benefits free of tax. Please see Section III B for more details.

C. Short-term assignments may have no impact on the employee’s tax position depending on the length of the assignment, and the home and assignment locations. In cases where there is no impact, the tax equalisation policy will not apply and employees continue to remain personally responsible for their tax filings and payments. In cases where there is an impact on the employee’s home country tax position and/or a tax liability is incurred in the assignment location, the tax equalisation policy will apply. Although the mechanics of the equalisation will be different from that for employees with Expatriate status, the same principles will apply. That is, tax preparation assistance will be provided, assignment location tax costs will be fully paid by the Firm, and the employee will only be responsible for the home country tax costs that would have been due in the absence of an assignment. Please note that to the extent foreign taxes paid by the Firm can be recovered by filing a home country tax return and claiming foreign tax credits, such tax recoveries will belong to the Firm. Furthermore, should a short-term assignment generate any additional home country tax refund, this refund will be for the benefit of the Firm.

D. The Firm has engaged PricewaterhouseCoopers (PwC) globally as the tax return provider to complete all necessary home and host country individual income tax returns for employees that fall under the Tax Equalisation Policy. All home and host country tax returns should ideally be completed by PwC, and reasonable fees associated with the preparation of these returns are met by the Firm.

1

If the employee would like to maintain his current personal tax adviser for preparation of his home and/or host country tax
return(s), he/she should inform [email address redacted] prior to the start of his assignment. The employee will have to provide PwC with copies of relevant tax returns prepared by an alternative tax adviser in order for PwC to prepare annual tax equalisation calculations.

Authorised employees are expected to co-operate fully with Human Resources and PwC in the preparation of actual tax returns and tax equalisation calculations. This includes providing all necessary information to Human Resources and PwC on a timely basis, prompt filing of completed home and host country tax returns, and prompt payment of any taxes due.

In cases in which late filing penalties or interest result from an employee’s delinquency or negligence, the employee will be liable for the actual penalties and interest assessed by the relevant tax authorities against his actual tax liability.

The Firm will not be responsible for any incremental accounting fees, late filing or payment penalties or interest that result from an employee’s lateness in providing information to PwC or not filing on a timely basis.

E. This policy is subject to modification to reflect changes in actual tax law, practice, and Divisional and Firm policy. Any unique circumstances not envisioned by the programme will be handled on an ad hoc basis by Human Resources.

F. It may be possible to mitigate the Firm’s tax exposure if the employee is able to organise his financial affairs in a particular way. The employee will be expected to co-operate with any such requests to reduce the Firm’s costs and will be protected from any consequential cost to them. Caution should be exercised in making major investments during the assignment, as there may be unique and potentially unfavourable tax consequences. Expatriates should retain competent tax advice prior to making an investment and may wish to utilise their annual PwC advisory allowance for this purpose (see Section II F).

G. Unless otherwise stated, this policy will be effective immediately, replacing the policy dated April 1, 2002.

All questions regarding policy and procedure should be directed to [name redacted] or [name redacted] in London Human Resources.

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Morgan Stanley European Tax Equalisation Policy

II. PROCEDURES

A. Exit/Entrance Interviews

Expatriates will be required to arrange and attend a “departure” meeting with PwC at the offices of Morgan Stanley prior to departure from the home location. At this meeting, all expatriates will be required to complete appropriate income tax and social security forms, any tax refund claim forms, any social security filings and other relevant documents, provide any necessary information relevant to the tax equalisation calculation and will receive limited home country tax planning advice related to their overseas assignment.

Upon return from the assignment, expatriates should also arrange and attend an “arrival” meeting with PwC to complete entrance forms, to receive advice on their taxation responsibilities, and to ensure that they are being taxed correctly on returning to the home country.

The relocation allowance will not be paid until HR receives confirmation from PwC that the employee has met with them for the “departure” meeting and all necessary filings have been satisfactorily completed.

B. Social Security Coverage

Expatriates will be subject to actual or hypothetical home country social security contributions for the duration of the overseas assignment. The expatriate’s contribution will be based on actual rates for home country social security contributions in force each year. Where the home country has reciprocal arrangements with the assignment country, the Firm will maintain the employee in the home country social security to the extent possible. In locations where no reciprocal arrangements exist, the Firm will be responsible for meeting all foreign social security costs during the assignment period.

Please refer to Section IV: Appendix, for further UK specific information around Social Security issues whilst on assignment from the UK.

C. Actual Home and Host Country Individual Income Tax Returns

Authorised employees must annually complete and submit a home country tax organiser to the PwC office responsible for their home country tax filings. PwC will then prepare all of the necessary home country tax returns. Please note that to the extent host country taxes paid by the Firm can be recovered by filing a home country tax return and claiming foreign tax credits, such tax recoveries/refunds should be refunded to the Firm.

Authorised employees must annually complete and submit a host country tax organiser to the PwC office responsible for their host country tax filings. Although actual host country taxes are paid directly by the Firm, all employees are responsible and are required to file host country tax returns. As the Firm meets the employee’s actual host country taxes, any refund received from the host country tax authorities should be refunded to the Firm.

As the late filing of income tax returns may result in the assessment of penalties and interest, authorised employees are required to return the tax organisers within four weeks of receipt. The Firm reserves the right to withhold payment of expatriate benefits if the expatriate is delinquent in supplying the necessary information.

It is the authorised employee’s responsibility to ensure that tax returns are filed on a timely basis. In cases in which late filing of the return or late payment of the tax raised by the assessment is due solely to the authorised employee’s

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Morgan Stanley European Tax Equalisation Policy

delinquency or negligence, the employee will be liable for the actual penalties and interest assessed by the tax authorities. No credit for these interest and penalties will be given in the tax equalisation calculation.

D. Non Home/Host Country Individual Income Tax Returns

The Firm will not meet the cost of preparing additional country tax returns (that is, other than home and host country), unless the expatriate is a US Citizen or Greencard holder (whereby Section III C 10 will apply), or authorisation for additional returns has been approved prior to the start of the assignment. Where the expatriate believes that any additional tax returns may be required as a result of business travel, this should be raised with PwC.

E. Tax Equalisation Calculation and Settlement

Once an expatriate’s final hypothetical tax liability for a particular tax year is calculated, all tax payments made by the expatriate are compared to the final hypothetical liability in order to determine if the Firm has a balance due to the expatriate or vice versa. Tax payments made by the expatriate include but are not limited to:

a. Hypothetical tax withheld from base salary, above base compensation, executive compensation and other allowances as appropriate.

b. Actual home country taxes withheld from the expatriate prior to commencement of his overseas assignment or following his return, unless the withholding is refundable.

c. Actual home or host country tax payments made by the expatriate as estimates or balances due with actual returns.

d. Actual tax withholding on interest, dividends, etc.

e. Actual tax payments made by the expatriate’s spouse, subject to stated limitations (see Section III C 3).

Any payment due to the employee will be made with the first available payroll after agreement of the final computation. Typically, this will be approximately six to eight weeks. If the expatriate owes the Firm further hypothetical tax, the final liability should be remitted within eight weeks of agreement of the final computation. If payment is not received within eight weeks, the Firm may add interest to any balance due at the official rate as charged by the home country tax authorities for late payment. In addition, the Firm reserves the right to offset outstanding liabilities to the Firm (including interest) against any other compensation amounts due to the employee, including but not limited to, bonuses and other above base compensation, termination or severance payments, etc. provided that, to the extent applicable, the Firm may not offset any outstanding liabilities to the Firm against nonqualified deferred compensation (as defined in Section 409A of the US Internal Revenue Code (“Section 409A”)) that is due to an employee, except to the extent not prohibited by Section 409A and would not cause the employee to recognize income for United States federal income tax purposes prior to the time of payment or settlement of such compensation or to incur additional tax or interest under Section 409A.

For further information regarding the tax equalisation calculation, please refer to Section III.

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Morgan Stanley European Tax Equalisation Policy

F. Annual Advisory Allowance

In addition to meeting the cost for preparation of home and host country tax returns in respect of all applicable years during the assignment, the Firm also provides the expatriate with advisory time to meet with PwC. The Firm will absorb the cost of this advisory time up to the following maximum time limits in each year of assignment:

Level:	Time Allocation:
Managing Director	6 hours
Executive Director	4 hours
All other Professional Staff	3 hours

Note that any unused allocation cannot be carried forward from year to year nor can future years’ entitlement be used currently. In addition, note that the maximum time limits are for consultations in both the home and host countries.

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Morgan Stanley European Tax Equalisation Policy

III. TAX EQUALISATION CALCULATION

A. Hypothetical Tax Withholding

An expatriate receives as part of his compensation package a base salary, a Cost Of Living Allowance (COLA), when appropriate, an assumed home country housing deduction, when appropriate, and hypothetical tax and social security withholding.

It should be noted that hypothetical withholding, as with actual withholding or provisional tax payments required in certain jurisdictions, is an estimate of the expatriate’s final hypothetical tax. This estimate will be adjusted up or down on the tax equalisation resulting in a refund due to the expatriate or a liability due the Firm, just as actual withholdings or provisional tax payments are credited on the actual filing of a tax return resulting in an amount due to, or from, the tax authority.

The hypothetical withholding will not take into account the effect of any tax planning mechanisms, with the exception of monthly pension contributions made via the home country payroll. Appropriate tax relief for these investments will be reflected in the final hypothetical tax liability.

Adjustments to hypothetical tax withholding will be allowed only for those expatriates who have substantiating evidence, and are subject to review by International Services.

B. Income and Capital Subject to Tax Equalisation

The tax equalisation calculation is prepared by PwC. Expatriates are tax equalised up to and including the tax year of repatriation or termination. In some cases, tax equalisation may extend to subsequent tax years to the extent that those years are affected by items of income, deduction or credit relating to the expatriate assignment, with the exception of executive compensation (including but not limited to, stock units and stock options). The tax equalisation calculation is essentially a hypothetical or “dummy” home country return in which tax is calculated and assessed only on income and deductions an employee would have received had he/she remained in the home location.

Listed below are the types of income which are generally subject to hypothetical tax, as well as those types of income which are not subject to hypothetical tax. The Firm pays the actual home and host country taxes on both types of income:

Income and Capital subject to hypothetical tax includes but is not limited to:	Income not subject to hypothetical tax:
MS Base Salary	Moving Expenses
MS Bonus	COLA
MS Executive Compensation (to the extent tax equalised – see Section III C 9)	Housing Allowance Utilities Payments
MS Termination Payments	Home Leave
MS Commission and Pool Payments	Social Club
Investment Income	Tuition Reimbursement
Income and Capital gain sums derived from stock or other property	Language Lessons Furniture Rental Allowance
Domestic Medical Insurance Benefit	International Medical Insurance
Remittance of Income and Chargeable Gains	Foreign Tax Payments
	Relocation Allowance
	Visa/Immigration costs
	Car Loss reimbursement

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Morgan Stanley European Tax Equalisation Policy

C. Assumptions Used in Tax Equalisation Calculations

The assumptions listed below are used in the preparation of the tax equalisation calculation:

1. Income Tax - Hypothetical income taxes, and Social Security as appropriate, are determined by using the applicable statutory home country tax rates for the year in question.

2. Filing Status - The tax equalisation calculation will be prepared using the expatriate’s actual filing status as if he/she had remained in the home location.

3. Spousal Income - If the home and/or host country does not require joint tax returns or filing as a single person is advantageous, the Expatriate’s spouse is responsible for the preparation and cost of their home and/or host country tax return as well as the payment of any applicable home and/or host country taxes. The Expatriate may use the annual advisory allowance to cover some or all of the tax preparation cost using the advisory time allotment (see Section II. F).

4. Joiners - If the employee joins Morgan Stanley in the home country in the same tax year as he/she is expatriated then the tax rates and allowances used in the hypothetical computation for that year will be pro-rated from the date of leaving the previous home country employer. For example:

a. If the employee has not previously worked in the home country, then he/she will receive the full year’s rates and allowances.

b. If the employee leaves his previous home country employer and immediately joins Morgan Stanley, the rates and allowances will be pro-rated according to the date of joining.

c. If the employee leaves his previous home country employer and has a period of unemployment before joining Morgan Stanley, the rates and allowances will be apportioned from the first day of that unemployment.

5. Leavers - If the expatriate leaves Morgan Stanley during the year, then the rates and allowances for that year will be pro-rated to the date of termination, unless he/she has no home country taxable income in the remainder of the home location tax year, in which case no pro-ration of the rates and allowances will be made.

For expatriates who terminate employment in a host location and do not return to the home country, the Firm will be responsible only for the host taxes that would have been due if the expatriate had returned to the home location upon termination. Expatriates should be aware that this can result in a significant differential in some jurisdictions.

6. Joiners/Leavers Outside Income - If the employee joins and/or leaves the Firm during the year, then outside income will only be tax equalised to the extent that it has arisen during the period of his employment with the Firm.

7. International Medical Cover - Medical benefits will be provided to an expatriate during the overseas assignment through the International Medical Program detailed in the expatriate package. The taxable benefit of the home country medical plan will be included in the expatriate’s taxable income for home country hypothetical tax purposes.

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Morgan Stanley European Tax Equalisation Policy

8. Rental Income - Employees are encouraged to maintain their home country property and rent it out during their expatriate assignment. Any net rental income will be included in the tax equalisation calculation.

9. Executive Compensation - Executive Compensation including, but not limited to, stock units and stock options, is not tax equalised after repatriation, termination or localisation in the assignment location. After the repatriation/termination/localisation date, employees are responsible for all actual taxes on such income. This includes compensation that was granted and/or vested during the expatriate assignment period. Employees are also responsible for filing any necessary tax returns to declare such income, unless additional tax preparation assistance from PwC has been authorised by the Firm.

10. US Citizens/Greencard holders - As required, the Firm will authorise PwC to prepare US Federal (and state where applicable) tax returns for the duration of the assignment. US Citizens/Greencard holders will be tax equalised to the US and home country tax position that would have prevailed had they remained in the home location. PwC will prepare a hypothetical US tax calculation and the expatriate will be responsible for any hypothetical US tax due on this calculation.

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Morgan Stanley European Tax Equalisation Policy

IV. APPENDIX : UK SPECIFIC INFORMATION

A. UK NATIONAL INSURANCE

Where an expatriate is assigned to a host country with which there is no totalisation agreement with the UK, the expatriate may not be able to remain subject to UK national insurance. As such, actual national insurance contributions may not be paid by the Firm during the assignment. In these circumstances, the Firm will pay the employer and employee social security contributions required in the host country.

An expatriate in this position should consider paying UK voluntary (Class 2 or Class 3) national insurance contributions for the period of his assignment in order to maintain his UK national insurance record and to make each tax year of the assignment a qualifying year for UK state pension purposes. PwC can provide further information in this regard at the exit interview.

Note that regardless of the expatriate’s actual social security position whilst on assignment, he/she will be subject to actual or hypothetical UK Class 1 national insurance contributions.

In very limited circumstances, the Firm and/or the expatriate will not be able to pay employee social security contributions in either the home or host countries, and as a result, the expatriate might not be covered by any social security scheme for the duration of his assignment. These cases will be dealt with on an ad hoc basis.

If a UK expatriate does not have a national insurance number, he/she must make arrangements to apply for one prior to his departure from the UK, if he/she is eligible to do so. Eligibility can be confirmed by PwC. If the Firm is unable to obtain continuing coverage under the UK social security system as a result of the expatriate’s failure to apply for a national insurance number, the expatriate will be responsible for any incremental employer and employee social security costs which arise in the assignment location.

B. UK HYPOTHETICAL TAX WITHHOLDING

Upon actually leaving the home country for the assignment location, if the assignment is likely to extend to at least one UK tax year, most expatriates will provisionally cease to have any further UK tax liability on their earned compensation. Although no actual UK tax will then be withheld on base and above base compensation, the Firm will withhold hypothetical tax. If, however, an actual UK liability exists during the assignment due to interest, dividends, rental income, etc arising in the UK, the law requires that a UK tax return be filed on a timely basis.

Even if the expatriate has no actual UK tax liability and no actual UK tax return is therefore required, the expatriate is still responsible for the payment of hypothetical taxes. The Firm provides PwC with all necessary Morgan Stanley compensation and benefits information for each tax year. Each expatriate must supply PwC with all other information pertinent to the calculation of the hypothetical tax. An organiser will be sent to the expatriate shortly after the end of the tax year and it is required to be returned within four weeks of receipt.

The hypothetical tax withholding on base salary is determined by a number of factors, including the level of base salary and the current tax year’s hypothetical PAYE tax code. Hypothetical tax on above-base compensation will also be withheld at the employee’s appropriate UK marginal tax rate.

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Morgan Stanley European Tax Equalisation Policy

C. DUAL CONTRACTS OF EMPLOYMENT

Employees with dual contracts of employment prior to their foreign assignment will be tax equalised as if the dual contract continued to be in effect (subject to the provisos outlined in the below paragraph). The compensation related to the non-UK contract will be calculated for hypothetical tax purposes by using the percentage of business days the employee spent working for Morgan Stanley under the non-UK contract during the Firm’s year (on an annualised basis) immediately prior to the year of their foreign assignment.

In calculating the hypothetical offshore percentage, please note the following two provisos: (i) Any business days spent working in the pending assignment location city will not be included for the purposes of the hypothetical dual contract split. (ii) The prior year actual dual contract split will not be used for calculating the hypothetical split if that year is deemed to be unrepresentative of the employee’s typical travel pattern. In all cases, the proportion to be treated as paid under the non-UK contract will be determined by Human Resources.

Payments of base salary made under both the UK and the non-UK contracts will be included in the spendable income computation for Cost of Living Allowance purposes and in the calculation for the hypothetical tax deduction for that computation, but only the UK base salary will be included in the calculation of the hypothetical tax to be actually deducted in arriving at net income. In addition, please also note section E below with regard to the remittance basis for those employed under a dual contract.

Dual contracts will be used in tax equalisation only as long as dual contracts remain effective for UK income tax purposes and valid under UK tax law. There is no guarantee of obtaining a dual contract on repatriation and this will be reviewed based on facts, circumstances and applicable law for continuation.

D. RELIEF FOR OVERSEAS WORKDAYS

Employees with a history of claiming relief on their UK tax returns for workdays spent outside of the UK will continue to be equalised to this position whilst on assignment, subject to the following:

1. The employee must provide PwC with documentation supporting prior year overseas workdays claims (e.g. copy of UK tax return).

2. Hypothetical overseas workdays relief will be limited to the actual percentage relief claimed on the prior year tax return, excluding any days spent working in the pending assignment location city.

3. Hypothetical relief for overseas workdays will only be included in the hypothetical tax calculation for as long as the employee would have retained an entitlement had they remained in the UK, and as long as the deduction remains valid under UK law.

E. REMITTANCE BASIS

With effect from 6 April 2008, non-UK domiciled individuals and those considered Resident/Not Ordinarily Resident in the UK are required to make a claim to be taxed on the remittance basis if total relevant offshore income and gains in any tax year exceeds £2,000, thereby forfeiting any claim to a personal allowance. Employees falling within these categories will be equalised to the remittance basis whilst on assignment, subject to the following:

1. In all circumstances, for those individuals employed in the capacity of IBD Analyst, the remittance basis will not apply.

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Morgan Stanley European Tax Equalisation Policy

2. For Resident/Not Ordinarily Resident employees, relief for overseas workdays will be available based on Section D above, thereby forfeiting the claim to a personal allowance, unless relevant offshore income and gains during each tax year for which relief is being claimed being less than or equal to £2,000.

3. Non-UK domiciled employees with Resident/Ordinarily Resident status will be tax equalised to that status (i.e. offshore investment income will not be subject to UK tax, unless remitted to the UK). Employees falling into this category who do not have a history of claiming the remittance basis, will be entitled to use their Annual Advisory Allowance to allow PwC to determine their optimal tax position and to adjust the tax equalisation calculation as necessary. This entitlement is subject to the individual being able to provide relevant supporting documentation.

4. Where a dual contract employee is sent on an overseas assignment, in all cases, it will be assumed that the remittance basis applies.

5. In all circumstances, Morgan Stanley will not seek to recoup the £30,000 Remittance Basis Charge that employees may have been required to pay under UK tax legislation as a result of claiming the remittance basis prior to the commencement of their assignment (i.e. where they have been resident in the UK for at least 7 out of the previous 9 tax years).

F. ALLOWANCES AND DEDUCTIONS

Certain allowances and deductions given/claimed on the expatriate’s UK tax return immediately prior to his foreign assignment may be allowed on the hypothetical return. These allowances and deductions include, but are not limited to:

a. Charitable contributions to the extent they have been made in the past and are still legally required to be made under a deed of covenant or Give As You Earn/Gift Aid.

b. Additional monthly voluntary pension contributions (AVCs) to the extent that they have been made in the past into the company pension scheme. However, please note section H below with regard to the maximum contributions that will be subject to tax equalisation.

c. Waivers into the UK or offshore pension plan to the extent they have been made in prior years. However, please note section H below with regard to the maximum contributions that will be subject to tax equalisation.

G. CHILD BENEFIT

Where an employee was entitled to receive child benefit prior to the commencement of their overseas assignment, this will continue to be recognised within the tax equalisation calculation for the duration of the assignment period. The employee is responsible for notifying and providing evidence of the births of any children during the assignment period.

H. PENSION CONTRIBUTIONS

With regard to pension contributions, the maximum amounts to be included within the tax equalisation calculation will be limited to the average contributions made by an employee in the previous three tax years prior to the date of commencement of the overseas assignment.

Where pension contributions are subject to the Special Annual Allowance charge introduced on the 22 April 2009; this charge will not be covered by the tax equalisation policy.

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Morgan Stanley European Tax Equalisation Policy

An employee will be subject to this Special Annual Allowance charge if they:

• Have total taxable income of more than £150,000 in the current or one of the previous two tax years;

• AND increase their pension contributions (including AVCs and employer contributions) after 21 April 2009 such that they are over and above the higher of:

a) £20,000 per annum; or

b) the employee’s ‘regular’ pension contributions prior to 21 April 2009 (i.e. contributions made at least quarterly); or

c) if appropriate, the limit imposed for infrequent pension contributions (see below).

The Special Annual Allowance charge is calculated as 20% of any contributions over and above the abovementioned thresholds.

If you have made ‘infrequent’ (less than quarterly) contributions of more than £20,000 into a money purchase scheme between 6 April 2006 and 5 April 2009, then your special annual allowance limit will be the three year average of your infrequent contributions - up to a higher maximum of £30,000. However, this limit may only be applied after deducting any regular contributions already made.

I. RESTRICTED INVESTMENTS

The Firm recognises that as a result of the expatriate assignment the individual may be prevented from participating in UK tax efficient income schemes such as an Individual Savings Account (ISA). To compensate the individual for this, the Firm will exempt from hypothetical tax the first £900 of an individual’s outside investment income (excluding capital gain income). This will be expressed in the form of a deduction against investment income, limited to the lower of the investment income or £900.

J. “CYCLE2WORK”, “COMPUTERS@HOME” AND “GYM SALARY SACRIFICE”

Deductions for the Cycle2Work and/or Computers@Home and/or Gym salary sacrifice schemes will continue during the expatriate assignment, up to the end of the relevant scheme’s life.

K. SHARE OWNERSHIP PLAN

Expatriates who have elected to purchase Salary shares via the UK Share Ownership Plan will continue to have deductions taken from their salary throughout the annual deduction period unless they give notice for the Firm to stop making deductions.

12

EX-10.6

EXHIBIT 10.6

AMENDMENT TO

401(k) SAVINGS PLAN

Morgan Stanley & Co. LLC (the “Company”) hereby amends the Morgan Stanley 401(k) Savings Plan (the “Plan”) as follows:

1. Effective as of the consummation of the transactions described in the Purchase Agreement by and among SCI Services, Inc., Ocwen Financial Corporation and certain other parties dated as of October 19, 2011, Appendix A shall be amended (i) by adding the date of the consummation of the transactions described in the Saxon Purchase Agreement (as defined below) at the end of the entry for SCI Services, Inc., Saxon Mortgage, Inc., Americas Moneyline, Inc., Saxon Mortgage Services, Inc. and Saxon Funding Management, Inc. in the list of Participating Companies contained therein indicating the cessation of such entities’ participation in the Plan, and (ii) by adding the following new paragraph at the end of the Section headed “SCI Services, Inc., Saxon Mortgage, Inc., Americas Moneyline, Inc., Saxon Mortgage Services, Inc. and Saxon Funding Management, Inc.”:

“Cessation of Participation of SCI Services, Inc., Saxon Mortgage, Inc., Americas Moneyline, Inc., Saxon Mortgage Services, Inc. and Saxon Funding Management, Inc. Effective as of the consummation of the transactions described in the Purchase Agreement (the “Saxon Purchase Agreement”) by and among SCI Services, Inc., Ocwen Financial Corporation and certain other parties dated as of October 19, 2011 (the “Saxon Closing Date”), (i) SCI Services, Inc., Saxon Mortgage, Inc., Americas Moneyline, Inc., Saxon Mortgage Services, Inc. and Saxon Funding Management, Inc. and any subsidiaries (the “Saxon Companies”) shall cease to be Participating Companies in the Plan; (ii) employees of the Saxon Companies shall cease to actively participate in the Plan; and (iii) employees of the Saxon Companies described as “Business Employees” in the Saxon Purchase Agreement immediately prior to the Saxon Closing Date shall become fully vested in all amounts allocated to their Accounts. Any such Business Employee shall be treated as eligible to receive a Matching Contribution for 2012 pursuant to Section 6(k) of the Plan and such Matching Contribution shall be based on his or her 2012 Matched Contributions and Earnings prior to the Saxon Closing Date.”

*  *  *  *  *  *  *  *  *

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf as of this 28^th day of February, 2012.

MORGAN STANLEY & CO. LLC
By:	/s/ JEFF BRODSKY
Title:	Global Head of Human Resources

2

EX-12

EXHIBIT 12

Morgan Stanley

Ratio of Earnings to Fixed Charges

and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

(dollars in millions)

(unaudited)

	Three Months Ended March 31, 2012		2011		2010		2009		Fiscal 2008		Fiscal 2007		One Month Ended December 31, 2008
Ratio of Earnings to Fixed Charges
Earnings:
Income (loss) before income taxes(1)	$	7	$	6,574	$	4,601	$	1,119	$	1,098	$	2,570	$	(1,989	)
Add: Fixed charges, net		1,667		7,171		6,691		7,119		36,645		58,172		1,181
Income (loss) before income taxes and fixed charges, net	$	1,674	$	13,745	$	11,292	$	8,238	$	37,743	$	60,742	$	(808	)
Fixed Charges:
Total interest expense	$	1,594	$	6,885	$	6,412	$	6,868	$	36,422	$	57,959	$	1,161
Interest factor in rents		73		286		279		251		224		214		20
Total fixed charges	$	1,667	$	7,171	$	6,691	$	7,119	$	36,646	$	58,173	$	1,181
Ratio of earnings to fixed charges		1.0		1.9		1.7		1.2		1.0		1.0		*
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Earnings:
Income (loss) before income taxes(1)	$	7	$	6,574	$	4,601	$	1,119	$	1,098	$	2,570	$	(1,989	)
Add: Fixed charges, net		1,667		7,171		6,691		7,119		36,645		58,172		1,181
Income (loss) before income taxes and fixed charges, net	$	1,674	$	13,745	$	11,292	$	8,238	$	37,743	$	60,742	$	(808	)
Fixed Charges:
Total interest expense	$	1,594	$	6,885	$	6,412	$	6,868	$	36,422	$	57,959	$	1,161
Interest factor in rents		73		286		279		251		224		214		20
Preferred stock dividends		33		380		1,000		2,041		113		86		497
Total fixed charges and preferred stock dividends	$	1,700	$	7,551	$	7,691	$	9,160	$	36,759	$	58,259	$	1,678
Ratio of earnings to fixed charges and preferred stock dividends		1.0		1.8		1.5		0.9		1.0		1.0		*

(1) Income (loss) from continuing operations before income taxes does not include dividends on preferred securities subject to mandatory redemption, gain (loss) on discontinued operations, noncontrolling interests and income or loss from equity investees.

Fixed charges consist of interest cost, including interest on deposits, interest on discontinued operations, dividends on preferred securities subject to mandatory redemption, and that portion of rent expense to be representative of the interest factor.

Fixed charges do not include interest expense on uncertain tax liabilities as the Company records these amounts within the Provision for income taxes.

The preferred stock dividend amounts represent pre-tax earnings required to cover dividends on preferred stock.

* The earnings for the one month ended December 31, 2008 were inadequate to cover total fixed charges and total fixed charges and preferred stock dividends.

The coverage deficiency for total fixed charges for the one month ended December 31, 2008 was $1,989 million.

The coverage deficiency for total fixed charges and preferred stock dividends for the one month ended December 31, 2008 was $2,486 million.

EX-15

EXHIBIT 15

To the Board of Directors and Shareholders of Morgan Stanley:

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited condensed consolidated financial information of Morgan Stanley and subsidiaries for the three-month periods ended March 31, 2012 and 2011, and have issued our report dated May 7, 2012. As indicated in such report, because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, is being incorporated by reference in the following Registration Statements of Morgan Stanley:

Filed on Form S-3:

Registration Statement No. 33-57202

Registration Statement No. 33-60734

Registration Statement No. 33-89748

Registration Statement No. 33-92172

Registration Statement No. 333-07947

Registration Statement No. 333-27881

Registration Statement No. 333-27893

Registration Statement No. 333-27919

Registration Statement No. 333-46403

Registration Statement No. 333-46935

Registration Statement No. 333-76111

Registration Statement No. 333-75289

Registration Statement No. 333-34392

Registration Statement No. 333-47576

Registration Statement No. 333-83616

Registration Statement No. 333-106789

Registration Statement No. 333-117752

Registration Statement No. 333-129243

Registration Statement No. 333-131266

Registration Statement No. 333-155622

Registration Statement No. 333-156423

Registration Statement No. 333-178081

Filed on Form S-4:

Registration Statement No. 333-25003

Filed on Form S-8:

Registration Statement No. 33-63024

Registration Statement No. 33-63026

Registration Statement No. 33-78038

Registration Statement No. 33-79516

Registration Statement No. 33-82240

Registration Statement No. 33-82242

Registration Statement No. 33-82244

Registration Statement No. 333-04212

Registration Statement No. 333-28141

Registration Statement No. 333-28263

Registration Statement No. 333-62869

Registration Statement No. 333-78081

Registration Statement No. 333-95303

Registration Statement No. 333-85148

Registration Statement No. 333-85150

Registration Statement No. 333-108223

Registration Statement No. 333-142874

Registration Statement No. 333-146954

Registration Statement No. 333-159503

Registration Statement No. 333-159504

Registration Statement No. 333-159505

Registration Statement No. 333-168278

Registration Statement No. 333-172634

Registration Statement No. 333-177454

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP

New York, New York

May 7, 2012

EX-31.1

EXHIBIT 31.1

Certification

I, James P. Gorman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Morgan Stanley;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2012

/s/ JAMES P. GORMAN

James P. Gorman

Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification

I, Ruth Porat, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Morgan Stanley;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2012

/s/ RUTH PORAT

Ruth Porat

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Morgan Stanley (the “Company”) on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James P. Gorman, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JAMES P. GORMAN

James P. Gorman

Chairman and Chief Executive Officer

Dated: May 7, 2012

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Morgan Stanley (the “Company”) on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ruth Porat, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RUTH PORAT

Ruth Porat

Executive Vice President and

Chief Financial Officer

Dated: May 7, 2012

XML

Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2012

Derivative Instrument Detail [Abstract]

Components of Derivative Products

			At March 31, 2012				At December 31, 2011
			Assets		Liabilities		Assets		Liabilities
			(dollars in millions)
Exchange traded derivative products		$	3,882	$	6,071	$	4,103	$	4,969
OTC derivative products			36,134		36,694		43,961		41,484
	Total	$	40,016	$	42,765	$	48,064	$	46,453

Summary by Counterparty Credit Rating and Remaining Contract Maturity of the Fair Value of OTC Derivatives in a Gain Position

OTC Derivative Products—Financial Instruments Owned at March 31, 2012(1)

											Cross-Maturity and Cash  Collateral Netting(3)		Net  Exposure Post-Cash Collateral		Net  Exposure Post-Collateral
			Years to Maturity
Credit Rating(2)			Less than 1		1 - 3		3 - 5		Over 5
			(dollars in millions)
AAA		$	224	$	1,058	$	1,276	$	7,837	$	(5,813)	$	4,582	$	4,408
AA			2,983		5,988		5,226		16,675		(22,926)		7,946		5,959
A			6,867		5,478		10,791		28,012		(41,189)		9,959		6,769
BBB			3,456		3,638		2,838		14,690		(16,673)		7,949		6,544
Non-investment grade			2,931		2,991		1,832		4,216		(6,272)		5,698		3,144
	Total	$	16,461	$	19,153	$	21,963	$	71,430	$	(92,873)	$	36,134	$	26,824

(1)       Fair values shown represent the Company's net exposure to counterparties related to the Company's OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2)       Obligor credit ratings are determined by the Company's Credit Risk Management Department.

(3)       Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

OTC Derivative Products—Financial Instruments Owned at December 31, 2011(1)

		Years to Maturity									Cross-Maturity and Cash Collateral Netting(3)		Net Exposure Post-Cash Collateral		Net Exposure Post-Collateral
Credit Rating(2)			Less  than 1		1 - 3		3 - 5		Over 5
			(dollars in millions)
AAA		$	621	$	1,615	$	1,586	$	10,375	$	(7,513)	$	6,684	$	6,389
AA			5,578		7,547		5,972		21,068		(31,074)		9,091		7,048
A			7,576		5,538		10,224		27,417		(41,608)		9,147		7,117
BBB			4,437		4,448		3,231		17,758		(17,932)		11,942		10,337
Non-investment grade			2,819		2,949		2,703		5,084		(6,458)		7,097		4,158
	Total	$	21,031	$	22,097	$	23,716	$	81,702	$	(104,585)	$	43,961	$	35,049

_____________

(1)       Fair values shown represent the Company's net exposure to counterparties related to the Company's OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2)       Obligor credit ratings are determined by the Company's Credit Risk Management Department.

(3)       Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

Fair Value of Derivative Instruments Designated and Not Designated as Accounting Hedges by Type of Derivative Contract on a Gross Basis

				Assets at				Liabilities at
				March 31, 2012				March 31, 2012
				Fair Value		Notional		Fair Value		Notional
				(dollars in millions)
Derivatives designated as accounting hedges:
	Interest rate contracts		$	7,759	$	72,728	$	—	$	—
	Foreign exchange contracts			392		12,845		148		9,692
		Total derivatives designated as accounting hedges		8,151		85,573		148		9,692
Derivatives not designated as accounting hedges(1):
	Interest rate contracts			783,760		20,207,486		762,593		19,864,081
	Credit contracts			99,996		2,382,764		93,766		2,331,035
	Foreign exchange contracts			47,707		1,718,721		50,783		1,803,265
	Equity contracts			46,538		673,987		51,149		689,748
	Commodity contracts			40,116		430,298		40,506		385,031
	Other			61		3,448		72		6,058
		Total derivatives not designated as accounting hedges		1,018,178		25,416,704		998,869		25,079,218
Total derivatives			$	1,026,329	$	25,502,277	$	999,017	$	25,088,910
Cash collateral netting				(68,587)		—		(38,526)		—
Counterparty netting				(917,726)		—		(917,726)		—
	Total derivatives		$	40,016	$	25,502,277	$	42,765	$	25,088,910

_____________

(1)       Notional amounts include net notionals related to long and short futures contracts of $85 billion and $75 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $189 million and $36 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

				Assets at				Liabilities at
				December 31, 2011				December 31, 2011
				Fair Value		Notional		Fair Value		Notional
				(dollars in millions)
Derivatives designated as accounting hedges:
	Interest rate contracts		$	8,151	$	71,706	$	—	$	—
	Foreign exchange contracts			348		12,222		57		7,111
		Total derivatives designated as accounting hedges		8,499		83,928		57		7,111
Derivatives not designated as accounting hedges(1):
	Interest rate contracts			904,725		21,099,876		880,027		21,005,733
	Credit contracts			138,791		2,466,623		130,726		2,428,042
	Foreign exchange contracts			61,995		1,582,364		64,691		1,604,493
	Equity contracts			46,287		603,290		48,286		595,146
	Commodity contracts			39,778		411,661		39,998		374,594
	Other			598		11,662		2,275		24,905
		Total derivatives not designated as accounting hedges		1,192,174		26,175,476		1,166,003		26,032,913
Total derivatives			$	1,200,673	$	26,259,404	$	1,166,060	$	26,040,024
Cash collateral netting				(77,938)		—		(44,936)		—
Counterparty netting				(1,074,671)		—		(1,074,671)		—
	Total derivatives		$	48,064	$	26,259,404	$	46,453	$	26,040,024

_____________

(1)       Notional amounts include net notionals related to long and short futures contracts of $77 billion and $66 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $605million and $37 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

Summary of Gains or Losses Reported on Derivative Instruments Designated and Not Designated as Accounting Hedges

	Gains (Losses) Recognized
	Three Months Ended
	March 31,
Product Type	2012		2011
	(dollars in millions)
Derivatives	$	(546)	$	(1,095)
Borrowings		698		1,258
Total	$	152	$	163

			Gains (Losses) Recognized in OCI (effective portion)
			Three Months Ended
			March 31,
Product Type			2012		2011
			(dollars in millions)
Foreign exchange contracts(1)		$	21	$	(126)
	Total	$	21	$	(126)

_____________

(1)       Losses of $66million and $47 million wererecognized in income related to amounts excluded from hedge effectiveness testing during the quarters ended March 31, 2012 and 2011, respectively.

			Gains (Losses) Recognized in Income(1)(2)
			Three Months Ended
			March 31,
Product Type			2012		2011
			(dollars in millions)
Interest rate contracts		$	1,607	$	925
Credit contracts			(672)		(697)
Foreign exchange contracts			595		(339)
Equity contracts			(828)		(1,319)
Commodity contracts			(576)		(271)
Other contracts			55		208
	Total derivative instruments	$	181	$	(1,493)

____________

(1)       Gains (losses) on derivative contracts not designated as hedges are primarily included in Principal transactions—Trading.

(2)       Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Principal transactions—Trading.

Disclosure of Credit Derivatives and Other Credit Contracts

		At March 31, 2012
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	1,285,767	$	21,182	$	1,266,956	$	(20,328)
Index and basket credit default swaps		716,615		13,068		548,335		(11,560)
Tranched index and basket credit default swaps		349,543		8,100		546,583		(16,692)
Total	$	2,351,925	$	42,350	$	2,361,874	$	(48,580)

		At December 31, 2011
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	1,325,045	$	47,045	$	1,315,333	$	(45,345)
Index and basket credit default swaps		787,228		29,475		601,452		(24,373)
Tranched index and basket credit default swaps		320,131		17,109		545,476		(31,976)
Total	$	2,432,404	$	93,629	$	2,462,261	$	(101,694)

The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at March 31, 2012:

			Protection Sold
			Maximum Potential Payout/Notional										Fair Value
			Years to Maturity										(Asset)/
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total		Liability(1)(2)
			(dollars in millions)
Single name credit default swaps:
	AAA	$	1,733	$	5,488	$	16,458	$	10,828	$	34,507	$	673
	AA		11,876		19,269		23,462		12,448		67,055		603
	A		77,436		116,747		85,603		46,123		325,909		4,760
	BBB		139,019		207,126		113,761		57,297		517,203		(2,771)
	Non-investment grade		95,683		124,621		79,016		41,773		341,093		17,917
Total			325,747		473,251		318,300		168,469		1,285,767		21,182
Index and basket credit default swaps(3):
	AAA		49,836		68,416		48,295		26,424		192,971		(1,688)
	AA		3,945		7,973		10,567		9,691		32,176		202
	A		4,023		11,023		29,450		16,832		61,328		1,708
	BBB		8,605		82,109		186,346		77,980		355,040		1,519
	Non-investment grade		111,557		119,125		125,080		68,881		424,643		19,427
Total			177,966		288,646		399,738		199,808		1,066,158		21,168
Total credit default swaps sold		$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350
Other credit contracts(4)(5)		$	186	$	1,125	$	527	$	2,721	$	4,559	$	(1,787)
Total credit derivatives and
	other credit contracts	$	503,899	$	763,022	$	718,565	$	370,998	$	2,356,484	$	40,563

_____________

(1)       Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2)       Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3)       Credit ratings are calculated internally.

(4)       Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5)       Fair value amount shown represents the fair value of the hybrid instruments.

The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at December 31, 2011:

			Protection Sold
			Maximum Potential Payout/Notional										Fair Value
			Years to Maturity										(Asset)/
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total		Liability(1)(2)
			(dollars in millions)
Single name credit default swaps:
	AAA	$	1,290	$	5,681	$	24,087	$	12,942	$	44,000	$	1,536
	AA		12,416		22,043		23,341		10,986		68,786		1,597
	A		67,344		124,445		85,543		47,640		324,972		8,683
	BBB		131,588		218,262		115,320		64,347		529,517		4,789
	Non-investment grade		94,105		133,867		82,163		47,635		357,770		30,440
Total			306,743		504,298		330,454		183,550		1,325,045		47,045
Index and basket credit default swaps(3):
	AAA		48,115		49,997		33,584		19,110		150,806		(907)
	AA		6,584		15,349		9,498		15,745		47,176		1,053
	A		5,202		18,996		17,396		12,286		53,880		2,470
	BBB		8,525		99,004		235,888		32,057		375,474		8,365
	Non-investment grade		112,451		141,042		160,537		65,993		480,023		35,603
Total			180,877		324,388		456,903		145,191		1,107,359		46,584
Total credit default swaps sold		$	487,620	$	828,686	$	787,357	$	328,741	$	2,432,404	$	93,629
Other credit contracts(4)(5)		$	65	$	2,356	$	717	$	2,469	$	5,607	$	(1,146)
Total credit derivatives and other
	credit contracts	$	487,685	$	831,042	$	788,074	$	331,210	$	2,438,011	$	92,483

_____________

(1)       Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2)       Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3)       Credit ratings are calculated internally.

(4)       Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5)       Fair value amount shown represents the fair value of the hybrid instruments.

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Fair Value Disclosures (Gains (Losses) Due to Changes in Instrument Specific Credit Risk) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Short-term and Long-term Borrowings
Gains (losses) due to changes in instrument specific credit risk	$ (1,978)	[1]	$ (189)	[1]
Loans
Gains (losses) due to changes in instrument specific credit risk	293	[2]	140	[2]
Unfunded Lending Commitments
Gains (losses) due to changes in instrument specific credit risk	$ 407	[3]	$ 10	[3]

[1] The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company’s secondary bond market spreads.

[2] Instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates.

[3] Gains (losses) were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period end.

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Fair Value Disclosures (Narrative) (Details) (Recurring, USD $) In Billions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Assets | Financial Instruments Owned | Corporate and Other Debt
Amount reclassification from level 3 to level 2		$ 1.6
Amount reclassification from level 2 to level 3		1.3
Assets | Financial Instruments Owned | Derivative and Other Contracts
Amount reclassified from level 1 to level 2	0.3
Amount reclassified from level 2 to level 1	1.1	0.6
Liabilities | Financial Instruments Sold, Not yet Purchased | Derivative and Other Contracts
Amount reclassified from level 1 to level 2	0.4
Amount reclassified from level 2 to level 1	$ 1.2	$ 0.8

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Variable Interest Entities and Securitization Activities (Transfers of Assets Treated as Secured Financings) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Commercial Mortgage Loans
Assets, carrying value	$ 111	$ 121
Liabilities, carrying value	111	121
Credit-Linked Notes
Assets, carrying value	318	383
Liabilities, carrying value	268	339
Equity-Linked Transactions
Assets, carrying value	812	1,243
Liabilities, carrying value	778	1,214
Other
Assets, carrying value	90	75
Liabilities, carrying value	$ 90	$ 74

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Fair Value Disclosures (Amount by Which Contractual Principal Amount Exceeds Fair Value) (Details) (USD $) In Billions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Fair Value Disclosures
Short-term and long-term debt borrowings	$ 1.2	[1]	$ 2.5	[1]
Loans	23.9	[2]	27.2	[2]
Loans 90 or more days past due and/or on non-accrual status	21.3	[2],[3]	22.1	[2],[3]
Aggregate fair value of loans in non-accrual status including all loans 90 or more days past due	1.5		2.0
Amounts past due 90 days or greater (unpaid principal balance)	$ 0.9		$ 1.5

[1] These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index.

[2] The majority of this difference between principal and fair value amounts emanates from the Company’s distressed debt trading business, which purchases distressed debt at amounts well below par.

[3] The aggregate fair value of loans that were in non-accrual status, which includes all loans 90 or more days past due, was $1.5 billion and $2.0 billion at March 31, 2012 and December 31, 2011, respectively. The aggregate fair value of loans that were 90 or more days past due was $0.9 billion and $1.5 billion at March 31, 2012 and December 31, 2011, respectively.

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Borrowings and Other Secured Financings (Components of Long-term Borrowings) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Borrowings and Other Secured Financings
Senior debt	$ 167,986	$ 175,471
Subordinated notes	3,899	3,910
Junior subordinated debentures	4,838	4,853
Total	$ 176,723	$ 184,234

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Segment and Geographic Information (Net Interest by Segments) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Interest income	$ 1,542	[1]	$ 1,859	[1]
Interest expense	1,601	[1]	1,853	[1]
Net interest	(59)		6
Institutional Securities
Interest income	1,145		1,486
Interest expense	1,606		1,813
Net interest	(461)		(327)
Global Wealth Management Group
Interest income	490		453
Interest expense	80		112
Net interest	410		341
Asset Management
Interest income	3		4
Interest expense	11		12
Net interest	(8)		(8)
Intersegment Eliminations
Interest income	(96)		(84)
Interest expense	(96)		(84)
Net interest	$ 0		$ 0

[1] Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument’s fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2012

Discontinued Operations

Information Regarding Amounts Included In Discontinued Operations

			Three Months Ended
			March 31,
			2012		2011
			(dollars in millions)
Net revenues(1):
	Saxon	$	76	$	24
	Quilter		31		33
	Other(2)		—		10
		$	107	$	67
Pre-tax gain (loss) on discontinued operations(1):
	Revel	$	—	$	(10)
	Saxon(3)		25		(34)
	Quilter		2		3
	Other(2)		—		13
		$	27	$	(28)

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Securities Available for Sale (Tables)

3 Months Ended

Mar. 31, 2012

Securities Available For Sale

Schedule of Available for Sale Securities

					At March 31, 2012
					Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than-Temporary Impairment		Fair Value
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	13,680	$	129	$	1	$	—	$	13,808
		U.S. agency securities			16,352		69		17		—		16,404
			Total U.S. government and agency securities		30,032		198		18		—		30,212
	Corporate and other debt:
		Auto loan asset-backed securities			237		—		—		—		237
		Corporate bonds			631		1		1		—		631
		FFELP student loan asset-backed securities(1)			1,431		4		1		—		1,434
			Total Corporate and other debt		2,299		5		2		—		2,302
	Total debt securities available for sale				32,331		203		20		—		32,514
Equity securities available for sale					15		—		1		—		14
Total				$	32,346	$	203	$	21	$	—	$	32,528
(1)	Amounts are backed by a guarantee from the U.S. Department of Education of at least 95% of the principal balance and interest on such loans.
					At December 31, 2011
					Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than-Temporary Impairment		Fair Value
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	13,240	$	182	$	—	$	—	$	13,422
		U.S. agency securities			16,083		54		20		—		16,117
	Corporate and other debt(1)				944		—		3		—		941
		Total debt securities available for sale			30,267		236		23		—		30,480
Equity securities available for sale					15		—		—		—		15
Total				$	30,282	$	236	$	23	$	—	$	30,495
(1)	Amounts represent FFELP student loan asset-backed securities, in which the loans are backed by a guarantee from the U.S. Department of Education of
	at least 95% of the principal balance and interest on such loans.

Schedule of Available for Sale Securities in an Unrealized Loss Position

					Less than 12 Months				12 Months or Longer				Total
At March 31, 2012					Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	1,923	$	1	$	—	$	—	$	1,923	$	1
		U.S. agency securities			3,973		12		1,292		5		5,265		17
			Total U.S. government and agency securities		5,896		13		1,292		5		7,188		18
	Corporate and other debt:
		Corporate bonds			458		1		—		—		458		1
		FFELP student loan asset-backed securities			450		1		—		—		450		1
			Total Corporate and other debt		908		2		—		—		908		2
	Total debt securities available for sale				6,804		15		1,292		5		8,096		20
Equity securities available for sale					14		1		—		—		14		1
Total				$	6,818	$	16	$	1,292	$	5	$	8,110	$	21
					Less than 12 Months				12 Months or Longer				Total
At December 31, 2011					Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. agency securities		$	6,250	$	15	$	1,492	$	5	$	7,742	$	20
	Corporate and other debt				679		3		—		—		679		3
Total				$	6,929	$	18	$	1,492	$	5	$	8,421	$	23

Schedule of Amortized Cost and Fair Valueof Available for Sale Debt Securities by Contractual Date

March 31, 2012				Amortized Cost		Fair Value	Annualized Average Yield
			(dollars in millions)
U.S. government and agency securities:
	U.S. Treasury securities:
		Due within 1 year	$	2,298	$	2,319	1.4%
		After 1 year but through 5 years		10,214		10,314	0.9%
		After 5 years		1,168		1,175	1.4%
		Total		13,680		13,808
	U.S. agency securities:
		After 5 years		16,352		16,404
		Total		16,352		16,404	1.2%
		Total U.S. government and agency securities		30,032		30,212	1.1%
Corporate and other debt:
	Auto loan asset-backed securities:
		After 1 year but through 5 years		237		237	0.8%
		Total		237		237
	Corporate bonds:
		Due within 1 year		43		43	0.7%
		After 1 year but through 5 years		570		570	1.1%
		After 5 years		18		18	1.7%
		Total		631		631
	FFELP student loan asset-backed securities:
		After 5 years		1,431		1,434	1.2%
		Total		1,431		1,434
		Total Corporate and other debt		2,299		2,302	1.1%
		Total debt securities available for sale	$	32,331	$	32,514	1.1%

Schedule of Proceeds of Sale of Securities Available for Sale

		Three Months Ended
		March 31,
		2012		2011
	(dollars in millions)
Gross realized gains	$	1	$	12
Gross realized losses	$	1	$	—
Proceeds of sales of securities available for sale	$	—	$	6,121

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Borrowings and Other Secured Financings (Other Secured Financings) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	$ 21,435	[1]	$ 20,719	[1]
Original Maturities Greater than One Year
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	19,883		18,696
Original Maturities One Year or Less
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	305		275
Failed Sales
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	1,247	[2]	1,748	[2]
Fair Value
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	$ 13,081		$ 14,594

[1] Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

[2] For more information on failed sales, see Note 6.

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Financing Receivables (Summary of Financing Receivables) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Loans	$ 16,318	[1]	$ 15,255	[1]
Allowance	26		17
Commercial And Industrial [Member]
Loans	5,358		5,083
Consumer Loan [Member]
Loans	5,462		5,170
Residential Real Estate [Member]
Loans	5,092		4,674
Wholesale Real Estate [Member]
Loans	$ 406		$ 328

[1] Amounts are net of allowances of $26 million and $17 million at March 31, 2012 and December 31, 2011, respectively.

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Commitments, Guarantees and Contingencies (Obligations under Guarantee Arrangements) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012
Accrued losses under these guarantees	$ 7
Credit Risk Contract [Member]
Maximum Potential Payout/Notional	2,351,925	[1]
Guarantor Obligations, Current Carrying Value	42,350	[1]
Collateral/Recourse	0	[1]
Other Contract [Member]
Maximum Potential Payout/Notional	4,559
Guarantor Obligations, Current Carrying Value	(1,787)
Collateral/Recourse	0
Derivative [Member]
Maximum Potential Payout/Notional	2,773,691	[1]
Guarantor Obligations, Current Carrying Value	85,784	[1]
Collateral/Recourse	0	[1]
Standby Letters Of Credit And Other Financial Guarantees Issued [Member]
Maximum Potential Payout/Notional	9,808	[2],[3]
Guarantor Obligations, Current Carrying Value	(141)	[2],[3]
Collateral/Recourse	6,788	[2],[3]
Market Value Guarantees [Member]
Maximum Potential Payout/Notional	792
Guarantor Obligations, Current Carrying Value	13
Collateral/Recourse	89
Liquidity Facilities [Member]
Maximum Potential Payout/Notional	5,236
Guarantor Obligations, Current Carrying Value	(7)
Collateral/Recourse	6,552
Whole Loan Sales Representations And Warranties [Member]
Maximum Potential Payout/Notional	24,366
Guarantor Obligations, Current Carrying Value	79
Collateral/Recourse	0
Securitizations Representations And Guarantees [Member]
Maximum Potential Payout/Notional	78,029
Guarantor Obligations, Current Carrying Value	35
Collateral/Recourse	0
General Partner Guarantee [Member]
Maximum Potential Payout/Notional	282
Guarantor Obligations, Current Carrying Value	77
Collateral/Recourse	0
Years To Maturity - Less Than 1 [Member] | Credit Risk Contract [Member]
Maximum Potential Payout/Notional	503,713	[1]
Years To Maturity - Less Than 1 [Member] | Other Contract [Member]
Maximum Potential Payout/Notional	186
Years To Maturity - Less Than 1 [Member] | Derivative [Member]
Maximum Potential Payout/Notional	1,084,120	[1]
Years To Maturity - Less Than 1 [Member] | Standby Letters Of Credit And Other Financial Guarantees Issued [Member]
Maximum Potential Payout/Notional	1,247	[2],[3]
Years To Maturity - Less Than 1 [Member] | Market Value Guarantees [Member]
Maximum Potential Payout/Notional	0
Years To Maturity - Less Than 1 [Member] | Liquidity Facilities [Member]
Maximum Potential Payout/Notional	4,827
Years To Maturity - Less Than 1 [Member] | Whole Loan Sales Representations And Warranties [Member]
Maximum Potential Payout/Notional	0
Years To Maturity - Less Than 1 [Member] | Securitizations Representations And Guarantees [Member]
Maximum Potential Payout/Notional	0
Years To Maturity - Less Than 1 [Member] | General Partner Guarantee [Member]
Maximum Potential Payout/Notional	83
1 - 3 Years | Credit Risk Contract [Member]
Maximum Potential Payout/Notional	761,897	[1]
1 - 3 Years | Other Contract [Member]
Maximum Potential Payout/Notional	1,125
1 - 3 Years | Derivative [Member]
Maximum Potential Payout/Notional	889,974	[1]
1 - 3 Years | Standby Letters Of Credit And Other Financial Guarantees Issued [Member]
Maximum Potential Payout/Notional	1,704	[2],[3]
1 - 3 Years | Market Value Guarantees [Member]
Maximum Potential Payout/Notional	51
1 - 3 Years | Liquidity Facilities [Member]
Maximum Potential Payout/Notional	305
1 - 3 Years | Whole Loan Sales Representations And Warranties [Member]
Maximum Potential Payout/Notional	0
1 - 3 Years | Securitizations Representations And Guarantees [Member]
Maximum Potential Payout/Notional	0
1 - 3 Years | General Partner Guarantee [Member]
Maximum Potential Payout/Notional	18
3 - 5 Years | Credit Risk Contract [Member]
Maximum Potential Payout/Notional	718,038	[1]
3 - 5 Years | Other Contract [Member]
Maximum Potential Payout/Notional	527
3 - 5 Years | Derivative [Member]
Maximum Potential Payout/Notional	375,232	[1]
3 - 5 Years | Standby Letters Of Credit And Other Financial Guarantees Issued [Member]
Maximum Potential Payout/Notional	1,253	[2],[3]
3 - 5 Years | Market Value Guarantees [Member]
Maximum Potential Payout/Notional	188
3 - 5 Years | Liquidity Facilities [Member]
Maximum Potential Payout/Notional	37
3 - 5 Years | Whole Loan Sales Representations And Warranties [Member]
Maximum Potential Payout/Notional	0
3 - 5 Years | Securitizations Representations And Guarantees [Member]
Maximum Potential Payout/Notional	0
3 - 5 Years | General Partner Guarantee [Member]
Maximum Potential Payout/Notional	25
Over 5 Years | Credit Risk Contract [Member]
Maximum Potential Payout/Notional	368,277	[1]
Over 5 Years | Other Contract [Member]
Maximum Potential Payout/Notional	2,721
Over 5 Years | Derivative [Member]
Maximum Potential Payout/Notional	424,365	[1]
Over 5 Years | Standby Letters Of Credit And Other Financial Guarantees Issued [Member]
Maximum Potential Payout/Notional	5,604	[2],[3]
Over 5 Years | Market Value Guarantees [Member]
Maximum Potential Payout/Notional	553
Over 5 Years | Liquidity Facilities [Member]
Maximum Potential Payout/Notional	67
Over 5 Years | Whole Loan Sales Representations And Warranties [Member]
Maximum Potential Payout/Notional	24,366
Over 5 Years | Securitizations Representations And Guarantees [Member]
Maximum Potential Payout/Notional	78,029
Over 5 Years | General Partner Guarantee [Member]
Maximum Potential Payout/Notional	156
Real Estate Funds
Maximum Potential Payout/Notional	$ 225

[1] Carrying amounts of derivative contracts are shown on a gross basis prior to cash collateral or counterparty netting. For further information on derivative contracts, see Note 10.

[2] Approximately $2.6 billion of standby letters of credit are also reflected in the “Commitments” table in primary and secondary lending commitments. Standby letters of credit are recorded at fair value within Financial instruments owned or Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition.

[3] Amounts include guarantees issued by consolidated real estate funds sponsored by the Company of approximately $225 million. These guarantees relate to obligations of the fund’s investee entities, including guarantees related to capital expenditures and principal and interest debt payments. Accrued losses under these guarantees of approximately $7 million are reflected as a reduction of the carrying value of the related fund investments, which are reflected in Financial instruments owned—Investments on the condensed consolidated statement of financial condition.

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Fair Value Disclosures (Financial Instruments Not Carried at FV) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Financial Liabilities
Securities sold under agreement to repurchase	$ 347		$ 348
Level 1
Financial Assets:
Cash and due from banks	10,133
Interest bearing deposits with banks	28,592
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	30,152
Federal funds sold and securities purchased under agreements to resell	0
Securities borrowed	0
Receivables: Customers	0	[1]
Receivables: Brokers, dealers and clearing organizations	0	[1]
Receivables: Fees, interest and other	0	[1]
Loans	0	[2]
Financial Liabilities
Deposits	0
Commercial paper and other short-term borrowings	0
Securities sold under agreement to repurchase	0
Securities loaned	0
Other secured financings	0
Payables: Customers	0	[1]
Payables: Brokers, dealers and clearing organizations	0	[1]
Long-term borrowings	0
Level 2
Financial Assets:
Cash and due from banks	0
Interest bearing deposits with banks	0
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	0
Federal funds sold and securities purchased under agreements to resell	135,161
Securities borrowed	141,484
Receivables: Customers	38,962	[1]
Receivables: Brokers, dealers and clearing organizations	5,718	[1]
Receivables: Fees, interest and other	0	[1]
Loans	1,923	[2]
Financial Liabilities
Deposits	64,603
Commercial paper and other short-term borrowings	439
Securities sold under agreement to repurchase	99,539
Securities loaned	34,646
Other secured financings	6,527
Payables: Customers	119,045	[1]
Payables: Brokers, dealers and clearing organizations	12,143	[1]
Long-term borrowings	120,471
Level 3
Financial Assets:
Cash and due from banks	0
Interest bearing deposits with banks	0
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	0
Federal funds sold and securities purchased under agreements to resell	612
Securities borrowed	125
Receivables: Customers	0	[1]
Receivables: Brokers, dealers and clearing organizations	0	[1]
Receivables: Fees, interest and other	5,922	[1]
Loans	14,868	[2]
Financial Liabilities
Deposits	0
Commercial paper and other short-term borrowings	257
Securities sold under agreement to repurchase	7,502
Securities loaned	267
Other secured financings	1,856
Payables: Customers	0	[1]
Payables: Brokers, dealers and clearing organizations	0	[1]
Long-term borrowings	7,491
Carrying Value
Financial Assets:
Cash and due from banks	10,133
Interest bearing deposits with banks	28,592
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	30,152
Federal funds sold and securities purchased under agreements to resell	136,133
Securities borrowed	141,610
Receivables: Customers	38,962	[1]
Receivables: Brokers, dealers and clearing organizations	5,718	[1]
Receivables: Fees, interest and other	6,220	[1]
Loans	16,729	[2]
Financial Liabilities
Deposits	64,461
Commercial paper and other short-term borrowings	696
Securities sold under agreement to repurchase	106,983
Securities loaned	34,431
Other secured financings	8,354
Payables: Customers	119,045	[1]
Payables: Brokers, dealers and clearing organizations	12,143	[1]
Long-term borrowings	133,499
Estimated Fair Value
Financial Assets:
Cash and due from banks	10,133
Interest bearing deposits with banks	28,592
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	30,152
Federal funds sold and securities purchased under agreements to resell	135,773
Securities borrowed	141,609
Receivables: Customers	38,962	[1]
Receivables: Brokers, dealers and clearing organizations	5,718	[1]
Receivables: Fees, interest and other	5,922	[1]
Loans	16,791	[2]
Financial Liabilities
Deposits	64,603
Commercial paper and other short-term borrowings	696
Securities sold under agreement to repurchase	107,041
Securities loaned	34,913
Other secured financings	8,383
Payables: Customers	119,045	[1]
Payables: Brokers, dealers and clearing organizations	12,143	[1]
Long-term borrowings	$ 127,962

[1] (1) Accrued interest, fees and dividend receivables and payables where carrying value approximates fair value have been excluded.

[2] (2) Includes all loans measured at fair value on a non-recurring basis.

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Discontinued Operations (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended	3 Months Ended				12 Months Ended	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011		Mar. 31, 2012 Revel		Mar. 31, 2011 Revel		Dec. 31, 2010 Revel	Mar. 31, 2012 Saxon		Mar. 31, 2011 Saxon		Dec. 31, 2011 Saxon	Mar. 31, 2012 Quilter		Mar. 31, 2011 Quilter		Mar. 31, 2012 Other		Mar. 31, 2011 Other
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net revenues	$ 107		$ 67							$ 76	[1]	$ 24	[1]		$ 31	[1]	$ 33	[1]	$ 0	[1],[2]	$ 10	[1],[2]
Gain (loss) from discontinued operations	27	[3]	(28)	[3]	0	[1]	(10)	[1]		25	[1],[4]	(34)	[1],[4]		2	[1]	3	[1]	0	[1],[2]	13	[1],[2]
Pre-tax gain from the reversal of the previously recognized impairment loss	51
Impairment losses	12		3											98
Severance costs	5
Pre-tax gain (loss) from disposal of discontinued operations									$ 1,200	$ 51

[1] Amounts included eliminations of intersegment activity.

[2] Amounts included in Other for the three months ended March 31, 2011 are related to CityMortgage Bank, Retail Asset Management and other.

[3] See Notes 1 and 20 for discussion of discontinued operations.

[4] Amount included a pre-tax gain of approximately $51 million primarily resulting from the subsequent increase in fair value of Saxon, which had incurred impairment losses of $98 million in the quarter ended December 31, 2011, as well as approximately $5 million of severance costs incurred in connection with the disposition of Saxon. See Note 21 for a further discussion of the disposition of Saxon.

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Goodwill and Net Intangible Assets (Amortizable Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Accumulated Amortization	$ 994	$ 910

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Derivative Instruments and Hedging Activities (Notional and Fair Value of Protection Sold and Purchased through Credit Default Swaps) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	$ 2,356,484		$ 2,438,011
Credit risk derivative liabilities, fair value	40,563	[1],[2]	92,483	[1],[2]
Protection Sold | Less than 1 Year
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	503,899		487,685
Protection Sold | 1 - 3 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	763,022		831,042
Protection Sold | 3 - 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	718,565		788,074
Protection Sold | Over 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	370,998		331,210
Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	2,351,925		2,432,404
Credit risk derivative liabilities, fair value	42,350	[1],[2]	93,629	[1],[2]
Credit Default Swaps | Protection Sold | Less than 1 Year
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	503,713		487,620
Credit Default Swaps | Protection Sold | 1 - 3 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	761,897		828,686
Credit Default Swaps | Protection Sold | 3 - 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	718,038		787,357
Credit Default Swaps | Protection Sold | Over 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	368,277		328,741
Credit Default Swaps | Protection Purchased
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	2,361,874		2,462,261
Credit risk derivative assets, fair value	(48,580)		(101,694)
Single Name Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,285,767		1,325,045
Credit risk derivative liabilities, fair value	21,182	[1],[2]	47,045	[1],[2]
Single Name Credit Default Swaps | Protection Sold | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	34,507		44,000
Credit risk derivative liabilities, fair value	673	[1],[2]	1,536	[1],[2]
Single Name Credit Default Swaps | Protection Sold | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	67,055		68,786
Credit risk derivative liabilities, fair value	603	[1],[2]	1,597	[1],[2]
Single Name Credit Default Swaps | Protection Sold | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	325,909		324,972
Credit risk derivative liabilities, fair value	4,760	[1],[2]	8,683	[1],[2]
Single Name Credit Default Swaps | Protection Sold | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	517,203		529,517
Credit risk derivative assets, fair value	(2,771)	[1],[2]
Credit risk derivative liabilities, fair value			4,789	[1],[2]
Single Name Credit Default Swaps | Protection Sold | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	341,093		357,770
Credit risk derivative liabilities, fair value	17,917	[1],[2]	30,440	[1],[2]
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	325,747		306,743
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,733		1,290
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	11,876		12,416
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	77,436		67,344
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	139,019		131,588
Single Name Credit Default Swaps | Protection Sold | Less than 1 Year | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	95,683		94,105
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	473,251		504,298
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	5,488		5,681
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	19,269		22,043
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	116,747		124,445
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	207,126		218,262
Single Name Credit Default Swaps | Protection Sold | 1 - 3 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	124,621		133,867
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	318,300		330,454
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	16,458		24,087
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	23,462		23,341
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	85,603		85,543
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	113,761		115,320
Single Name Credit Default Swaps | Protection Sold | 3 - 5 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	79,016		82,163
Single Name Credit Default Swaps | Protection Sold | Over 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	168,469		183,550
Single Name Credit Default Swaps | Protection Sold | Over 5 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	10,828		12,942
Single Name Credit Default Swaps | Protection Sold | Over 5 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	12,448		10,986
Single Name Credit Default Swaps | Protection Sold | Over 5 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	46,123		47,640
Single Name Credit Default Swaps | Protection Sold | Over 5 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	57,297		64,347
Single Name Credit Default Swaps | Protection Sold | Over 5 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	41,773		47,635
Single Name Credit Default Swaps | Protection Purchased
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,266,956		1,315,333
Credit risk derivative assets, fair value	(20,328)		(45,345)
Total Index and Basket Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,066,158	[3]	1,107,359	[3]
Credit risk derivative liabilities, fair value	21,168	[1],[2],[3]	46,584	[1],[2],[3]
Total Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	177,966	[3]	180,877	[3]
Total Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	288,646	[3]	324,388	[3]
Total Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	399,738	[3]	456,903	[3]
Total Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	199,808	[3]	145,191	[3]
Index and Basket Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	716,615		787,228
Credit risk derivative liabilities, fair value	13,068		29,475
Index and Basket Credit Default Swaps | Protection Sold | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	192,971	[3]	150,806	[3]
Credit risk derivative assets, fair value	(1,688)	[1],[2],[3]	(907)	[1],[2],[3]
Index and Basket Credit Default Swaps | Protection Sold | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	32,176	[3]	47,176	[3]
Credit risk derivative liabilities, fair value	202	[1],[2],[3]	1,053	[1],[2],[3]
Index and Basket Credit Default Swaps | Protection Sold | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	61,328	[3]	53,880	[3]
Credit risk derivative liabilities, fair value	1,708	[1],[2],[3]	2,470	[1],[2],[3]
Index and Basket Credit Default Swaps | Protection Sold | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	355,040	[3]	375,474	[3]
Credit risk derivative liabilities, fair value	1,519	[1],[2],[3]	8,365	[1],[2],[3]
Index and Basket Credit Default Swaps | Protection Sold | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	424,643	[3]	480,023	[3]
Credit risk derivative liabilities, fair value	19,427	[1],[2],[3]	35,603	[1],[2],[3]
Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	49,836	[3]	48,115	[3]
Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	3,945	[3]	6,584	[3]
Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	4,023	[3]	5,202	[3]
Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	8,605	[3]	8,525	[3]
Index and Basket Credit Default Swaps | Protection Sold | Less than 1 Year | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	111,557	[3]	112,451	[3]
Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	68,416	[3]	49,997	[3]
Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	7,973	[3]	15,349	[3]
Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	11,023	[3]	18,996	[3]
Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	82,109	[3]	99,004	[3]
Index and Basket Credit Default Swaps | Protection Sold | 1 - 3 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	119,125	[3]	141,042	[3]
Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	48,295	[3]	33,584	[3]
Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	10,567	[3]	9,498	[3]
Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	29,450	[3]	17,396	[3]
Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	186,346	[3]	235,888	[3]
Index and Basket Credit Default Swaps | Protection Sold | 3 - 5 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	125,080	[3]	160,537	[3]
Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years | AAA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	26,424	[3]	19,110	[3]
Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years | AA
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	9,691	[3]	15,745	[3]
Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years | A
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	16,832	[3]	12,286	[3]
Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years | BBB
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	77,980	[3]	32,057	[3]
Index and Basket Credit Default Swaps | Protection Sold | Over 5 Years | Non-investment Grade
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	68,881	[3]	65,993	[3]
Index and Basket Credit Default Swaps | Protection Purchased
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	548,335		601,452
Credit risk derivative assets, fair value	(11,560)		(24,373)
Tranched Index and Basket Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	349,543		320,131
Credit risk derivative liabilities, fair value	8,100		17,109
Tranched Index and Basket Credit Default Swaps | Protection Purchased
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	546,583		545,476
Credit risk derivative assets, fair value	(16,692)		(31,976)
Single Name, and Non-tranched Index and Basket Credit Default Swaps | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,800,000		2,100,000
Single Name, and Non-tranched Index and Basket Credit Default Swaps | Protection Purchased
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	2,000,000		1,900,000
Other Contracts | Protection Sold
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	4,559	[4],[5]	5,607	[4],[5]
Credit risk derivative assets, fair value	(1,787)	[1],[2],[4],[5]	(1,146)	[1],[2],[4],[5]
Other Contracts | Protection Sold | Less than 1 Year
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	186	[4],[5]	65	[4],[5]
Other Contracts | Protection Sold | 1 - 3 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	1,125	[4],[5]	2,356	[4],[5]
Other Contracts | Protection Sold | 3 - 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	527	[4],[5]	717	[4],[5]
Other Contracts | Protection Sold | Over 5 Years
Credit Derivatives [Line Items]
Credit risk derivatives, notional amount	$ 2,721	[4],[5]	$ 2,469	[4],[5]

[1] Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

[2] Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

[3] Credit ratings are calculated internally.

[4] Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

[5] Fair value amount shown represents the fair value of the hybrid instruments.

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Derivative Instruments and Hedging Activities (Other Disclosures) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Derivative [Line Items]
Embedded derivatives, net fair value	$ 42		$ 53
Embedded derivatives, notional amount	3,299		3,312
Recognized gains (losses) related to changes in the fair value of bifurcated embedded derivatives	7	(19)
Amount of payables associated with cash collateral received that was netted against derivative assets	68,587		77,938
Amount of receivables in respect of cash collateral paid that was netted against derivative liabilities	38,526		44,936
Cash collateral receivables	276		268
Cash collateral payables	32		9
Credit Risk Related Contingencies
Aggregate fair value of derivative contracts that contain credit-risk-related contingent features that are in a net liability position	34,669
Posted collateral	28,717
Amount of additional collateral or termination payments that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company's long-term credit rating, related to bilateral arrangements between the Company and other parties	2,883
A3 Moody's/A- S&P
Credit Risk Related Contingencies
Amount of additional collateral or termination payments that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company's long-term credit rating	135
Baa1 Moody's/BBB+ S&P
Credit Risk Related Contingencies
Amount of additional collateral or termination payments that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company's long-term credit rating	$ 3,432

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Commitments, Guarantees and Contingencies (Narrative) (Details) (USD $) In Millions, unless otherwise specified			0 Months Ended					0 Months Ended
	Mar. 31, 2012	Oct. 15, 2009	Jun. 27, 2011 Citibank N.A.	Sep. 25, 2009 Citibank N.A.	Mar. 31, 2012 Citibank N.A.	Mar. 31, 2012 Abu Dhabi Commercial Bank, et al. [Member]	Jan. 23, 2012 Abu Dhabi Commercial Bank, et al. [Member]	Jul. 15, 2010 China Development Industrial Bank [Member]	Mar. 31, 2012 China Development Industrial Bank [Member]	Jul. 15, 2010 Receivable From China Development Industrial Bank [Member]	Mar. 31, 2012 Federal Home Loan Bank of San Francisco [Member]	Mar. 15, 2010 Federal Home Loan Bank of San Francisco [Member]
Contributed to Stable Value Program		$ 20
Future obligation to make a payment to Stable Value Program	40
Estimate of possible loss					269	983				12
Maximum potential payout									240		398
Value of securities issued							983
Damages sought			269	245				228
Credit default swap asset								275
Mortgage pass through certificate backed by securitization trusts original amount												980
Mortgage pass through certificate backed by securitization trusts unpaid amount											$ 398

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Borrowings and Other Secured Financings (Narratives) (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2012 Y	Dec. 31, 2011 Y
Notes issued, principal amount	$ 5,000,000,000
Notes were repaid	16,000,000,000
Weighted average maturity of long-term borrowings (in years)	5.3	5.0
Long-term debt outstanding	176,723,000,000	184,234,000,000
TLGP
Long-term debt outstanding	$ 4,700,000,000	$ 12,100,000,000

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Variable Interest Entities and Securitization Activities (Mortgage Servicing Activities for SPEs) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Assets serviced (unpaid principal balance)	$ 10,000		$ 11,000
Amounts past due 90 days or greater (unpaid principal balance)	900		1,500
Unconsolidated SPEs | Residential Mortgage
Assets serviced (unpaid principal balance)	9,545		9,821
Amounts past due 90 days or greater (unpaid principal balance)	2,867	[1]	3,087	[1]
Percentage of amounts past due 90 days or greater	30.00%	[1]	31.40%	[1]
Credit losses	167		631
Unconsolidated SPEs | Commercial Mortgage
Assets serviced (unpaid principal balance)	6,157		5,750
Amounts past due 90 days or greater (unpaid principal balance)	0	[1]	0	[1]
Percentage of amounts past due 90 days or greater	0.00%	[1]	0.00%	[1]
Credit losses	0		0
Consolidated SPEs | Residential Mortgage
Assets serviced (unpaid principal balance)	2,119		2,180
Amounts past due 90 days or greater (unpaid principal balance)	339	[1]	354	[1]
Percentage of amounts past due 90 days or greater	16.00%	[1]	16.20%	[1]
Credit losses	18		81
Consolidated SPEs | Commercial Mortgage
Assets serviced (unpaid principal balance)	924		1,596
Amounts past due 90 days or greater (unpaid principal balance)	0	[1]	0	[1]
Percentage of amounts past due 90 days or greater	0.00%	[1]	0.00%	[1]
Credit losses	$ 0		$ 0

[1] Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2012

Employee Benefit Plans

Employee Benefit Plans

16.Employee Benefit Plans.

The Company sponsors various pension plans for the majority of its U.S. and non-U.S. employees. The Company provides certain other postretirement benefits, primarily health care and life insurance, to eligible U.S. employees. The Company also provides certain postemployment benefits to certain former employees or inactive employees prior to retirement.

Effective January 1, 2011, the Morgan Stanley Employees Retirement Plan (the “Pension Plan”) for U.S. participants ceased accruals of benefits under the Pension Plan.

The components of the Company's net periodic benefit expense for its pension and postretirement plans were as follows:

			Three Months Ended
			March 31,
			2012		2011
			(dollars in millions)
Service cost, benefits earned during the period		$	8	$	8
Interest cost on projected benefit obligation			41		42
Expected return on plan assets			(28)		(33)
Net amortization of prior service costs			(3)		(4)
Net amortization of actuarial loss			7		5
	Net periodic benefit expense	$	25	$	18

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Fair Value Disclosures (Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) (Recurring, USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Securities Received as Collateral
Assets
Beginning balance			$ 1
Realized and Unrealized Gains (Losses)			0	[1]
Purchases			0
Sales			(1)
Issuances			0
Settlements			0
Net Transfers			0
Ending balance			0
Unrealized Gains (Losses) for Level 3 Assets Outstanding			0	[2]
Intangible Assets
Assets
Beginning balance	133		157
Realized and Unrealized Gains (Losses)	(34)	[3]	(15)	[1]
Purchases	0		3
Sales	0		(1)
Issuances	0		0
Settlements	0		0
Net Transfers	0		0
Ending balance	99		144
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(34)	[4]	(14)	[2]
Deposits
Liabilities
Beginning balance			16
Realized and Unrealized Gains (Losses)			2	[1]
Purchases			0
Sales			0
Issuances			0
Settlements			(14)
Net Transfers			0
Ending balance			0
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding			0	[2]
Commercial Paper and Other Short-term Borrowings
Liabilities
Beginning balance	2		2
Realized and Unrealized Gains (Losses)	0	[3]	0	[1]
Purchases	0		0
Sales	0		0
Issuances	13		4
Settlements	0		(2)
Net Transfers	0		0
Ending balance	15		4
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	0	[4]	0	[2]
Obligation to Return Securities Received as Collateral
Liabilities
Beginning balance			1
Realized and Unrealized Gains (Losses)			0	[1]
Purchases			(1)
Sales			0
Issuances			0
Settlements			0
Net Transfers			0
Ending balance			0
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding			0	[2]
Securities Sold under Agreements to Repurchase
Liabilities
Beginning balance	340		351
Realized and Unrealized Gains (Losses)	1	[3]	(2)	[1]
Purchases	0		0
Sales	0		0
Issuances	0		0
Settlements	0		(1)
Net Transfers	(153)		0
Ending balance	186		352
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	3	[4]	(2)	[2]
Other Secured Financings
Liabilities
Beginning balance	570		1,016
Realized and Unrealized Gains (Losses)	(44)	[3]	(12)	[1]
Purchases	0		0
Sales	0		0
Issuances	12		0
Settlements	(32)		(117)
Net Transfers	0		(306)
Ending balance	594		605
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	(44)	[4]	(12)	[2]
Long-term Borrowings
Liabilities
Beginning balance	1,603		1,316
Realized and Unrealized Gains (Losses)	(173)	[3]	(84)	[1]
Purchases	0		0
Sales	0		0
Issuances	262		141
Settlements	(78)		(180)
Net Transfers	183		13
Ending balance	2,143		1,374
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	(171)	[4]	(83)	[2]
Financial Instruments Owned | U.S. Agency Securities
Assets
Beginning balance	8		13
Realized and Unrealized Gains (Losses)	0	[3]	0	[1]
Purchases	42		103
Sales	(26)		(52)
Issuances	0		0
Settlements	0		0
Net Transfers	(1)		(7)
Ending balance	23		57
Unrealized Gains (Losses) for Level 3 Assets Outstanding	0	[4]	0	[2]
Financial Instruments Owned | Other Sovereign Government Obligations
Assets
Beginning balance	119		73
Realized and Unrealized Gains (Losses)	(1)	[3]	0	[1]
Purchases	8		59
Sales	(118)		0
Issuances	0		0
Settlements	0		0
Net Transfers	0		(6)
Ending balance	8		126
Unrealized Gains (Losses) for Level 3 Assets Outstanding	0	[4]	0	[2]
Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	12,032		15,516
Realized and Unrealized Gains (Losses)	153	[3]	624	[1]
Purchases	1,256		1,857
Sales	(1,821)		(1,803)
Issuances	0		0
Settlements	(422)		(1,061)
Net Transfers	(304)		(294)
Ending balance	10,894		14,839
Unrealized Gains (Losses) for Level 3 Assets Outstanding	85	[4]	503	[2]
Financial Instruments Owned | Corporate Equities
Assets
Beginning balance	417		484
Realized and Unrealized Gains (Losses)	(45)	[3]	(53)	[1]
Purchases	901		101
Sales	(758)		(98)
Issuances	0		0
Settlements	0		0
Net Transfers	39		68
Ending balance	554		502
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(9)	[4]	(18)	[2]
Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	4,523	[5]	5,577	[5]
Realized and Unrealized Gains (Losses)	(1,152)	[3],[5]	(353)	[1],[5]
Purchases	272	[5]	355	[5]
Sales	(58)	[5]	(12)	[5]
Issuances	(69)	[5]	(1,037)	[5]
Settlements	32	[5]	389	[5]
Net Transfers	259	[5]	325	[5]
Ending balance	3,807	[5]	5,244	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(1,694)	[4],[5]	29	[2],[5]
Financial Instruments Owned | Investments
Assets
Beginning balance	7,283		7,754
Realized and Unrealized Gains (Losses)	75	[3]	236	[1]
Purchases	424		384
Sales	(151)		(697)
Issuances	0		0
Settlements	0		0
Net Transfers	45		(94)
Ending balance	7,676		7,583
Unrealized Gains (Losses) for Level 3 Assets Outstanding	45	[4]	106	[2]
Financial Instruments Owned | Physical Commodities
Assets
Beginning balance	46
Realized and Unrealized Gains (Losses)	0	[3]
Purchases	0
Sales	0
Issuances	0
Settlements	(46)
Net Transfers	0
Ending balance	0
Unrealized Gains (Losses) for Level 3 Assets Outstanding	0	[4]
Financial Instruments Sold, Not yet Purchased | Other Sovereign Government Obligations
Liabilities
Beginning balance	8
Realized and Unrealized Gains (Losses)	0	[3]
Purchases	(7)
Sales	0
Issuances	0
Settlements	0
Net Transfers	0
Ending balance	1
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	0	[4]
Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance	732		501
Realized and Unrealized Gains (Losses)	(33)	[3]	94	[1]
Purchases	(480)		(27)
Sales	126		158
Issuances	0		0
Settlements	(55)		0
Net Transfers	(9)		(35)
Ending balance	347		503
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	(107)	[4]	101	[2]
Financial Instruments Sold, Not yet Purchased | Corporate Equities
Liabilities
Beginning balance	1		15
Realized and Unrealized Gains (Losses)	(2)	[3]	(1)	[1]
Purchases	(2)		(8)
Sales	10		1
Issuances	0		0
Settlements	0		0
Net Transfers	(9)		0
Ending balance	2		9
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	0	[4]	0	[2]
State and Municipal Securities | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	0		110
Realized and Unrealized Gains (Losses)	0	[3]	(1)	[1]
Purchases	0		4
Sales	0		(96)
Issuances	0		0
Settlements	0		0
Net Transfers	3		(13)
Ending balance	3		4
Unrealized Gains (Losses) for Level 3 Assets Outstanding	0	[4]	0	[2]
Residential Mortgage-backed Securities | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	494		319
Realized and Unrealized Gains (Losses)	(21)	[3]	(58)	[1]
Purchases	6		198
Sales	(245)		(183)
Issuances	0		0
Settlements	0		(1)
Net Transfers	(191)		86
Ending balance	43		361
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(18)	[4]	(21)	[2]
Residential Mortgage-backed Securities | Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance	355
Realized and Unrealized Gains (Losses)	0	[3]
Purchases	(294)
Sales	0
Issuances	0
Settlements	0
Net Transfers	0
Ending balance	61
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	(61)	[4]
Commercial Mortgage-backed Securities | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	134		188
Realized and Unrealized Gains (Losses)	23	[3]	16	[1]
Purchases	5		9
Sales	(21)		(30)
Issuances	0		0
Settlements	(1)		0
Net Transfers	(13)		(51)
Ending balance	127		132
Unrealized Gains (Losses) for Level 3 Assets Outstanding	16	[4]	10	[2]
Asset-backed Securities | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	31		13
Realized and Unrealized Gains (Losses)	1	[3]	0	[1]
Purchases	0		12
Sales	(28)		(19)
Issuances	0		0
Settlements	0		0
Net Transfers	(1)		(6)
Ending balance	3		0
Unrealized Gains (Losses) for Level 3 Assets Outstanding	1	[4]	0	[2]
Corporate Bonds | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	675		1,368
Realized and Unrealized Gains (Losses)	45	[3]	33	[1]
Purchases	426		255
Sales	(225)		(215)
Issuances	0		0
Settlements	0		0
Net Transfers	(22)		(75)
Ending balance	899		1,366
Unrealized Gains (Losses) for Level 3 Assets Outstanding	39	[4]	55	[2]
Corporate Bonds | Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance	219		44
Realized and Unrealized Gains (Losses)	(59)	[3]	1	[1]
Purchases	(186)		(27)
Sales	126		155
Issuances	0		0
Settlements	0		0
Net Transfers	(25)		(21)
Ending balance	193		150
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	(74)	[4]	8	[2]
Collateralized Debt Obligations | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	980		1,659
Realized and Unrealized Gains (Losses)	123	[3]	254	[1]
Purchases	296		355
Sales	(161)		(595)
Issuances	0		0
Settlements	0		(36)
Net Transfers	(73)		(44)
Ending balance	1,165		1,593
Unrealized Gains (Losses) for Level 3 Assets Outstanding	82	[4]	93	[2]
Collateralized Debt Obligations | Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance			0
Realized and Unrealized Gains (Losses)			1	[1]
Purchases			0
Sales			3
Issuances			0
Settlements			0
Net Transfers			0
Ending balance			2
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding			1	[2]
Loans and Lending Commitments | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	9,590		11,666
Realized and Unrealized Gains (Losses)	(20)	[3]	386	[1]
Purchases	496		1,023
Sales	(1,018)		(643)
Issuances	0		0
Settlements	(421)		(1,024)
Net Transfers	(30)		(190)
Ending balance	8,597		11,218
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(35)	[4]	382	[2]
Unfunded Lending Commitments | Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance	85		263
Realized and Unrealized Gains (Losses)	25	[3]	92	[1]
Purchases	0		0
Sales	0		0
Issuances	0		0
Settlements	0		0
Net Transfers	0		0
Ending balance	60		171
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	25	[4]	92	[2]
Other Debt | Financial Instruments Owned | Corporate and Other Debt
Assets
Beginning balance	128		193
Realized and Unrealized Gains (Losses)	2	[3]	(6)	[1]
Purchases	27		1
Sales	(123)		(22)
Issuances	0		0
Settlements	0		0
Net Transfers	23		(1)
Ending balance	57		165
Unrealized Gains (Losses) for Level 3 Assets Outstanding	0	[4]	(16)	[2]
Other Debt | Financial Instruments Sold, Not yet Purchased | Corporate and Other Debt
Liabilities
Beginning balance	73		194
Realized and Unrealized Gains (Losses)	1	[3]	0	[1]
Purchases	0		0
Sales	0		0
Issuances	0		0
Settlements	(55)		0
Net Transfers	16		(14)
Ending balance	33		180
Unrealized Gains (Losses) for Level 3 Liabilities Outstanding	3	[4]	0	[2]
Interest Rate Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	420	[5]	424	[5]
Realized and Unrealized Gains (Losses)	170	[3],[5]	169	[1],[5]
Purchases	6	[5]	1	[5]
Sales	0	[5]	0	[5]
Issuances	(5)	[5]	(663)	[5]
Settlements	(139)	[5]	(114)	[5]
Net Transfers	(430)	[5]	125	[5]
Ending balance	22	[5]	(58)	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	179	[4],[5]	100	[2],[5]
Credit Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	5,814	[5]	6,594	[5]
Realized and Unrealized Gains (Losses)	(1,381)	[3],[5]	(673)	[1],[5]
Purchases	63	[5]	128	[5]
Sales	0	[5]	0	[5]
Issuances	(10)	[5]	(152)	[5]
Settlements	(47)	[5]	71	[5]
Net Transfers	(58)	[5]	111	[5]
Ending balance	4,381	[5]	6,079	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(1,786)	[4],[5]	(245)	[2],[5]
Foreign Exchange Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	43	[5]	46	[5]
Realized and Unrealized Gains (Losses)	(99)	[3],[5]	(124)	[1],[5]
Purchases	0	[5]	0	[5]
Sales	0	[5]	0	[5]
Issuances	0	[5]	0	[5]
Settlements	162	[5]	127	[5]
Net Transfers	(40)	[5]	(3)	[5]
Ending balance	66	[5]	46	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(83)	[4],[5]	(100)	[2],[5]
Equity Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	(1,234)	[5]	(762)	[5]
Realized and Unrealized Gains (Losses)	(99)	[3],[5]	75	[1],[5]
Purchases	199	[5]	65	[5]
Sales	(58)	[5]	(12)	[5]
Issuances	(50)	[5]	(85)	[5]
Settlements	(250)	[5]	15	[5]
Net Transfers	50	[5]	59	[5]
Ending balance	(1,442)	[5]	(645)	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	(161)	[4],[5]	75	[2],[5]
Commodity Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	570	[5]	188	[5]
Realized and Unrealized Gains (Losses)	199	[3],[5]	(9)	[1],[5]
Purchases	4	[5]	161	[5]
Sales	0	[5]	0	[5]
Issuances	(4)	[5]	(132)	[5]
Settlements	37	[5]	85	[5]
Net Transfers	(3)	[5]	37	[5]
Ending balance	803	[5]	330	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	101	[4],[5]	(4)	[2],[5]
Other Contracts | Financial Instruments Owned | Derivative and Other Contracts
Assets
Beginning balance	(1,090)	[5]	(913)	[5]
Realized and Unrealized Gains (Losses)	58	[3],[5]	209	[1],[5]
Purchases	0	[5]	0	[5]
Sales	0	[5]	0	[5]
Issuances	0	[5]	(5)	[5]
Settlements	269	[5]	205	[5]
Net Transfers	740	[5]	(4)	[5]
Ending balance	(23)	[5]	(508)	[5]
Unrealized Gains (Losses) for Level 3 Assets Outstanding	56	[4],[5]	203	[2],[5]
Private Equity Funds | Financial Instruments Owned | Investments
Assets
Beginning balance	1,936		1,986
Realized and Unrealized Gains (Losses)	(7)	[3]	107	[1]
Purchases	101		32
Sales	(36)		(190)
Issuances	0		0
Settlements	0		0
Net Transfers	0		71
Ending balance	1,994		2,006
Unrealized Gains (Losses) for Level 3 Assets Outstanding	1	[4]	95	[2]
Real Estate Funds | Financial Instruments Owned | Investments
Assets
Beginning balance	1,213		1,176
Realized and Unrealized Gains (Losses)	52	[3]	64	[1]
Purchases	87		14
Sales	(14)		(3)
Issuances	0		0
Settlements	0		0
Net Transfers	0		0
Ending balance	1,338		1,251
Unrealized Gains (Losses) for Level 3 Assets Outstanding	5	[4]	102	[2]
Hedge Funds | Financial Instruments Owned | Investments
Assets
Beginning balance	696		901
Realized and Unrealized Gains (Losses)	25	[3]	(9)	[1]
Purchases	22		135
Sales	(33)		(189)
Issuances	0		0
Settlements	0		0
Net Transfers	(87)		33
Ending balance	623		871
Unrealized Gains (Losses) for Level 3 Assets Outstanding	23	[4]	(9)	[2]
Principal Investments | Financial Instruments Owned | Investments
Assets
Beginning balance	2,937		3,131
Realized and Unrealized Gains (Losses)	38	[3]	66	[1]
Purchases	180		202
Sales	(65)		(301)
Issuances	0		0
Settlements	0		0
Net Transfers	104		(41)
Ending balance	3,194		3,057
Unrealized Gains (Losses) for Level 3 Assets Outstanding	57	[4]	(85)	[2]
Other Investments [Member] | Financial Instruments Owned | Investments
Assets
Beginning balance	501		560
Realized and Unrealized Gains (Losses)	(33)	[3]	8	[1]
Purchases	34		1
Sales	(3)		(14)
Issuances	0		0
Settlements	0		0
Net Transfers	28		(157)
Ending balance	527		398
Unrealized Gains (Losses) for Level 3 Assets Outstanding	$ (41)	[4]	$ 3	[2]

[1] Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $236 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

[2] Amounts represent unrealized gains (losses) for the quarter ended March 31, 2011 related to assets and liabilities still outstanding at March 31, 2011.

[3] Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $75 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

[4] Amounts represent unrealized gains (losses) for the quarter ended March 31, 2012 related to assets and liabilities still outstanding at March 31, 2012.

[5] Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Calculation Of Basic And Diluted EPS

				Three Months Ended
				March 31,
				2012		2011
Basic EPS:
	Income from continuing operations		$	149	$	1,145
	Net gain (loss) from discontinued operations			(15)		(15)
	Net income			134		1,130
	Net income applicable to noncontrolling interests			228		162
	Net income (loss) applicable to Morgan Stanley			(94)		968
	Less: Preferred dividends (Series A Preferred Stock)			(11)		(11)
	Less: Preferred dividends (Series B Preferred Stock)			—		(196)
	Less: Preferred dividends (Series C Preferred Stock)			(13)		(13)
	Less: Allocation of earnings to participating RSUs(1):
		From continuing operations		(1)		(12)
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	(119)	$	736
	Weighted average common shares outstanding			1,877		1,456
Earnings (loss) per basic common share:
	Income (loss) from continuing operations		$	(0.05)	$	0.52
	Net gain (loss) from discontinued operations			(0.01)		(0.01)
		Earnings (loss) per basic common share	$	(0.06)	$	0.51
Diluted EPS:
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	(119)	$	736
	Weighted average common shares outstanding			1,877		1,456
	Effect of dilutive securities:
		Stock options and RSUs(1)		—		16
	Weighted average common shares outstanding and common stock equivalents			1,877		1,472
Earnings (loss) per diluted common share:
	Income (loss) from continuing operations		$	(0.05)	$	0.51
	Net income (loss) from discontinued operations			(0.01)		(0.01)
		Earnings (loss) per diluted common share	$	(0.06)	$	0.50

(1)RSUs that are considered participating securities participate in all of the earnings of the Company in the computation of basic EPS, and therefore, such RSUs are not included as incremental shares in the diluted calculation.

Antidilutive Securities Excluded From The Computation Of Diluted EPS

		Three Months Ended
		March 31,
Number of Antidilutive Securities Outstanding at End of Period:		2012	2011
		(shares in millions)
RSUs and Performance-based stock units		103	26
Stock options		45	60
Series B Preferred Stock		—	311
	Total	148	397

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Goodwill and Net Intangible Assets (Changes in Carrying Amount of Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Dec. 31, 2011
Amortizable net intangible assets, beginning balance	$ 3,872
Foreign currency translation adjustments and other	3
Amortization expense	(84)
Impairment losses	(2)	[1]
Intangible assets acquired during the year	2
Intangible assets disposed of during the period	0
Amortizable net intangible assets, ending balance	3,791
Mortgage servicing rights	99		133
Indefinite-lived intangible assets	280		280
Net intangible assets	4,170		4,285
Institutional Securities
Amortizable net intangible assets, beginning balance	229
Foreign currency translation adjustments and other	3
Amortization expense	(4)
Impairment losses	(2)	[1]
Intangible assets acquired during the year	2
Intangible assets disposed of during the period	0
Amortizable net intangible assets, ending balance	228
Mortgage servicing rights	87		122
Indefinite-lived intangible assets	0		0
Net intangible assets	315		351
Global Wealth Management Group [Member]
Amortizable net intangible assets, beginning balance	3,641
Foreign currency translation adjustments and other	0
Amortization expense	(80)
Impairment losses	0	[1]
Intangible assets acquired during the year	0
Intangible assets disposed of during the period	0
Amortizable net intangible assets, ending balance	3,561
Mortgage servicing rights	12		11
Indefinite-lived intangible assets	280		280
Net intangible assets	3,853		3,932
Asset Management
Amortizable net intangible assets, beginning balance	2
Foreign currency translation adjustments and other	0
Amortization expense	0
Impairment losses	0	[1]
Intangible assets acquired during the year	0
Intangible assets disposed of during the period	0
Amortizable net intangible assets, ending balance	2
Mortgage servicing rights	0		0
Indefinite-lived intangible assets	0		0
Net intangible assets	$ 2		$ 2

[1]     Impairment losses are recorded within Other expenses.

XML

Earnings Per Common Share (Antidilutive Securities Excluded from the Computation of Diluted EPS) (Details) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Antidilutive securities outstanding	148	397
RSUs and PSUs [Member]
Antidilutive securities outstanding	103	26
Stock Options [Member]
Antidilutive securities outstanding	45	60
Series B Preferred Stock [Member]
Antidilutive securities outstanding	0	311

XML

Goodwill and Net Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2012

Goodwill and Net Intangible Assets

Changes in Carrying Amount of Goodwill

		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
Goodwill at December 31, 2011(1)	$	330	$	5,616	$	740	$	6,686
Foreign currency translation adjustments and other		14		─		─		14
Goodwill at March 31, 2012(1)	$	344	$	5,616	$	740	$	6,700

_____________

• The amount of the Company's goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27million related to the Asset Management business segment,was $7,400million and $7,386million at March 31, 2012and December 31, 2011, respectively.

Changes in Carrying Amount of Intangible Assets

		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Mortgage servicing rights (see Note 6)		122		11		—		133
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at December 31, 2011	$	351	$	3,932	$	2	$	4,285
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Foreign currency translation adjustments and other		3		—		—		3
Amortization expense		(4)		(80)		—		(84)
Impairment losses(1)		(2)		—		—		(2)
Intangible assets acquired during the period		2		—		—		2
Amortizable net intangible assets at March 31, 2012		228		3,561		2		3,791
Mortgage servicing rights (see Note 6)		87		12		—		99
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at March 31, 2012	$	315	$	3,853	$	2	$	4,170

_____________

• Impairment losses are recorded within Other expenses.

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Fair Value Disclosures (Fair Value of Investments that Calculate Net Asset Value) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Investments	$ 8,329	$ 8,195
Fair Value	4,206	4,261
Unfunded Commitment	1,103	1,391
Private Equity Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	1,955	1,906
Unfunded Commitment	813	938
Percent of investments that will be liquidated in the next five years	6.00%
Percent of investments that will be liquidated within five to 10 years	33.00%
Percent of investments that will be liquidated after 10 years	61.00%
Real Estate Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	1,310	1,188
Unfunded Commitment	288	448
Percent of investments that will be liquidated in the next five years	4.00%
Percent of investments that will be liquidated within five to 10 years	40.00%
Percent of investments that will be liquidated after 10 years	56.00%
Hedge Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Redemption frequency	at least on a six-month period basis
Redemption notice period	90 days or less
Long-short Equity Hedge Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	511	545
Unfunded Commitment	0	5
Redemption notice period	primarily greater than six months	primarily greater than six months
Percent of investments redeemable at least quarterly	36.00%	38.00%
Percent of investments redeemable every six months	34.00%	32.00%
Percent of investments redeemable greater than six months	30.00%	30.00%
Long-short Equity Hedge Funds | Initial Period Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Percent of investments that cannot be redeemed currently	8.00%
Long-short Equity Hedge Funds | Subsequent Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Redemption restriction period	three years or less
Long-short Equity Hedge Funds | Exit Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Percent of investments that cannot be redeemed currently	7.00%
Redemption restriction period	one year or less
Fixed Income/Credit-Related Hedge Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	23	124
Unfunded Commitment	0	0
Fixed Income/Credit-Related Hedge Funds | Initial Period Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Percent of investments that cannot be redeemed currently	17.00%
Fixed Income/Credit-Related Hedge Funds | Subsequent Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Redemption restriction period	one year or less
Event Driven Hedge Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	71	163
Unfunded Commitment	0	0
Multi-strategy Hedge Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Fair Value	336	335
Unfunded Commitment	$ 2	$ 0
Multi-strategy Hedge Funds | Initial Period Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Percent of investments that cannot be redeemed currently	74.00%
Multi-strategy Hedge Funds | Subsequent Lock-up Restrictions
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Redemption restriction period	primarily two years or less

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Variable Interest Entities and Securitization Activities (Non-Consolidated VIEs) (Details) (Non-Consolidated VIEs, USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Mortgage and Asset-Backed Securities
Carrying value of exposure to loss - Assets	$ 195,492	[1]	$ 231,110	[2]
Maximum exposure to loss	17,469		16,780
Carrying value of exposure to loss - Liabilities	13		13
Mortgage and Asset-Backed Securities | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	16,876		16,570
Mortgage and Asset-Backed Securities | Debt and Equity Interests
Maximum exposure to loss	16,785	[3]	16,469	[4]
Mortgage and Asset-Backed Securities | Debt and Equity Interests | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	16,785	[3]	16,469	[4]
Mortgage and Asset-Backed Securities | Derivative and Other Contracts
Maximum exposure to loss	92		103
Carrying value of exposure to loss - Liabilities	13		13
Mortgage and Asset-Backed Securities | Derivative and Other Contracts | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	91		101
Mortgage and Asset-Backed Securities | Commitments, Guarantees and Other
Maximum exposure to loss	592		208
Carrying value of exposure to loss - Liabilities	0		0
Mortgage and Asset-Backed Securities | Residential Mortgage Loans
Carrying value of exposure to loss - Assets	700		600
Mortgage and Asset-Backed Securities | Commercial Mortgage Loans
Carrying value of exposure to loss - Assets	900		1,100
Mortgage and Asset-Backed Securities | Other Consumer and Commercial Loans
Carrying value of exposure to loss - Assets	1,700		1,300
Mortgage and Asset-Backed Securities | U.S. Agency Collateralized Mortgage Obligations [Member]
Carrying value of exposure to loss - Assets	13,500		13,500
Mortgage and Asset-Backed Securities | Variable Interest Entity Assets | Residential Mortgage Loans
Carrying value of exposure to loss - Assets	11,300		9,100
Mortgage and Asset-Backed Securities | Variable Interest Entity Assets | Commercial Mortgage Loans
Carrying value of exposure to loss - Assets	55,400		81,700
Mortgage and Asset-Backed Securities | Variable Interest Entity Assets | Other Consumer and Commercial Loans
Carrying value of exposure to loss - Assets	18,500		18,700
Mortgage and Asset-Backed Securities | Variable Interest Entity Assets | U.S. Agency Collateralized Mortgage Obligations [Member]
Carrying value of exposure to loss - Assets	110,300		121,600
Collateralized Debt Obligations
Carrying value of exposure to loss - Assets	20,910	[1]	7,593	[2]
Maximum exposure to loss	846		1,334
Carrying value of exposure to loss - Liabilities	3		159
Collateralized Debt Obligations | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	790		1,148
Collateralized Debt Obligations | Debt and Equity Interests
Maximum exposure to loss	748	[3]	491	[4]
Collateralized Debt Obligations | Debt and Equity Interests | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	748	[3]	491	[4]
Collateralized Debt Obligations | Derivative and Other Contracts
Maximum exposure to loss	98		843
Carrying value of exposure to loss - Liabilities	3		159
Collateralized Debt Obligations | Derivative and Other Contracts | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	42		657
Collateralized Debt Obligations | Commitments, Guarantees and Other
Maximum exposure to loss	0		0
Carrying value of exposure to loss - Liabilities	0		0
Municipal Tender Option Bonds
Carrying value of exposure to loss - Assets	6,650	[1]	6,833	[2]
Maximum exposure to loss	4,267		4,342
Carrying value of exposure to loss - Liabilities	1		0
Municipal Tender Option Bonds | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	141		225
Municipal Tender Option Bonds | Debt and Equity Interests
Maximum exposure to loss	134	[3]	201	[4]
Municipal Tender Option Bonds | Debt and Equity Interests | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	134	[3]	201	[4]
Municipal Tender Option Bonds | Derivative and Other Contracts
Maximum exposure to loss	4,133		4,141
Carrying value of exposure to loss - Liabilities	1		0
Municipal Tender Option Bonds | Derivative and Other Contracts | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	7		24
Municipal Tender Option Bonds | Commitments, Guarantees and Other
Maximum exposure to loss	0		0
Carrying value of exposure to loss - Liabilities	0		0
Other Structured Financings
Carrying value of exposure to loss - Assets	1,899	[1]	1,944	[2]
Maximum exposure to loss	1,712		1,782
Carrying value of exposure to loss - Liabilities	13		14
Other Structured Financings | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	596		640
Other Structured Financings | Debt and Equity Interests
Maximum exposure to loss	937	[3]	978	[4]
Other Structured Financings | Debt and Equity Interests | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	596	[3]	640	[4]
Other Structured Financings | Derivative and Other Contracts
Maximum exposure to loss	0		0
Carrying value of exposure to loss - Liabilities	0		0
Other Structured Financings | Derivative and Other Contracts | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	0		0
Other Structured Financings | Commitments, Guarantees and Other
Maximum exposure to loss	775		804
Carrying value of exposure to loss - Liabilities	13		14
Other
Carrying value of exposure to loss - Assets	28,678	[1]	20,997	[2]
Maximum exposure to loss	4,528		4,183
Carrying value of exposure to loss - Liabilities	296		290
Other | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	2,774		2,751
Other | Debt and Equity Interests
Maximum exposure to loss	2,436	[3]	2,413	[4]
Other | Debt and Equity Interests | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	2,436	[3]	2,413	[4]
Other | Derivative and Other Contracts
Maximum exposure to loss	1,102		1,209
Carrying value of exposure to loss - Liabilities	128		114
Other | Derivative and Other Contracts | Carrying Value of Exposure to Loss
Carrying value of exposure to loss - Assets	338		338
Other | Commitments, Guarantees and Other
Maximum exposure to loss	990		561
Carrying value of exposure to loss - Liabilities	$ 168		$ 176

[1] Mortgage and asset-backed securitizations include VIE assets as follows: $11.3 billion of residential mortgages; $55.4 billion of commercial mortgages; $110.3 billion of U.S. agency collateralized mortgage obligations; and $18.5 billion of other consumer or commercial loans.

[2] Mortgage and asset-backed securitizations include VIE assets as follows: $9.1 billion of residential mortgages; $81.7 billion of commercial mortgages; $121.6 billion of U.S. agency collateralized mortgage obligations; and $18.7 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period’s presentation.

[3] Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.7 billion of residential mortgages; $0.9 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.7 billion of other consumer or commercial loans.

[4] Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $1.1 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.3 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period’s presentation.

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Securities Available for Sale (Schedule of Proceeds of Sale of Securities Available for Sale) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Securities Available For Sale
Gross realized gains	$ 1	$ 12
Gross realized losses	1	0
Proceeds of sales of debt securities available for sale	$ 0	$ 6,121

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Introduction and Basis of Presentation (Details) (MSSB)	3 Months Ended
	Mar. 31, 2012
MSSB
Percentage of interest in Morgan Stanley Smith Barney Holdings LLC	51.00%

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Condensed Consolidated Statements of Changes in Total Equity (unaudited) (USD $) In Millions	Total		Preferred Stock	Common Stock	Paid-In Capital	Retained Earnings	Employee Stock Trust	Accumulated Other Comprehensive Income (Loss)	Common Stock Held in Treasury at Cost	Common Stock Issued to Employee Trust	Non-controlling Interests
BALANCE AT at Dec. 31, 2010	$ 65,407		$ 9,597	$ 16	$ 13,521	$ 38,603	$ 3,465	$ (467)	$ (4,059)	$ (3,465)	$ 8,196
Net income	1,130		0	0	0	968	0	0	0	0	162
Dividends	(302)		0	0	0	(302)	0	0	0	0	0
Shares issued under employee plans and related tax effects	541		0	0	(1,336)	0	3	0	1,877	(3)	0
Repurchases of common stock	(273)		0	0	0	0	0	0	(273)	0	0
Net change in cash flow hedges	1	[1]	0	0	0	0	0	1	0	0	0
Pension, postretirement and other related adjustments	5	[2]	0	0	0	0	0	5	0	0	0
Foreign currency translation adjustments	37	[3]	0	0	0	0	0	71	0	0	(34)
Change in net unrealized gains on securities available for sale	(36)	[4]	0	0	0	0	0	(36)	0	0	0
Other increases (decreases) in noncontrolling interests	(2)		0	0	0	0	0	0	0	0	(2)
BALANCE AT at Mar. 31, 2011	66,508		9,597	16	12,185	39,269	3,468	(426)	(2,455)	(3,468)	8,322
BALANCE AT at Dec. 31, 2011	70,078		1,508	20	22,836	40,341	3,166	(157)	(2,499)	(3,166)	8,029
Net income	134		0	0	0	(94)	0	0	0	0	228
Dividends	(129)		0	0	0	(129)	0	0	0	0	0
Shares issued under employee plans and related tax effects	584		0	0	94	0	86	0	490	(86)	0
Repurchases of common stock	(183)		0	0	0	0	0	0	(183)	0	0
Net change in cash flow hedges	2	[1]	0	0	0	0	0	2	0	0	0
Pension, postretirement and other related adjustments	2	[2]	0	0	0	0	0	2	0	0	0
Foreign currency translation adjustments	20	[3]	0	0	0	0	0	112	0	0	(92)
Change in net unrealized gains on securities available for sale	(19)	[4]	0	0	0	0	0	(19)	0	0	0
Other increases (decreases) in noncontrolling interests	103		0	0	0	0	0	0	0	0	103
BALANCE AT at Mar. 31, 2012	$ 70,592		$ 1,508	$ 20	$ 22,930	$ 40,118	$ 3,252	$ (60)	$ (2,192)	$ (3,252)	$ 8,268

[1] Amounts are net of provision for income taxes of $1 million and $2 million for the quarters ended March 31, 2012 and 2011, respectively.

[2] Amounts are net of provision for (benefit from) income taxes of $2 million and $(4) million for the quarters ended March 31, 2012 and 2011, respectively.

[3] Amounts are net of provision for (benefit from) income taxes of $4 million and $(68) million for the quarters ended March 31, 2012 and 2011, respectively.

[4] Amounts are net of (benefit from) income taxes of $(13) million and $(24) million for the quarters ended March 31, 2012 and 2011, respectively.

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Collateralized Transactions (Narrative) (Details) (USD $) In Billions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Customer margin loans outstanding	$ 19.4	$ 16.2
Fair value of financial instruments received as collateral where the Company is permitted to sell or repledge the securities	586	488
Fair value of financial instruments received as collateral where the Company has sold or repledged	$ 420	$ 335

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Interest Income and Interest Expense (Tables)

3 Months Ended

Mar. 31, 2012

Interest Income And Interest Expense

Schedule Of Details Of Interest Income And Interest Expense

				Three Months Ended
				March 31,
				2012		2011
				(dollars in millions)
Interest income(1):
	Financial instruments owned(2)		$	791	$	918
	Securities available for sale			86		88
	Loans			118		105
	Interest bearing deposits with banks			27		35
	Federal funds sold and securities purchased under agreements
		to resell and Securities borrowed		113		277
	Other			407		436
Total Interest income			$	1,542	$	1,859
Interest expense(1):
	Deposits		$	45	$	66
	Commercial paper and other short-term borrowings			13		8
	Long-term debt			1,254		1,313
	Securities sold under agreements to repurchase
		and Securities loaned		463		471
	Other			(174)		(5)
Total Interest expense			$	1,601	$	1,853
Net interest			$	(59)	$	6

_____________

(1)       Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument's fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

(2)       Interest expense on Financial instruments sold, not yet purchased is reported as a reduction to Interest income on Financial instruments owned.

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Discontinued Operations

3 Months Ended

Mar. 31, 2012

Discontinued Operations

Discontinued Operations

20.Discontinued Operations.

See Note 1 for a discussion of the Company's discontinued operations.

The table below provides information regarding amounts included in discontinued operations:

			Three Months Ended
			March 31,
			2012		2011
			(dollars in millions)
Net revenues(1):
	Saxon	$	76	$	24
	Quilter		31		33
	Other(2)		—		10
		$	107	$	67
Pre-tax gain (loss) on discontinued operations(1):
	Revel	$	—	$	(10)
	Saxon(3)		25		(34)
	Quilter		2		3
	Other(2)		—		13
		$	27	$	(28)

_____________

(1)Amounts included eliminations of intersegment activity.

(2)       Amounts included in Other for the three months ended March 31, 2011 are related to CityMortgage Bank, Retail Asset Management and other.

(3)       Amount included a pre-tax gain of approximately $51 million primarily resulting from the subsequent increase in fair value of Saxon, which had incurredimpairment losses of $98 million in the quarter ended December 31, 2011, as well as approximately $5 million of severance costs incurred in connection with the disposition of Saxon. See Note 21 for a further discussion of the disposition of Saxon.

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Equity Method Investments

3 Months Ended

Mar. 31, 2012

Equity Method Investment, Financial Statement, Reported Amounts [Abstract]

Equity Method Investments

19.Equity Method Investments.

The Company has investments accounted for under the equity method of accounting (see Note 1) of $4,384 million and $4,524million at March 31, 2012 and December 31, 2011, respectively, included in Other investments in the condensed consolidated statements of financial condition. Losses from these investments were $32 million and $660 million for the quarters ended March 31, 2012 and 2011, respectively and are included in Other revenues in the condensed consolidated statements of income. The loss for 2011 included the loss related to the Company's 40% stake in MUMSS, as described below. See Note 24 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K for further information.

Japanese Securities Joint Venture

On May 1, 2010, the Company and Mitsubishi UFJ Financial Group, Inc. (“MUFG”)formed a joint venture in Japan of their respective investment banking and securities businesses. MUFG and the Company have integrated their respective Japanese securities companies by forming two joint venture companies. MUFG contributed the investment banking, wholesale and retail securities businesses conducted in Japan by Mitsubishi UFJ Securities Co., Ltd. into Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”).The Company contributed the investment banking operations conducted in Japan by its subsidiary MSMS, formerly known as Morgan Stanley Japan Securities Co., Ltd., into MUMSS (MSMS, together with MUMSS, the “Joint Venture”). MSMS will continue its sales and trading and capital markets business conducted in Japan. Following the respective contributions to the Joint Venture and a cash payment of 23 billion yen ($247 million), from MUFG to the Company, the Company owns a 40% economic interest in the Joint Venture and MUFG owns a 60% economic interest in the Joint Venture.

The Company holds a 40% voting interest and MUFG holds a 60% voting interest in MUMSS, while the Company holds a 51% voting interest and MUFG holds a 49% voting interest in MSMS. The Company continues to consolidate MSMS in its consolidated financial statements and, commencing on May 1, 2010, accounted for its interest in MUMSS as an equity method investment within the Institutional Securities business segment. During the quarters ended March 31, 2012 and 2011, the Company recorded a gain (loss) of $27 million and $(655) million, respectively, within Other revenues in the condensed consolidated statements of income, arising from the Company's 40% stake in MUMSS.

In order to enhance the risk management at MUMSS, during the quarter ended March 31, 2011, the Company entered into a transaction with MUMSS whereby the risk associated with the fixed income trading positions that previously caused the majority of the aforementioned MUMSS losses in 2011 was transferred to MSMS. In return for entering into the transaction, the Company received total consideration of $659 million, which represented the estimated fair value of the fixed income trading positions transferred.

At March 31, 2012, the Company performed an impairment review of its equity method investment in MUMSS in view of the current financial performance of MUMSS and the current state of the Japanese economy. The Company recorded no other-than-temporary impairment loss at March 31, 2012. Adverse market or economic events, as well as further deterioration of economic performance, could result in impairment charges of this investment in future periods.

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Income Taxes (Provision for (Benefit from) Income Taxes from Continuing Operations) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Income Taxes
Provision for (benefit from) income taxes from continuing operations	$ 54		$ (244)
Provision for (benefit from) income taxes from discontinued operations	$ 42	[1]	$ (13)	[1]

[1] See Notes 1 and 20 for discussion of discontinued operations.

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Fair Value Disclosures (Assets Measured at Fair Value on a Nonrecurring Basis) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended					3 Months Ended	12 Months Ended							3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011	Dec. 31, 2011		Mar. 31, 2012 Saxon	Dec. 31, 2011 Saxon	Mar. 31, 2012 Level 1		Mar. 31, 2012 Level 2		Mar. 31, 2012 Level 3		Mar. 31, 2012 Nonrecurring		Mar. 31, 2011 Nonrecurring		Mar. 31, 2012 Nonrecurring Loans		Mar. 31, 2011 Nonrecurring Loans		Mar. 31, 2012 Nonrecurring Other Investments [Member]		Mar. 31, 2011 Nonrecurring Other Investments [Member]		Mar. 31, 2012 Nonrecurring Premises, Equipment and Software Costs		Mar. 31, 2011 Nonrecurring Goodwill		Mar. 31, 2012 Nonrecurring Intangible Assets		Mar. 31, 2011 Nonrecurring Intangible Assets		Mar. 31, 2012 Nonrecurring Level 1	Mar. 31, 2011 Nonrecurring Level 1		Mar. 31, 2012 Nonrecurring Level 1 Loans		Mar. 31, 2012 Nonrecurring Level 1 Other Investments [Member]		Mar. 31, 2012 Nonrecurring Level 1 Premises, Equipment and Software Costs		Mar. 31, 2012 Nonrecurring Level 1 Intangible Assets		Mar. 31, 2012 Nonrecurring Level 2	Mar. 31, 2011 Nonrecurring Level 2		Mar. 31, 2012 Nonrecurring Level 2 Loans		Mar. 31, 2012 Nonrecurring Level 2 Other Investments [Member]		Mar. 31, 2012 Nonrecurring Level 2 Premises, Equipment and Software Costs		Mar. 31, 2012 Nonrecurring Level 2 Intangible Assets		Mar. 31, 2012 Nonrecurring Level 3	Mar. 31, 2011 Nonrecurring Level 3		Mar. 31, 2012 Nonrecurring Level 3 Loans		Mar. 31, 2012 Nonrecurring Level 3 Other Investments [Member]		Mar. 31, 2012 Nonrecurring Level 3 Premises, Equipment and Software Costs		Mar. 31, 2012 Nonrecurring Level 3 Intangible Assets
Carrying Value
Loans	$ 16,729			$ 15,369												$ 559	[1]	$ 298	[1]
Other investments	4,688			4,832												77	[2]					47	[2]
Premises, equipment and software costs	6,410			6,457																						3	[2]
Intangible assets	4,170			4,285												0	[3]													2	[4]
Goodwill	6,700	[5]		6,686	[5]
Total carrying value														350		636
Fair Value
Loans								0	[6]	1,923	[6]	14,868	[6]																						0	[1]	0	[1]								46	[1]	144	[1]								513	[1]	154	[1]
Other investments																																			0	[2]			0	[2]						0	[2]			0	[2]						77	[2]			47	[2]
Premises, equipment and software costs																																									0	[2]										0	[2]										3	[2]
Intangible assets	99			133																															0	[3]							2	[4]		0	[3]							0	[4]		0	[3]							0	[4]
Total fair value																																		2	0										144	46										204	590
Gains (losses) in fair value adjustment														(12)	[7]	4	[7]	(6)	[1],[7]	16	[1],[7]	(3)	[2],[7]	(9)	[2],[7]	(1)	[7]	0	[7]	(2)	[4],[7]	(3)	[3],[7]
Additional Disclosures
Pre-tax gain (loss) from disposal of discontinued operations						51
Impairment losses	$ 12		$ 3				$ 98

[1] Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

[2] Losses recorded were determined primarily using discounted cash flow models.

[3] Losses primarily related to investment management contracts, including contracts associated with FrontPoint, and were determined primarily using discounted cash flow models.

[4] Losses were determined primarily using discounted cash flow models or a valuation technique incorporating an observable market index.

[5] The amount of the Company’s goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27 million related to the Asset Management business segment, was $7,400 million and $7,386 million at March 31, 2012 and December 31, 2011, respectively

[6] (2) Includes all loans measured at fair value on a non-recurring basis.

[7] Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2012

Employee Benefit Plans

Components of Net Periodic Benefit Expense

			Three Months Ended
			March 31,
			2012		2011
			(dollars in millions)
Service cost, benefits earned during the period		$	8	$	8
Interest cost on projected benefit obligation			41		42
Expected return on plan assets			(28)		(33)
Net amortization of prior service costs			(3)		(4)
Net amortization of actuarial loss			7		5
	Net periodic benefit expense	$	25	$	18

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Subsequent Events

3 Months Ended

Mar. 31, 2012

Subsequent Events

Subsequent Events

21.Subsequent Events.

Common Dividend.

On April 19, 2012, the Company announced that its Board of Directors declared a quarterly dividend per common share of $0.05. The dividend is payable on May 15, 2012 to common shareholders of record on April30, 2012.

Long-Term Borrowings.

Subsequent to March 31, 2012 and through April 30, 2012, the Company's long-term borrowings (net of issuances) decreased by approximately $1.6billion.

Quilter.

On April 2, 2012, the Company closed the sale of Quilter, its retail wealth management business in the U.K.The Company has classified Quilter as held for sale within the Global Wealth Management Group business segment and the results of its operations are presented as discontinued operations for all periods presented.

Saxon.

On October 24, 2011, the Company announced that it had reached an agreement to sell Saxon, a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation. During the first quarter of 2012, the transaction was restructured as a sale of Saxon's assets, the first phase of which was completed in the second quarter of 2012. The remaining operations of Saxon are expected to be wound down within the year. The Company expects to incur incremental wind-down costs in future periods. The results of Saxon are reported as discontinued operations within the Institutional Securities business segment for all periods presented.

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Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Revenue Recognition, Policy

For a detailed discussion about the Company's significant accounting policies, see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

During the quarter ended March 31, 2012, other than the following, no other updates were made to the Company's significant accounting policies.

Consolidated Statements Of Cash Flows

Securities Available for Sale – Other-than-temporary Impairment.

For available for sale (“AFS”) debt securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. When determining if a credit loss exists, the Company considers all relevant information including the length of time and the extent to which the fair value has been less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors; the historical and implied volatility of the fair value of the security; the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; failure of the issuer of the security to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency and recoveries or additional declines in fair value after the balance sheet date. When estimating the present value of expected cash flows, information shall include the remaining payment terms of the security, prepayment speeds, financial condition of the issuer(s), expected defaults and the value of any underlying collateral.

For AFS equity securities, the Company considers various factors including the intent and ability to hold the equity security for a period of time sufficient to allow for any anticipated recovery in market value in evaluating whether another-than-temporary impairment(“OTTI”) exists. If the equity security is considered other-than-temporarily impaired, the security will be written down to fair value, with the full difference between fair value and cost recognized in earnings.

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

Financial Instruments and Fair Value—Valuation Process.

The Valuation Review Group (“VRG”) within the Financial Control Group (“FCG”) is responsible for the Company's fair value valuation policies, processes and procedures. VRG is independent of the business units and reports to the Chief Financial Officer (“CFO”), who has final authority over the valuation of the Company's financial instruments.  VRG implements valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

The Company's control processes include:

Model Review. VRG, in conjunction with the Market Risk Department (“MRD”) and, where appropriate, the Credit Risk Management Department, both of which report to the Chief Risk Officer, independently review the valuation model's theoretical soundness, the appropriateness of the valuation methodology and calibration techniques developed by the business units using observable inputs. Where inputs are not observable, VRG reviews the appropriateness of the proposed valuation methodology to ensure it is consistent with how a market participant would arrive at the unobservable input. The valuation methodologies utilized in the absence of observable inputs may include extrapolation techniques and the use of comparable observable inputs. As part of the review, VRG develops a methodology to independently verify the fair value generated by the business unit's valuation model. Before trades are executed using new valuation models, those models are required to be independently reviewed. All ofthe Company's valuation models are subject to an independent annual review.

Independent Price Verification. The business units are responsible for determining the fair value of financial instruments using approved valuation models and valuation methodologies. Generally on a monthly basis,VRG independently validates the fair values of financial instruments determined using valuation models by determining the appropriateness of the inputs used by the business units and testing compliance with the documented valuation methodologies approved in the model review process described above.

VRG uses recently executed transactions, other observable market data such as exchange data, broker/dealer quotes, third-party pricing vendors and aggregation services for validating the fair values of financial instruments generated using valuation models. VRG assesses the external sources and their valuation methodologies to determine if the external providers meet the minimum standards expected of a third-party pricing source. Pricing data provided by approved external sources is evaluated using a number of approaches; for example, by corroborating the external sources' prices to executed trades, analyzing the methodology and assumptions used by the external source to generate a price and/or by evaluating how active the third-party pricing source (or originating sources used by the third-party pricing source) is in the market. Based on this analysis, VRG generates a ranking of the observable market data to ensure that the highest-ranked market data source is used to validate the business unit's fair value of financial instruments.

For financial instruments categorized within Level 3 of the fair value hierarchy, VRG reviews the business unit's valuation techniques to ensure these are consistent with market participant assumptions.

The results of this independent price verification and any adjustments made by VRG to the fair value generated by the business units are presented to management of the three business segments (i.e., Institutional Securities, Global Wealth Management Group and Asset Management), the CFO and the Chief Risk Officer on a regular basis.

Review of New Level 3 Transactions. VRG reviews the model and valuation methodology used to price all new material Level 3 transactions and both FCG and MRD management must approve the fair value of the trade that is initially recognized.

Securities Available for Sale – Other-than-temporary Impairment.

For available for sale (“AFS”) debt securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. When determining if a credit loss exists, the Company considers all relevant information including the length of time and the extent to which the fair value has been less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors; the historical and implied volatility of the fair value of the security; the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; failure of the issuer of the security to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency and recoveries or additional declines in fair value after the balance sheet date. When estimating the present value of expected cash flows, information shall include the remaining payment terms of the security, prepayment speeds, financial condition of the issuer(s), expected defaults and the value of any underlying collateral.

For AFS equity securities, the Company considers various factors including the intent and ability to hold the equity security for a period of time sufficient to allow for any anticipated recovery in market value in evaluating whether another-than-temporary impairment(“OTTI”) exists. If the equity security is considered other-than-temporarily impaired, the security will be written down to fair value, with the full difference between fair value and cost recognized in earnings.

Accounting Developments.

Reconsideration of Effective Control for Repurchase Agreements.

In April 2011, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance that modifies the criteria that must be satisfied for a transfer of financial assets to be accounted for as a sale. If the transferor maintains effective control over the transferred assets, the transaction is to be accounted for as a financing. This guidance eliminates from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. This guidance is effective for transfers occurring on and after January 1, 2012.The adoption of this accounting guidance did not have a material impact on the Company's condensed consolidated financial statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.

In May 2011, the FASB issued an accounting update that clarifies existing fair value measurement guidance and changes certain principles or requirements for measuring fair value or disclosing information about fair value measurements. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurement in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The guidance became effective for the Company beginning on January 1, 2012. See Note 3 for additional disclosures as required by this accounting guidance.

Goodwill Impairment Test.

In September 2011, the FASB issued accounting guidance that simplifies how entities test goodwill for impairment. This guidance allows entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity no longer would be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This guidance became effective for the Company beginning on January 1, 2012. The adoption of this accounting guidance did not have a material impact on the Company's condensed consolidated financial statements.

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Consolidated Statements of Cash Flows (unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements Of Cash Flows
Cash payments for interest	$ 1,169	$ 1,697
Cash paid for income taxes	$ 145	$ 250

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Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2012.

				Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting		Balance at March 31, 2012
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. government and agency securities:
		U.S. Treasury securities		$	35,781	$	—	$	—	$	—	$	35,781
		U.S. agency securities			1,804		22,082		23		—		23,909
			Total U.S. government and agency securities		37,585		22,082		23		—		59,690
	Other sovereign government obligations				29,069		3,158		8		—		32,235
	Corporate and other debt:
		State and municipal securities			—		2,676		3		—		2,679
		Residential mortgage-backed securities			—		1,548		43		—		1,591
		Commercial mortgage-backed securities			—		1,829		127		—		1,956
		Asset-backed securities			—		1,076		3		—		1,079
		Corporate bonds			—		25,115		899		—		26,014
		Collateralized debt obligations			—		957		1,165		—		2,122
		Loans and lending commitments			—		14,940		8,597		—		23,537
		Other debt			—		10,483		57		—		10,540
			Total corporate and other debt		—		58,624		10,894		—		69,518
	Corporate equities(1)				56,582		1,927		554		—		59,063
	Derivative and other contracts:
		Interest rate contracts			914		786,488		4,117		—		791,519
		Credit contracts			—		90,206		9,790		—		99,996
		Foreign exchange contracts			1		47,378		720		—		48,099
		Equity contracts			991		44,359		1,188		—		46,538
		Commodity contracts			7,325		30,287		2,504		—		40,116
		Other			—		61		—		—		61
		Netting(2)			(8,687)		(895,017)		(7,896)		(74,713)		(986,313)
			Total derivative and other contracts		544		103,762		10,423		(74,713)		40,016
	Investments:
		Private equity funds			—		—		1,994		—		1,994
		Real estate funds			—		6		1,338		—		1,344
		Hedge funds			—		318		623		—		941
		Principal investments			98		—		3,194		—		3,292
		Other			157		74		527		—		758
			Total investments		255		398		7,676		—		8,329
	Physical commodities				—		9,573		—		—		9,573
		Total financial instruments owned			124,035		199,524		29,578		(74,713)		278,424
Securities available for sale					13,822		18,706		—		—		32,528
Securities received as collateral					17,542		186		—		—		17,728
Federal funds sold and securities purchased
	under agreements to resell				—		318		—		—		318
Intangible assets(3)					—		—		99		—		99
Total assets measured at fair value				$	155,399	$	218,734	$	29,677	$	(74,713)	$	329,097
Liabilities at Fair Value
Deposits				$	—	$	1,980	$	—	$	—	$	1,980
Commercial paper and other short-term borrowings					—		1,306		15		—		1,321
Financial instruments sold, not yet purchased:
	U.S. government and agency securities:
		U.S. Treasury securities			23,544		—		—		—		23,544
		U.S. agency securities			1,727		318		—		—		2,045
			Total U.S. government and agency securities		25,271		318		—		—		25,589
	Other sovereign government obligations				24,979		1,374		1		—		26,354
	Corporate and other debt:
		State and municipal securities			—		4		—		—		4
		Residential mortgage-backed securities			—		2		61		—		63
		Commercial mortgage-backed securities			—		9		—		—		9
		Corporate bonds			—		6,888		193		—		7,081
		Collateralized debt obligations			—		17		—		—		17
		Unfunded lending commitments			—		931		60		—		991
		Other debt			—		349		33		—		382
			Total corporate and other debt		—		8,200		347		—		8,547
	Corporate equities(1)				26,271		1,452		2		—		27,725
	Derivative and other contracts:
		Interest rate contracts			1,053		757,445		4,095		—		762,593
		Credit contracts			—		88,357		5,409		—		93,766
		Foreign exchange contracts			2		50,275		654		—		50,931
		Equity contracts			1,226		47,293		2,630		—		51,149
		Commodity contracts			8,177		30,628		1,701		—		40,506
		Other			—		49		23		—		72
		Netting(2)			(8,687)		(895,017)		(7,896)		(44,652)		(956,252)
			Total derivative and other contracts		1,771		79,030		6,616		(44,652)		42,765
		Total financial instruments sold, not yet purchased			78,292		90,374		6,966		(44,652)		130,980
Obligation to return securities received as collateral					23,167		199		—		—		23,366
Securities sold under agreements to repurchase					—		161		186		—		347
Other secured financings					—		12,487		594		—		13,081
Long-term borrowings					2		41,079		2,143		—		43,224
Total liabilities measured at fair value				$	101,461	$	147,586	$	9,904	$	(44,652)	$	214,299

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3) Amount represents mortgage servicing rights (“MSR”) accounted for at fair value. See Note 6 for further information on MSRs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2011.

				Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting		Balance at December 31, 2011
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. government and agency securities:
		U.S. Treasury securities		$	38,769	$	1	$	—	$	—	$	38,770
		U.S. agency securities			4,332		20,339		8		—		24,679
			Total U.S. government and agency securities		43,101		20,340		8		—		63,449
	Other sovereign government obligations				22,650		6,290		119		—		29,059
	Corporate and other debt:
		State and municipal securities			—		2,261		—		—		2,261
		Residential mortgage-backed securities			—		1,304		494		—		1,798
		Commercial mortgage-backed securities			—		1,686		134		—		1,820
		Asset-backed securities			—		937		31		—		968
		Corporate bonds			—		25,873		675		—		26,548
		Collateralized debt obligations			—		1,711		980		—		2,691
		Loans and lending commitments			—		14,854		9,590		—		24,444
		Other debt			—		8,265		128		—		8,393
			Total corporate and other debt		—		56,891		12,032		—		68,923
	Corporate equities(1)				45,173		2,376		417		—		47,966
	Derivative and other contracts:
		Interest rate contracts			1,493		906,082		5,301		—		912,876
		Credit contracts			—		123,689		15,102		—		138,791
		Foreign exchange contracts			—		61,770		573		—		62,343
		Equity contracts			929		44,558		800		—		46,287
		Commodity contracts			6,356		31,246		2,176		—		39,778
		Other			—		292		306		—		598
		Netting(2)			(7,596)		(1,045,912)		(11,837)		(87,264)		(1,152,609)
			Total derivative and other contracts		1,182		121,725		12,421		(87,264)		48,064
	Investments:
		Private equity funds			—		7		1,936		—		1,943
		Real estate funds			—		5		1,213		—		1,218
		Hedge funds			—		473		696		—		1,169
		Principal investments			161		104		2,937		—		3,202
		Other			141		21		501		—		663
			Total investments		302		610		7,283		—		8,195
	Physical commodities				—		9,651		46		—		9,697
		Total financial instruments owned			112,408		217,883		32,326		(87,264)		275,353
Securities available for sale					13,437		17,058		—		—		30,495
Securities received as collateral					11,530		121		—		—		11,651
Federal funds sold and securities purchased under
	agreements to resell				—		112		—		—		112
Intangible assets(3)					—		—		133		—		133
Total assets measured at fair value				$	137,375	$	235,174	$	32,459	$	(87,264)	$	317,744
Liabilities at Fair Value
Deposits				$	—	$	2,101	$	—	$	—	$	2,101
Commercial paper and other short-term borrowings					—		1,337		2		—		1,339
Financial instruments sold, not yet purchased:
	U.S. government and agency securities:
		U.S. Treasury securities			17,776		—		—		—		17,776
		U.S. agency securities			1,748		106		—		—		1,854
			Total U.S. government and agency securities		19,524		106		—		—		19,630
	Other sovereign government obligations				14,981		2,152		8		—		17,141
	Corporate and other debt:
		State and municipal securities			—		3		—		—		3
		Residential mortgage-backed securities			—		—		355		—		355
		Commercial mortgage-backed securities			—		14		—		—		14
		Corporate bonds			—		6,217		219		—		6,436
		Collateralized debt obligations			—		3		—		—		3
		Unfunded lending commitments			—		1,284		85		—		1,369
		Other debt			—		157		73		—		230
			Total corporate and other debt		—		7,678		732		—		8,410
	Corporate equities(1)				24,347		149		1		—		24,497
	Derivative and other contracts:
		Interest rate contracts			1,680		873,466		4,881		—		880,027
		Credit contracts			—		121,438		9,288		—		130,726
		Foreign exchange contracts			—		64,218		530		—		64,748
		Equity contracts			877		45,375		2,034		—		48,286
		Commodity contracts			7,144		31,248		1,606		—		39,998
		Other			—		879		1,396		—		2,275
		Netting(2)			(7,596)		(1,045,912)		(11,837)		(54,262)		(1,119,607)
			Total derivative and other contracts		2,105		90,712		7,898		(54,262)		46,453
	Physical commodities				—		16		—		—		16
		Total financial instruments sold, not yet purchased			60,957		100,813		8,639		(54,262)		116,147
Obligation to return securities received as collateral					15,267		127		—		—		15,394
Securities sold under agreements to repurchase					—		8		340		—		348
Other secured financings					—		14,024		570		—		14,594
Long-term borrowings					10		38,050		1,603		—		39,663
Total liabilities measured at fair value				$	76,234	$	156,460	$	11,154	$	(54,262)	$	189,586

_____________

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3)       Amount represents MSRs accounted for at fair value. See Note 6 for further information on MSRs.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2012.

					Beginning Balance at December 31, 2011		Total Realized and Unrealized Gains (Losses) (1)		Purchases		Sales		Issuances		Settlements		Net Transfers		Ending Balance at March 31, 2012		Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2012(2)
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. agency securities			$	8	$	—	$	42	$	(26)	$	—	$	—	$	(1)	$	23	$	—
	Other sovereign government obligations				119		(1)		8		(118)		—		—		—		8		—
	Corporate and other debt:
		State and municipal securities			—		—		—		—		—		—		3		3		—
		Residential mortgage-backed securities			494		(21)		6		(245)		—		—		(191)		43		(18)
		Commercial mortgage-backed securities			134		23		5		(21)		—		(1)		(13)		127		16
		Asset-backed securities			31		1		—		(28)		—		—		(1)		3		1
		Corporate bonds			675		45		426		(225)		—		—		(22)		899		39
		Collateralized debt obligations			980		123		296		(161)		—		—		(73)		1,165		82
		Loans and lending commitments			9,590		(20)		496		(1,018)		—		(421)		(30)		8,597		(35)
		Other debt			128		2		27		(123)		—		—		23		57		—
			Total corporate and other debt		12,032		153		1,256		(1,821)		—		(422)		(304)		10,894		85
	Corporate equities				417		(45)		901		(758)		—		—		39		554		(9)
	Net derivative and other contracts(3):
		Interest rate contracts			420		170		6		—		(5)		(139)		(430)		22		179
		Credit contracts			5,814		(1,381)		63		—		(10)		(47)		(58)		4,381		(1,786)
		Foreign exchange contracts			43		(99)		—		—		—		162		(40)		66		(83)
		Equity contracts			(1,234)		(99)		199		(58)		(50)		(250)		50		(1,442)		(161)
		Commodity contracts			570		199		4		—		(4)		37		(3)		803		101
		Other			(1,090)		58		—		—		—		269		740		(23)		56
			Total net derivative and
			other contracts		4,523		(1,152)		272		(58)		(69)		32		259		3,807		(1,694)
	Investments:
		Private equity funds			1,936		(7)		101		(36)		—		—		—		1,994		1
		Real estate funds			1,213		52		87		(14)		—		—		—		1,338		5
		Hedge funds			696		25		22		(33)		—		—		(87)		623		23
		Principal investments			2,937		38		180		(65)		—		—		104		3,194		57
		Other			501		(33)		34		(3)		—		—		28		527		(41)
			Total investments		7,283		75		424		(151)		—		—		45		7,676		45
	Physical commodities				46		—		—		—		—		(46)		—		—		—
Intangible assets					133		(34)		—		—		—		—		—		99		(34)
Liabilities at Fair Value
Commercial paper and other
	short-term borrowings			$	2	$	—	$	—	$	—	$	13	$	—	$	—	$	15	$	—
Financial instruments sold, not yet purchased:
	Other sovereign government obligations				8		—		(7)		—		—		—		—		1		—
	Corporate and other debt:
		Residential mortgage-backed securities			355		—		(294)		—		—		—		—		61		(61)
		Corporate bonds			219		(59)		(186)		126		—		—		(25)		193		(74)
		Unfunded lending commitments			85		25		—		—		—		—		—		60		25
		Other debt			73		1		—		—		—		(55)		16		33		3
			Total corporate and other debt		732		(33)		(480)		126		—		(55)		(9)		347		(107)
	Corporate equities				1		(2)		(2)		10		—		—		(9)		2		—
Securities sold under agreements to repurchase					340		1		—		—		—		—		(153)		186		3
Other secured financings					570		(44)		—		—		12		(32)		—		594		(44)
Long-term borrowings					1,603		(173)		—		—		262		(78)		183		2,143		(171)

___________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $75 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for the quarter ended March 31, 2012 related to assets and liabilities still outstanding at March 31, 2012.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2011.

					Beginning Balance at December 31, 2010		Total Realized and Unrealized Gains (Losses) (1)		Purchases		Sales		Issuances		Settlements		Net Transfers		Ending Balance at March 31, 2011		Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2011(2)
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. agency securities			$	13	$	—	$	103	$	(52)	$	—	$	—	$	(7)	$	57	$	—
	Other sovereign government obligations				73		—		59		—		—		—		(6)		126		—
	Corporate and other debt:
		State and municipal securities			110		(1)		4		(96)		—		—		(13)		4		—
		Residential mortgage-backed securities			319		(58)		198		(183)		—		(1)		86		361		(21)
		Commercial mortgage-backed securities			188		16		9		(30)		—		—		(51)		132		10
		Asset-backed securities			13		—		12		(19)		—		—		(6)		—		—
		Corporate bonds			1,368		33		255		(215)		—		—		(75)		1,366		55
		Collateralized debt obligations			1,659		254		355		(595)		—		(36)		(44)		1,593		93
		Loans and lending commitments			11,666		386		1,023		(643)		—		(1,024)		(190)		11,218		382
		Other debt			193		(6)		1		(22)		—		—		(1)		165		(16)
			Total corporate and other debt		15,516		624		1,857		(1,803)		—		(1,061)		(294)		14,839		503
	Corporate equities				484		(53)		101		(98)		—		—		68		502		(18)
	Net derivative and other contracts(3):
		Interest rate contracts			424		169		1		—		(663)		(114)		125		(58)		100
		Credit contracts			6,594		(673)		128		—		(152)		71		111		6,079		(245)
		Foreign exchange rate contracts			46		(124)		—		—		—		127		(3)		46		(100)
		Equity contracts			(762)		75		65		(12)		(85)		15		59		(645)		75
		Commodity contracts			188		(9)		161		—		(132)		85		37		330		(4)
		Other			(913)		209		—		—		(5)		205		(4)		(508)		203
			Total net derivative and other contracts		5,577		(353)		355		(12)		(1,037)		389		325		5,244		29
	Investments:
		Private equity funds			1,986		107		32		(190)		—		—		71		2,006		95
		Real estate funds			1,176		64		14		(3)		—		—		—		1,251		102
		Hedge funds			901		(9)		135		(189)		—		—		33		871		(9)
		Principal investments			3,131		66		202		(301)		—		—		(41)		3,057		(85)
		Other			560		8		1		(14)		—		—		(157)		398		3
			Total investments		7,754		236		384		(697)		—		—		(94)		7,583		106
Securities received as collateral					1		—		—		(1)		—		—		—		—		—
Intangible assets					157		(15)		3		(1)		—		—		—		144		(14)
Liabilities at Fair Value
Deposits				$	16	$	2	$	—	$	—	$	—	$	(14)	$	—	$	—	$	—
Commercial paper and other short-term borrowings					2		—		—		—		4		(2)		—		4		—
Financial instruments sold, not yet purchased:
	Corporate and other debt:
		Corporate bonds			44		1		(27)		155		—		—		(21)		150		8
		Collateralized debt obligations			—		1		—		3		—		—		—		2		1
		Unfunded lending commitments			263		92		—		—		—		—		—		171		92
		Other debt			194		—		—		—		—		—		(14)		180		—
	Total corporate and other debt				501		94		(27)		158		—		—		(35)		503		101
	Corporate equities				15		(1)		(8)		1		—		—		—		9		—
Obligation to return securities received as collateral					1		—		(1)		—		—		—		—		—		—
Securities sold under agreements to repurchase					351		(2)		—		—		—		(1)		—		352		(2)
Other secured financings					1,016		(12)		—		—		—		(117)		(306)		605		(12)
Long-term borrowings					1,316		(84)		—		—		141		(180)		13		1,374		(83)

____________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $236 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for the quarter ended March 31,2011 related to assets and liabilities still outstanding at March 31, 2011.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Quantitative Information about and Sensitivity of Significant Unobservable Inputs used in Recurring Level 3 Fair Value Measurements

Balance at

Significant Unobservable Input(s) /

March 31,

Valuation

Sensitivity of the Fair Value to Changes

2012

Technique(s)

in the Unobservable Inputs

Range

(dollars in millions)

Assets(1)

Financial instruments owned:

Corporate and other debt:

Commercial mortgage-backed securities

$

127

Comparable pricing(2)

Comparable bond price / (A)

0 to 85 points

Corporate bonds

899

Comparable pricing(2)

Comparable bond price / (A)

2 to 120 points

Collateralized debt obligations

1,165

Comparable pricing(2)

Comparable bond price / (A)

15 to 82 points

Correlation model

Credit correlation / (B)

21% to 39%

Loans and lending commitments

8,597

Corporate loan model

Credit spread / (C)

26 to 1,109 basis points

Comparable pricing(2)

Comparable bond or loan price / (A)

10 to 100 points

Other debt

57

Comparable pricing(2)

Comparable bond price / (A)

1 to 9 points

Corporate equities(3)

554

Net asset value

Discount to net asset value / (C)

0% to 31%

Discounted cash flow

Implied weighted average cost of capital / (C)

9% to 40%

Market approach

Earnings before interest, taxes, depreciation and amortization ("EBITDA") multiple / (A)

3 to 21 times

Net derivative and other contracts:

Interest rate contracts

22

Option model

Interest rate volatility concentration liquidity multiple / (C)(D)

0 to 12 times

Interest rate volatility skew / (A)(D)

-1% to 81%

Credit contracts

4,381

Comparable pricing(2)

Cash synthetic basis / (C)

0 to 10 points

Comparable bond price / (C)

5 to 97 points

Correlation model

Credit correlation / (B)

9% to 82%

Foreign exchange contracts

66

Option model

Interest rate - Foreign exchange correlation / (A)

5% to 68%

Equity contracts

(1,442)

Option model

At the money volatility / (C)(D)

8% to 26%

Volatility skew / (C)(D)

-5% to 0%

Equity - Equity correlation / (C)(D)

40% to 97%

Equity - Foreign exchange correlation / (C)(D)

-45% to 35%

Equity - Interest rate correlation / (C)(D)

8% to 65%

Commodity contracts

803

Option model

Forward power price / (C)(D)

$22 to $134 per Megawatt hour

Commodity volatility / (A)(D)

13% to 113%

Cross commodity correlation / (C)(D)

21% to 99%

Investments (3):

Principal investments

3,194

Discounted cash flow

Implied weighted average cost of capital / (C)(D)

10% to 19%

Exit multiple / (A)(D)

5 to 10 times

Discounted cash flow

Capitalization rate / (C)(D)

5% to 9%

Equity discount rate / (C)(D)

16% to 35%

Market approach

EBITDA multiple / (A)

3 to 24 times

Other

527

Discounted cash flow

Implied weighted average cost of capital / (C)(D)

9% to 14%

Exit multiple / (A)(D)

4 to 10 times

Market approach

EBITDA multiple / (A)

3 to 11 times

Liabilities

Financial instruments sold, not yet purchased:

Corporate and other debt:

Residential mortgage-backed securities

$

61

Comparable pricing(2)

Comparable bond price / (A)

0 to 100 points

Corporate bonds

193

Comparable pricing(2)

Comparable bond price / (A)

6 to 121 points

Unfunded lending commitments

60

Corporate loan model

Credit spread / (C)

45 to 1,014 basis points

Securities sold under agreements to repurchase

186

Discounted cash flow

Funding spread / (A)

45 to 300 basis points

Other secured financings

594

Comparable pricing(2)

Comparable bond price / (A)

34 to 108 points

Discounted cash flow

Funding spread / (A)

267 to 269 basis points

Long-term borrowings

2,143

Option model

At the money volatility / (A)(D)

10% to 15%

Volatility skew / (A)(D)

-2% to 0%

Equity - Equity correlation / (C)(D)

70% to 97%

Equity - Foreign exchange correlation / (A)(D)

-70% to -40%

___________________

(1)Intangible assets consisting of MSRs of $84 million included in discontinued operations related to Saxon are excluded from the table. See Notes 1 and 20 for further information.

(2)       Prices for the identical instrument are not available and significant subjectivity may be involved when fair value is determined using pricing data available for comparable instruments.

(3)       Investments in funds measured using an unadjusted net asset value are excluded.

Sensitivity of the fair value to changes in the unobservable inputs:

(A)       Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement.

(B)       Significant changes in credit correlation may result in a significantly higher or lower fair value measurement. Increasing (decreasing) correlation drives a redistribution of risk within the capital structure such that junior tranches become less (more) risky and senior tranches become more (less) risky.

(C)Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement.

(D)       There are no predictable relationships between the significant unobservable inputs.

Fair Value of Investments that Calculate Net Asset Value

		At March 31, 2012				At December 31, 2011
					Unfunded				Unfunded
			Fair Value		Commitment		Fair Value		Commitment
		(dollars in millions)
Private equity funds		$	1,955	$	813	$	1,906	$	938
Real estate funds			1,310		288		1,188		448
Hedge funds(1):
	Long-short equity hedge funds		511		─		545		5
	Fixed income/credit-related hedge funds		23		─		124		─
	Event-driven hedge funds		71		─		163		─
	Multi-strategy hedge funds		336		2		335		─
Total		$	4,206	$	1,103	$	4,261	$	1,391

(1)       Fixed income/credit-related hedge funds, event-driven hedge funds, and multi-strategy hedge funds are redeemable at least on a six-month period basisprimarily with a notice period of 90 days or less. At March 31, 2012, approximately 36% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 34% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at March 31, 2012is primarily greater than six months. At December 31, 2011, approximately 38% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 32% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at December 31, 2011is primarily greater than six months.

Net Gains (Losses) Due to Changes in Fair Value for Items Measured at Fair Value Pursuant to the Fair Value Option Election

		Principal		Interest		Gains (Losses)
		Transactions-		Income		Included in
		Trading		(Expense)		Net Revenues
		(dollars in millions)
Three Months Ended March 31, 2012
Federal funds sold and securities purchased under
agreements to resell	$	(4)	$	1	$	(3)
Deposits		10		(22)		(12)
Commercial paper and other short-term borrowings		(129)		─		(129)
Securities sold under agreements to repurchase		(2)		(1)		(3)
Long-term borrowings		(2,951)		(344)		(3,295)
Three Months Ended March 31, 2011
Deposits	$	13	$	(30)	$	(17)
Commercial paper and other short-term borrowings		(5)		─		(5)
Securities sold under agreements to repurchase		(2)		─		(2)
Long-term borrowings		(1,266)		(290)		(1,556)

Gains (Losses) Due to Changes in Instrument Specific Credit Risk

		Three Months Ended
		March 31,
		2012		2011
		(dollars in millions)
Short-term and long-term borrowings(1)	$	(1,978)	$	(189)
Loans(2)		293		140
Unfunded lending commitments(3)		407		10

_____________

(1)       The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company's secondary bond market spreads.

(2)       Instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates.

(3)       Gains (losses) were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period end.

Amount by Which Contractual Principal Amount Exceeds Fair Value

		Contractual Principal Amount Exceeds Fair Value
		At		At
		March 31,		December 31,
		2012		2011
	(dollars in billions)
Short-term and long-term borrowings(1)	$	1.2	$	2.5
Loans(2)		23.9		27.2
Loans 90 or more days past due and/or on non-accrual status(2)(3)		21.3		22.1

_____________

(1)       These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index.

(2)       The majority of this difference between principal and fair value amounts emanates from the Company's distressed debt trading business, which purchases distressed debt at amounts well below par.

(3)       The aggregate fair value of loans that were in non-accrual status, which includes all loans 90 or more days past due, was $1.5 billion and $2.0 billion at March 31, 2012 and December 31, 2011, respectively. The aggregate fair value of loans that were 90 or more days past due was $0.9 billion and $1.5 billion at March 31, 2012 and December 31, 2011, respectively.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Three Months Ended March 31, 2012.

				Fair Value Measurements Using:
				Quoted Prices						Total
				in Active						Gains (Losses)
		Carrying		Markets for		Significant		Significant		for the
		Value At		Identical		Observable		Unobservable		Three Months Ended
		March 31,		Assets		Inputs		Inputs		March 31,
		2012		(Level 1)		(Level 2)		(Level 3)		2012(1)
	(dollars in millions)
Loans(2)	$	298	$	─	$	144	$	154	$	(6)
Other investments(3)		47		─		─		47		(3)
Premises, equipment and software costs(3)		3		─		─		3		(1)
Intangible assets(4)		2		2		─		─		(2)
Total	$	350	$	2	$	144	$	204	$	(12)

_____________

(1)       Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2)       Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses were determined primarily using discounted cash flow models or a valuation technique incorporating an observable market index.

Three Months Ended March 31, 2011.

				Fair Value Measurements Using:
				Quoted Prices						Total
				in Active						Gains (Losses)
		Carrying		Markets for		Significant		Significant		for the
		Value At		Identical		Observable		Unobservable		Three Months Ended
		March 31,		Assets		Inputs		Inputs		March 31,
		2011		(Level 1)		(Level 2)		(Level 3)		2011(1)
	(dollars in millions)
Loans(2)	$	559	$	─	$	46	$	513	$	16
Other investments(3)		77		─		─		77		(9)
Intangible assets(4)		─		─		─		─		(3)
Total	$	636	$	─	$	46	$	590	$	4

____________

(1)       Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2) Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models.The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses primarily related to investment management contracts, including contracts associated with FrontPoint, and were determined primarily using discounted cash flow models.

Financial Instruments Not Carried at Fair Value on a Recurring Basis

			At March 31, 2012				Fair Value Measurements using:
			Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(dollars in millions)
Financial Assets:
Cash and due from banks		$	10,133	$	10,133	$	10,133	$	—	$	—
Interest bearing deposits with banks			28,592		28,592		28,592		—		—
Cash deposited with clearing organizations or segregated under federal and
	other regulations or requirements		30,152		30,152		30,152		—		—
Federal funds sold and securities purchased under agreements to resell			136,133		135,773		—		135,161		612
Securities borrowed			141,610		141,609		—		141,484		125
Receivables:(1)
	Customers		38,962		38,962		—		38,962		—
	Brokers, dealers and clearing organizations		5,718		5,718		—		5,718		—
	Fees, interest and other		6,220		5,922		—		—		5,922
Loans(2)			16,729		16,791		—		1,923		14,868
Financial Liabilities:
Deposits		$	64,461	$	64,603	$	—	$	64,603	$	—
Commercial paper and other short-term borrowings			696		696		—		439		257
Securities sold under agreements to repurchase			106,983		107,041		—		99,539		7,502
Securities loaned			34,431		34,913		—		34,646		267
Other secured financings			8,354		8,383		—		6,527		1,856
Payables:(1)
	Customers		119,045		119,045		—		119,045		—
	Brokers, dealers and clearing organizations		12,143		12,143		—		12,143		—
Long-term borrowings			133,499		127,962		—		120,471		7,491

XML

Derivative Instruments and Hedging Activities (Fair Value of OTC Derivatives in a Gain Position) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Fair value of OTC derivatives in a gain position	$ 26,824	[1]	$ 35,049	[1]
AAA
Fair value of OTC derivatives in a gain position	4,408	[1],[2]	6,389	[1],[2]
AA
Fair value of OTC derivatives in a gain position	5,959	[1],[2]	7,048	[1],[2]
A
Fair value of OTC derivatives in a gain position	6,769	[1],[2]	7,117	[1],[2]
BBB
Fair value of OTC derivatives in a gain position	6,544	[1],[2]	10,337	[1],[2]
Non-investment Grade
Fair value of OTC derivatives in a gain position	3,144	[1],[2]	4,158	[1],[2]
Less than 1 Year
Fair value of OTC derivatives in a gain position	16,461	[1]	21,031	[1]
Less than 1 Year | AAA
Fair value of OTC derivatives in a gain position	224	[1],[2]	621	[1],[2]
Less than 1 Year | AA
Fair value of OTC derivatives in a gain position	2,983	[1],[2]	5,578	[1],[2]
Less than 1 Year | A
Fair value of OTC derivatives in a gain position	6,867	[1],[2]	7,576	[1],[2]
Less than 1 Year | BBB
Fair value of OTC derivatives in a gain position	3,456	[1],[2]	4,437	[1],[2]
Less than 1 Year | Non-investment Grade
Fair value of OTC derivatives in a gain position	2,931	[1],[2]	2,819	[1],[2]
1 - 3 Years
Fair value of OTC derivatives in a gain position	19,153	[1]	22,097	[1]
1 - 3 Years | AAA
Fair value of OTC derivatives in a gain position	1,058	[1],[2]	1,615	[1],[2]
1 - 3 Years | AA
Fair value of OTC derivatives in a gain position	5,988	[1],[2]	7,547	[1],[2]
1 - 3 Years | A
Fair value of OTC derivatives in a gain position	5,478	[1],[2]	5,538	[1],[2]
1 - 3 Years | BBB
Fair value of OTC derivatives in a gain position	3,638	[1],[2]	4,448	[1],[2]
1 - 3 Years | Non-investment Grade
Fair value of OTC derivatives in a gain position	2,991	[1],[2]	2,949	[1],[2]
3 - 5 Years
Fair value of OTC derivatives in a gain position	21,963	[1]	23,716	[1]
3 - 5 Years | AAA
Fair value of OTC derivatives in a gain position	1,276	[1],[2]	1,586	[1],[2]
3 - 5 Years | AA
Fair value of OTC derivatives in a gain position	5,226	[1],[2]	5,972	[1],[2]
3 - 5 Years | A
Fair value of OTC derivatives in a gain position	10,791	[1],[2]	10,224	[1],[2]
3 - 5 Years | BBB
Fair value of OTC derivatives in a gain position	2,838	[1],[2]	3,231	[1],[2]
3 - 5 Years | Non-investment Grade
Fair value of OTC derivatives in a gain position	1,832	[1],[2]	2,703	[1],[2]
Over 5 Years
Fair value of OTC derivatives in a gain position	71,430	[1]	81,702	[1]
Over 5 Years | AAA
Fair value of OTC derivatives in a gain position	7,837	[1],[2]	10,375	[1],[2]
Over 5 Years | AA
Fair value of OTC derivatives in a gain position	16,675	[1],[2]	21,068	[1],[2]
Over 5 Years | A
Fair value of OTC derivatives in a gain position	28,012	[1],[2]	27,417	[1],[2]
Over 5 Years | BBB
Fair value of OTC derivatives in a gain position	14,690	[1],[2]	17,758	[1],[2]
Over 5 Years | Non-investment Grade
Fair value of OTC derivatives in a gain position	4,216	[1],[2]	5,084	[1],[2]
Cross-Maturity and Cash Collateral Netting
Fair value of OTC derivatives in a gain position	(92,873)	[1],[3]	(104,585)	[1],[3]
Cross-Maturity and Cash Collateral Netting | AAA
Fair value of OTC derivatives in a gain position	(5,813)	[1],[2],[3]	(7,513)	[1],[2],[3]
Cross-Maturity and Cash Collateral Netting | AA
Fair value of OTC derivatives in a gain position	(22,926)	[1],[2],[3]	(31,074)	[1],[2],[3]
Cross-Maturity and Cash Collateral Netting | A
Fair value of OTC derivatives in a gain position	(41,189)	[1],[2],[3]	(41,608)	[1],[2],[3]
Cross-Maturity and Cash Collateral Netting | BBB
Fair value of OTC derivatives in a gain position	(16,673)	[1],[2],[3]	(17,932)	[1],[2],[3]
Cross-Maturity and Cash Collateral Netting | Non-investment Grade
Fair value of OTC derivatives in a gain position	(6,272)	[1],[2],[3]	(6,458)	[1],[2],[3]
Net Exposure Post-Cash Collateral
Fair value of OTC derivatives in a gain position	36,134	[1]	43,961	[1]
Net Exposure Post-Cash Collateral | AAA
Fair value of OTC derivatives in a gain position	4,582	[1],[2]	6,684	[1],[2]
Net Exposure Post-Cash Collateral | AA
Fair value of OTC derivatives in a gain position	7,946	[1],[2]	9,091	[1],[2]
Net Exposure Post-Cash Collateral | A
Fair value of OTC derivatives in a gain position	9,959	[1],[2]	9,147	[1],[2]
Net Exposure Post-Cash Collateral | BBB
Fair value of OTC derivatives in a gain position	7,949	[1],[2]	11,942	[1],[2]
Net Exposure Post-Cash Collateral | Non-investment Grade
Fair value of OTC derivatives in a gain position	$ 5,698	[1],[2]	$ 7,097	[1],[2]

[1] Fair values shown represent the Company’s net exposure to counterparties related to the Company’s OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

[2] Obligor credit ratings are determined by the Company’s Credit Risk Management Department.

[3] Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

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Commitments, Guarantees and Contingencies (Tables)

3 Months Ended

Mar. 31, 2012

Commitments, Guarantees and Contingencies [Abstract]

Commitments by Period of Expiration

			Years to Maturity
			Less								Total at
			than 1		1-3		3-5		Over 5		March 31, 2012
			(dollars in millions)
Letters of credit and other financial guarantees
	obtained to satisfy collateral requirements	$	2,068	$	12	$	6	$	—	$	2,086
Investment activities			1,160		238		44		274		1,716
Primary lending commitments—investment grade(1)(2)			10,181		9,854		31,778		1,997		53,810
Primary lending commitments—non-investment grade(2)			2,182		2,789		9,981		897		15,849
Secondary lending commitments(3)			56		203		20		112		391
Commitments for secured lending transactions			1,299		251		198		—		1,748
Forward starting reverse repurchase agreements and
	securities borrowing agreements(4)		74,317		—		—		—		74,317
Commercial and residential mortgage-related commitments			1,378		26		201		450		2,055
Other commitments			1,262		248		5		1		1,516
	Total	$	93,903	$	13,621	$	42,233	$	3,731	$	153,488

(1)       This amount includes commitments to asset-backed commercial paper conduits of $275 million at March 31, 2012, of which $138 million have maturities of less than one year and $137 million of which have maturities of one to three years.

(2) This amount includes $12.2billion of investment grade and $3.5billion of non-investment grade unfunded commitments accounted for as held for investment and $68million of investment grade and $191million of non-investment grade unfunded commitments accounted for as held for sale at March 31, 2012. The remainder of these lending commitments are carried at fairvalue.

(3)       These commitments are recorded at fair value within Financial instruments owned and Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition (see Note 3).

(4)       The Company enters into forward starting reverse repurchase and securities borrowing agreements (agreements that have a trade date at or prior to March 31, 2012 and settle subsequent to period-end) that are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations. These agreements primarily settle within three business days and of the amount atMarch 31, 2012,$70.7billion settled within three business days.

Obligations under Guarantee Arrangements

			Maximum Potential Payout/Notional										Carrying Amount (Asset)/ Liability		Collateral/ Recourse
			Years to Maturity
Type of Guarantee			Less than 1		1-3		3-5		Over 5		Total
			(dollars in millions)
Credit derivative contracts(1)		$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350	$	—
Other credit contracts			186		1,125		527		2,721		4,559		(1,787)		—
Non-credit derivative contracts(1)			1,084,120		889,974		375,232		424,365		2,773,691		85,784		—
Standby letters of credit and other
	financial guarantees issued(2)(3)		1,247		1,704		1,253		5,604		9,808		(141)		6,788
Market value guarantees			—		51		188		553		792		13		89
Liquidity facilities			4,827		305		37		67		5,236		(7)		6,552
Whole loan sales representations and
	warranties		—		—		—		24,366		24,366		79		—
Securitization representations and
	warranties		—		—		—		78,029		78,029		35		—
General partner guarantees			83		18		25		156		282		77		—

_____________

(1)Carrying amounts of derivative contracts are shown on a gross basis prior to cash collateral or counterparty netting. For further information on derivative contracts, see Note 10.

(2)       Approximately $2.6 billion of standby letters of credit are also reflected in the “Commitments” table in primary and secondary lending commitments. Standby letters of credit are recorded at fair value within Financial instruments owned or Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition.

(3)       Amounts include guarantees issued by consolidated real estate funds sponsored by the Company of approximately $225 million. These guarantees relate to obligations of the fund's investee entities, including guarantees related to capital expenditures and principal and interest debt payments. Accrued losses under these guarantees of approximately $7 million are reflected as a reduction of the carrying value of the related fund investments, which are reflected in Financial instruments owned—Investments on the condensed consolidated statement of financial condition.

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Fair Value Disclosures (Net Gains (Losses) Due to Changes in Fair Value for Items Measured at Fair Value Pursuant to the Fair Value Option Election) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Deposits
Gains (losses) due to changes in fair value	$ (12)	$ (17)
Federal Funds Sold and Securities Purchased under Agreements to Resell
Gains (losses) due to changes in fair value	(3)
Commercial Paper and Other Short-term Borrowings
Gains (losses) due to changes in fair value	(129)	(5)
Securities Sold under Agreements to Repurchase
Gains (losses) due to changes in fair value	(3)	(2)
Long-term Borrowings
Gains (losses) due to changes in fair value	(3,295)	(1,556)
Principal Transactions-Trading | Deposits
Gains (losses) due to changes in fair value	10	13
Principal Transactions-Trading | Federal Funds Sold and Securities Purchased under Agreements to Resell
Gains (losses) due to changes in fair value	(4)
Principal Transactions-Trading | Commercial Paper and Other Short-term Borrowings
Gains (losses) due to changes in fair value	(129)	(5)
Principal Transactions-Trading | Securities Sold under Agreements to Repurchase
Gains (losses) due to changes in fair value	(2)	(2)
Principal Transactions-Trading | Long-term Borrowings
Gains (losses) due to changes in fair value	(2,951)	(1,266)
Interest Income (Expense) | Deposits
Gains (losses) due to changes in fair value	(22)	(30)
Interest Income (Expense) | Federal Funds Sold and Securities Purchased under Agreements to Resell
Gains (losses) due to changes in fair value	1
Interest Income (Expense) | Commercial Paper and Other Short-term Borrowings
Gains (losses) due to changes in fair value	0	0
Interest Income (Expense) | Securities Sold under Agreements to Repurchase
Gains (losses) due to changes in fair value	(1)	0
Interest Income (Expense) | Long-term Borrowings
Gains (losses) due to changes in fair value	$ (344)	$ (290)

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Financing Receivables (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012 Y	Dec. 31, 2011
Loans held for sale	$ 411	$ 114
Percent of loans which are current	99.00%	99.00%
Amount of commercial asset-backed and wholesale real estate loans internally graded doubtful	35	87
Loans outstanding to certain employees, repayment terms, minimum (in years)	1
Loans outstanding to certain employees, repayment terms, maximum (in years)	12
Loans outstanding to employees	6,053	5,610
Loans outstanding to employees, allowance	131	119
Commercial and Industrial
Amount of gross loans collectively evaluated for impairment	5,326	4,934
Amount of gross loans individually evaluated for impairment	52	163
Gross loans, impairment	31	33
Consumer Loans
Amount of gross loans collectively evaluated for impairment	5,465	5,072
Amount of gross loans individually evaluated for impairment		100
Residential Real Estate
Amount of gross loans collectively evaluated for impairment	5,094	4,675
Wholesale Real Estate
Amount of gross loans collectively evaluated for impairment	373	278
Amount of gross loans individually evaluated for impairment	34	50
Gross loans, impairment	$ 34	$ 50

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Condensed Consolidated Statements Of Financial Condition (unaudited) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Assets
Cash and due from banks ($534 and $511 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities generally not available to the Company)	$ 10,133		$ 13,165
Interest bearing deposits with banks	28,592		34,147
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	30,152		29,454
Financial instruments owned, at fair value (approximately $144,873 and $140,749 were pledged to various parties at March 31, 2012 and December 31, 2011, respectively):
U.S. government and agency securities	59,690		63,449
Other sovereign government obligations	32,235		29,059
Corporate and other debt ($3,442 and $3,007 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)	69,518		68,923
Corporate equities	59,063	[1]	47,966	[1]
Derivative and other contracts	40,016		48,064
Investments ($1,797 and $1,666 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)	8,329		8,195
Physical commodities	9,573		9,697
Total financial instruments owned, at fair value	278,424		275,353
Securities available for sale, at fair value	32,528		30,495
Securities received as collateral, at fair value	17,728		11,651
Federal funds sold and securities purchased under agreements to resell (includes $318 and $112 at fair value at March 31, 2012 and December 31, 2011, respectively)	136,451		130,155
Securities borrowed	141,610		127,074
Receivables:
Customers	38,962		33,977
Brokers, dealers and clearing organizations	5,718		5,248
Fees, interest and other	10,263		9,444
Loans (net of allowances of $26 and $17 at March 31, 2012 and December 31, 2011, respectively)	16,729		15,369
Other investments	4,688		4,832
Premises, equipment and software costs (net of accumulated depreciation of $5,079 and $4,852 at March 31, 2012 and December 31, 2011, respectively) ($231 and $234 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)	6,410		6,457
Goodwill	6,700	[2]	6,686	[2]
Intangible assets (net of accumulated amortization of $994 and $910 at March 31, 2012 and December 31, 2011, respectively) (includes $99 and $133 at fair value at March 31, 2012 and December 31, 2011, respectively)	4,170		4,285
Other assets ($343 and $446 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities, generally not available to the Company)	11,772		12,106
Total assets	781,030	[3]	749,898	[3]
Liabilities and Equity
Deposits (includes $1,980 and $2,101 at fair value at March 31, 2012 and December 31, 2011, respectively)	66,441		65,662
Commercial paper and other short-term borrowings (includes $1,321 and $1,339 at fair value at March 31, 2012 and December 31, 2011, respectively)	2,017		2,843
Financial instruments sold, not yet purchased, at fair value:
U.S. government and agency securities	25,589		19,630
Other sovereign government obligations	26,354		17,141
Corporate and other debt	8,547		8,410
Corporate equities	27,725		24,497
Derivative and other contracts	42,765		46,453
Physical commodities	0		16
Total financial instruments sold, not yet purchased, at fair value	130,980		116,147
Obligation to return securities received as collateral, at fair value	23,366		15,394
Securities sold under agreements to repurchase (includes $347 and $348 at fair value at March 31, 2012 and December 31, 2011, respectively )	107,330		104,800
Securities loaned	34,431		30,462
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	21,435	[4]	20,719	[4]
Payables:
Customers	119,045		117,241
Brokers, dealers and clearing organizations	12,143		4,082
Interest and dividends	2,712		2,292
Other liabilities and accrued expenses ($117 and $121 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	13,815		15,944
Long-term borrowings (includes $43,224 and $39,663 at fair value at March 31, 2012 and December 31, 2011, respectively)	176,723		184,234
Total liabilities	710,438		679,820
Commitments and contingent liabilities (see note 11)
Morgan Stanley shareholders' equity:
Preferred stock	1,508		1,508
Common stock, $0.01 par value; Shares authorized: 3,500,000,000 at March 31, 2012 and December 31, 2011; Shares issued: 2,038,893,979 at March 31, 2012 and 1,989,377,171 at December 31, 2011; Shares outstanding: 1,978,337,922 at March 31, 2012 and 1,926,986,130 at December 31, 2011	20		20
Paid-in capital	22,930		22,836
Retained earnings	40,118		40,341
Employee stock trust	3,252		3,166
Accumulated other comprehensive loss	(60)		(157)
Common stock held in treasury, at cost, $0.01 par value; 60,556,057 shares at March 31, 2012 and 62,391,041 shares at December 31, 2011	(2,192)		(2,499)
Common stock issued to employee trust	(3,252)		(3,166)
Total Morgan Stanley shareholders' equity	62,324		62,049
Noncontrolling interests	8,268		8,029
Total equity	70,592		70,078
Total liabilities and equity	$ 781,030		$ 749,898

[1] The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

[2] The amount of the Company’s goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27 million related to the Asset Management business segment, was $7,400 million and $7,386 million at March 31, 2012 and December 31, 2011, respectively

[3] Corporate assets have been fully allocated to the Company’s business segments.

[4] Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

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Segment and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2012

Segment Reporting [Abstract]

Selected Financial Information by Segments

Three Months Ended March 31, 2012				Institutional Securities		Global  Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Total non-interest revenues			$	3,484	$	3,004	$	541	$	(35)	$	6,994
Net interest				(461)		410		(8)		—		(59)
Net revenues(1)			$	3,023	$	3,414	$	533	$	(35)	$	6,935
Income (loss) from continuing operations
	before income taxes		$	(312)	$	387	$	128	$	—	$	203
Provision for (benefit from) income taxes				(105)		121		38		—		54
Income (loss) from continuing operations				(207)		266		90		—		149
Discontinued operations(2):
	Gain from discontinued operations			24		2		1		—		27
	Provision for income taxes			41		1		—		—		42
		Net gain (loss) on discontinued operations		(17)		1		1		—		(15)
Net income (loss)				(224)		267		91		—		134
Net income applicable to noncontrolling
	interests			89		74		65		—		228
Net income (loss) applicable to Morgan Stanley			$	(313)	$	193	$	26	$	—	$	(94)

Three Months Ended March 31, 2011				Institutional Securities		Global Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Total non-interest revenues			$	3,895	$	3,063	$	630	$	(20)	$	7,568
Net interest				(327)		341		(8)		—		6
Net revenues(1)			$	3,568	$	3,404	$	622	$	(20)	$	7,574
Income from continuing operations before income
	taxes		$	432	$	344	$	125	$	—	$	901
Provision for (benefit from) income taxes				(363)		89		30		—		(244)
Income from continuing operations				795		255		95		—		1,145
Discontinued operations(2):
	Gain (loss) from discontinued operations			(38)		3		6		1		(28)
	Provision for (benefit from) income taxes			(15)		1		—		1		(13)
		Net gain (loss) on discontinued operations		(23)		2		6		—		(15)
Net income				772		257		101		—		1,130
Net income applicable to noncontrolling interests				61		74		27		—		162
Net income applicable to Morgan Stanley			$	711	$	183	$	74	$	—	$	968

(1)In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179million at December 31, 2011(see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

(2)       See Notes 1 and 20 for discussion of discontinued operations.

Net Interest by Segments

Net Interest			Institutional Securities		Global Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Three Months Ended March 31 2012
Interest income		$	1,145	$	490	$	3	$	(96)	$	1,542
Interest expense			1,606		80		11		(96)		1,601
	Net interest	$	(461)	$	410	$	(8)	$	—	$	(59)
Three Months Ended March 31 2011
Interest income		$	1,486	$	453	$	4	$	(84)	$	1,859
Interest expense			1,813		112		12		(84)		1,853
	Net interest	$	(327)	$	341	$	(8)	$	—	$	6

Assets by Segments

Total Assets(1)		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
At March 31, 2012	$	670,662	$	103,235	$	7,133	$	781,030
At December 31, 2011	$	641,456	$	101,427	$	7,015	$	749,898

(1)       Corporate assets have been fully allocated to the Company's business segments.

Net Revenues by Geographic Area

			Three Months Ended
			March 31,
Net Revenues			2012		2011
			(dollars in millions)
Americas		$	4,790	$	5,466
Europe, Middle East, and Africa			1,154		1,667
Asia			991		441
	Net revenues	$	6,935	$	7,574

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Earnings Per Common Share (Calculation of Basic and Diluted EPS) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Basic EPS:
Income from continuing operations	$ 149		$ 1,145
Net gain from discontinued operations	(15)	[1]	(15)	[1]
Net income	134		1,130
Net income applicable to noncontrolling interests	228		162
Net income applicable to Morgan Stanley	(94)		968
Less: Allocation of earnings to participating RSUs:
From continuing operations	(1)	[2]	(12)	[2]
Earnings (loss) applicable to Morgan Stanley common shareholders	(119)		736
Weighted average common shares outstanding	1,876,961,836		1,456,015,979
Earnings (loss) per basic common share:
Income (loss) from continuing operations	$ (0.05)		$ 0.52
Net gain from discontinued operations	$ (0.01)		$ (0.01)
Earnings (loss) per basic common share	$ (0.06)		$ 0.51
Diluted EPS:
Earnings (loss) applicable to Morgan Stanley common shareholders	(119)		736
Weighted average common shares outstanding	1,876,961,836		1,456,015,979
Effect of dilutive securities:
Stock options and RSUs	0	[2]	16,000,000	[2]
Weighted average common shares outstanding and common stock equivalents	1,876,961,836		1,472,307,592
Earnings (loss) per diluted common share:
Income (loss) from continuing operations	$ (0.05)		$ 0.51
Net gain (loss) from discontinued operations	$ (0.01)		$ (0.01)
Earnings (loss) per diluted common share	$ (0.06)		$ 0.50
Series A Preferred Stock [Member]
Basic EPS:
Less: Preferred dividends	(11)		(11)
Series B Preferred Stock [Member]
Basic EPS:
Less: Preferred dividends	0		(196)
Series C Preferred Stock [Member]
Basic EPS:
Less: Preferred dividends	$ (13)		$ (13)

[1] See Notes 1 and 20 for discussion of discontinued operations.

[2] RSUs that are considered participating securities participate in all of the earnings of the Company in the computation of basic EPS, and therefore, such RSUs are not included as incremental shares in the diluted calculation.

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Condensed Consolidated Statements Of Comprehensive Income (unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Condensed Consolidated Statements Of Comprehensive Income
Foreign currency translation adjustments, (benefit from) provision for income taxes	$ 4	$ (68)
Amortization of cash flow hedges, provision for income taxes	1	2
Net unrealized gain on securities available for sale, provision for (benefit from) income taxes	(13)	(24)
Pension and other postretirement adjustments, provision for (benefit from) income taxes	$ 2	$ (4)

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Total Equity (Components of Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Total Equity
Accumulated other comprehensive loss, net of tax	$ (60)	$ (157)

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Securities Available for Sale (Schedule of Available for Sale Securities in an Unrealized Loss Position) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Securities (Assets) [Member]
Fair Value, Less than 12 Months	$ 6,818
Gross Unrealized Losses, Less than 12 Months	16
Fair Value, 12 Months or Longer	1,292
Gross Unrealized Losses, 12 Months or Longer	5
Fair Value, Total	8,110
Gross Unrealized Losses, Total	21
Debt Securities
Fair Value, Less than 12 Months	6,804	6,929
Gross Unrealized Losses, Less than 12 Months	15	18
Fair Value, 12 Months or Longer	1,292	1,492
Gross Unrealized Losses, 12 Months or Longer	5	5
Fair Value, Total	8,096	8,421
Gross Unrealized Losses, Total	20	23
U.S. Government and Agency Securities
Fair Value, Less than 12 Months	5,896
Gross Unrealized Losses, Less than 12 Months	13
Fair Value, 12 Months or Longer	1,292
Gross Unrealized Losses, 12 Months or Longer	5
Fair Value, Total	7,188
Gross Unrealized Losses, Total	18
U.S. Treasury Securities
Fair Value, Less than 12 Months	1,923	0
Gross Unrealized Losses, Less than 12 Months	1	0
Fair Value, 12 Months or Longer	0	0
Gross Unrealized Losses, 12 Months or Longer	0	0
Fair Value, Total	1,923	0
Gross Unrealized Losses, Total	1	0
U.S. Agency Securities
Fair Value, Less than 12 Months	3,973	6,250
Gross Unrealized Losses, Less than 12 Months	12	15
Fair Value, 12 Months or Longer	1,292	1,492
Gross Unrealized Losses, 12 Months or Longer	5	5
Fair Value, Total	5,265	7,742
Gross Unrealized Losses, Total	17	20
Corporate and Other Debt
Fair Value, Less than 12 Months	908	679
Gross Unrealized Losses, Less than 12 Months	2	3
Fair Value, 12 Months or Longer	0	0
Gross Unrealized Losses, 12 Months or Longer	0	0
Fair Value, Total	908	679
Gross Unrealized Losses, Total	2	3
Corporate Bonds
Fair Value, Less than 12 Months	458
Gross Unrealized Losses, Less than 12 Months	1
Fair Value, 12 Months or Longer	0
Gross Unrealized Losses, 12 Months or Longer	0
Fair Value, Total	458
Gross Unrealized Losses, Total	1
FFELP Student Loan Asset-backed Securities
Fair Value, Less than 12 Months	450
Gross Unrealized Losses, Less than 12 Months	1
Fair Value, 12 Months or Longer	0
Gross Unrealized Losses, 12 Months or Longer	0
Fair Value, Total	450
Gross Unrealized Losses, Total	1
Equity Securities
Fair Value, Less than 12 Months	14
Gross Unrealized Losses, Less than 12 Months	1
Fair Value, 12 Months or Longer	0
Gross Unrealized Losses, 12 Months or Longer	0
Fair Value, Total	14
Gross Unrealized Losses, Total	$ 1

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Employee Benefit Plans (Components of Net Periodic Benefit Expense) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Service cost, benefits earned during the period	$ 8	$ 8
Interest cost on projected benefit obligation	41	42
Expected return on plan assets	(28)	(33)
Net amortization of prior service costs	(3)	(4)
Net amortization of actuarial loss	7	5
Net periodic benefit expense	$ 25	$ 18

XML

Variable Interest Entities and Securitization Activities (Tables)

3 Months Ended

Mar. 31, 2012

Securitization Activities and Variable Interest Entities [Abstract]

Consolidated VIEs

		At March 31, 2012
		Mortgage and Asset-backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
		(dollars in millions)
VIE assets	$	1,977	$	129	$	2,308	$	896	$	2,796
VIE liabilities	$	1,304	$	65	$	115	$	2,611	$	549

		At December 31, 2011
		Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
		(dollars in millions)
VIE assets	$	2,414	$	102	$	2,207	$	918	$	1,937
VIE liabilities	$	1,699	$	69	$	102	$	2,576	$	556

Non-Consolidated VIEs

			At March 31, 2012
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	195,492	$	20,910	$	6,650	$	1,899	$	28,678
Maximum exposure to loss:
	Debt and equity interests(2)		$	16,785	$	748	$	134	$	937	$	2,436
	Derivative and other contracts			92		98		4,133		—		1,102
	Commitments, guarantees and other			592		—		—		775		990
		Total maximum exposure to loss	$	17,469	$	846	$	4,267	$	1,712	$	4,528
Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	16,785	$	748	$	134	$	596	$	2,436
	Derivative and other contracts			91		42		7		—		338
		Total carrying value of exposure to loss—Assets	$	16,876	$	790	$	141	$	596	$	2,774
Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	13	$	3	$	1	$	—	$	128
	Commitments, guarantees and other			—		—		—		13		168
		Total carrying value of exposure to loss—Liabilities	$	13	$	3	$	1	$	13	$	296

(1)       Mortgage and asset-backed securitizations include VIE assets as follows: $11.3 billion of residential mortgages; $55.4 billion of commercial mortgages; $110.3 billion of U.S. agency collateralized mortgage obligations; and $18.5 billion of other consumer or commercial loans.

(2)       Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.7 billion of residential mortgages; $0.9 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.7 billion of other consumer or commercial loans.

			At December 31, 2011
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	231,110	$	7,593	$	6,833	$	1,944	$	20,997
Maximum exposure to loss:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	978	$	2,413
	Derivative and other contracts			103		843		4,141		—		1,209
	Commitments, guarantees and other			208		—		—		804		561
		Total maximum exposure to loss	$	16,780	$	1,334	$	4,342	$	1,782	$	4,183
Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	640	$	2,413
	Derivative and other contracts			101		657		24		—		338
		Total carrying value of exposure to loss—Assets	$	16,570	$	1,148	$	225	$	640	$	2,751
Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	13	$	159	$	—	$	—	$	114
	Commitments, guarantees and other			—		—		—		14		176
		Total carrying value of exposure to loss—Liabilities	$	13	$	159	$	—	$	14	$	290

(1)       Mortgage and asset-backed securitizations include VIE assets as follows: $9.1 billion of residential mortgages; $81.7 billion of commercial mortgages; $121.6 billion of U.S. agency collateralized mortgage obligations; and $18.7 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

(2)       Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $1.1 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.3 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

Information Regarding SPEs

				At March 31, 2012
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and  Other
				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	40,146	$	78,844	$	23,591	$	13,824
Retained interests (fair value):
	Investment grade		$	13	$	20	$	493	$	3
	Non-investment grade			113		51		—		1,549
		Total retained interests (fair value)	$	126	$	71	$	493	$	1,552
Interests purchased in the secondary market (fair value):
	Investment grade		$	24	$	227	$	60	$	394
	Non-investment grade			153		76		—		13
		Total interests purchased in the secondary market (fair value)	$	177	$	303	$	60	$	407
Derivative assets (fair value)			$	12	$	1,214	$	—	$	151
Derivative liabilities (fair value)			$	28	$	23	$	—	$	392

_____________

(1)Amounts include assets transferred by unrelated transferors.

				At March 31, 2012
				Level 1		Level 2		Level 3		Total
				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	526	$	3	$	529
	Non-investment grade			—		154		1,559		1,713
		Total retained interests (fair value)	$	—	$	680	$	1,562	$	2,242
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	705	$	—	$	705
	Non-investment grade			—		223		19		242
		Total interests purchased in the secondary market (fair value)	$	—	$	928	$	19	$	947
Derivative assets (fair value)			$	—	$	745	$	632	$	1,377
Derivative liabilities (fair value)			$	—	$	380	$	63	$	443

				At December 31, 2011
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and  Other
				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	41,977	$	85,333	$	33,728	$	14,315
Retained interests (fair value):
	Investment grade		$	14	$	22	$	1,151	$	2
	Non-investment grade			106		44		—		1,545
		Total retained interests (fair value)	$	120	$	66	$	1,151	$	1,547
Interests purchased in the secondary market (fair value):
	Investment grade		$	45	$	164	$	20	$	411
	Non-investment grade			149		82		—		11
		Total interests purchased in the secondary market (fair value)	$	194	$	246	$	20	$	422
Derivative assets (fair value)			$	18	$	1,200	$	—	$	223
Derivative liabilities (fair value)			$	30	$	31	$	—	$	510

_____________

(1)Amounts include assets transferred by unrelated transferors.

				At December 31, 2011
				Level 1		Level 2		Level 3		Total
				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	1,186	$	3	$	1,189
	Non-investment grade			—		74		1,621		1,695
		Total retained interests (fair value)	$	—	$	1,260	$	1,624	$	2,884
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	638	$	2	$	640
	Non-investment grade			—		126		116		242
		Total interests purchased in the secondary market (fair value)	$	—	$	764	$	118	$	882
Derivative assets (fair value)			$	—	$	869	$	572	$	1,441
Derivative liabilities (fair value)			$	—	$	541	$	30	$	571

Transfers of Assets Treated as Secured Financings

		At March 31, 2012				At December 31, 2011
		Carrying Value of				Carrying Value of
		Assets		Liabilities		Assets		Liabilities
		(dollars in millions)
Commercial mortgage loans	$	111	$	111	$	121	$	121
Credit-linked notes		318		268		383		339
Equity-linked transactions		812		778		1,243		1,214
Other		90		90		75		74

Mortgage Servicing Activities for SPEs

		At March 31, 2012
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
			(dollars in millions)
Assets serviced (unpaid principal balance)		$	9,545	$	2,119	$	6,157	$	924
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	2,867	$	339	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		30.0%		16.0%		—		—
Credit losses		$	167	$	18	$	—	$	—

_____________

(1)Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

		At December 31, 2011
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
			(dollars in millions)
Assets serviced (unpaid principal balance)		$	9,821	$	2,180	$	5,750	$	1,596
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	3,087	$	354	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		31.4%		16.2%		—		—
Credit losses		$	631	$	81	$	—	$	—

_____________

(1)       Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

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Variable Interest Entities and Securitization Activities (Narrative) (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Noncontrolling interest	$ 1,719,000,000		$ 1,653,000,000
Additional maximum exposure to loss	194,000,000		200,000,000
Securities issued by SPEs	3,700,000,000
Proceeds from new securitization transactions	6,000,000,000	7,900,000,000
Proceeds from cash flows from retained interests in securitization transactions	1,700,000,000	2,400,000,000
Intangible assets, fair value	99,000,000		133,000,000
Servicing advances, net of reserves	1,200,000,000		1,300,000,000
Servicing advances, reserves	5,000,000		14,000,000
Unpaid principal balance of assets serviced	10,000,000,000		11,000,000,000
Mortgage servicing rights	99,000,000		133,000,000
Saxon
Unpaid principal balance of assets serviced	836,000,000		872,000,000
Mortgage servicing rights	84,000,000		119,000,000
Residential Mortgage-backed Securities
Securities issued by SPEs	700,000,000
U.S. Agency Collateralized Mortgage Obligations [Member]
Securities issued by SPEs	1,000,000,000
Commercial Mortgage-backed Securities
Securities issued by SPEs	800,000,000
Collateralized Debt Obligations
Securities issued by SPEs	600,000,000
Consumer Loans
Securities issued by SPEs	$ 600,000,000

XML

Total Equity

3 Months Ended

Mar. 31, 2012

Total Equity

Total Equity

13.Total Equity.

Morgan Stanley Shareholders' Equity.

During the quarters ended March 31, 2012 and 2011, the Company did not purchase any of its common stock as part of its share repurchase program. At March 31, 2012, the Company had approximately $1.6billion remaining under its current share repurchase authorization. Share repurchases by the Company are subject to regulatory approval.

XML

Financing Receivables (Tables)

3 Months Ended

Mar. 31, 2012

Financing Receivables [Abstract]

Summary Of Financing Receivables

			At		At
			March 31, 2012		December 31, 2011
			(dollars in millions)
Commercial and industrial		$	5,358	$	5,083
Consumer loans			5,462		5,170
Residential real estate loans			5,092		4,674
Wholesale real estate loans			406		328
	Total loans held for investment(1)	$	16,318	$	15,255

_______________

(1) Amounts are net of allowances of $26million and $17 million at March 31, 2012 and December 31, 2011, respectively.

XML

Interest Income and Interest Expense (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Interest income:
Financial instruments owned	$ 791	[1],[2]	$ 918	[1],[2]
Securities available for sale	86	[1]	88	[1]
Loans	118	[1]	105	[1]
Interest bearing deposits with banks	27	[1]	35	[1]
Federal funds sold and securities purchased under agreements to resell and securities borrowed	113	[1]	277	[1]
Other	407	[1]	436	[1]
Total Interest income	1,542	[1]	1,859	[1]
Interest expense:
Deposits	45	[1]	66	[1]
Commercial paper and other short-term borrowings	13	[1]	8	[1]
Long-term debt	1,254	[1]	1,313	[1]
Securities sold under agreements to repurchase and securities loaned	463	[1]	471	[1]
Other	(174)	[1]	(5)	[1]
Total Interest expense	1,601	[1]	1,853	[1]
Net interest	$ (59)		$ 6

[1] Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument’s fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

[2] Interest expense on Financial instruments sold, not yet purchased is reported as a reduction to Interest income on Financial instruments owned.

XML

Interest Income and Interest Expense

3 Months Ended

Mar. 31, 2012

Interest Income And Interest Expense

Interest Income And Interest Expense

15.Interest Income and Interest Expense.

Details of Interest income and Interest expense were as follows:

				Three Months Ended
				March 31,
				2012		2011
				(dollars in millions)
Interest income(1):
	Financial instruments owned(2)		$	791	$	918
	Securities available for sale			86		88
	Loans			118		105
	Interest bearing deposits with banks			27		35
	Federal funds sold and securities purchased under agreements
		to resell and Securities borrowed		113		277
	Other			407		436
Total Interest income			$	1,542	$	1,859
Interest expense(1):
	Deposits		$	45	$	66
	Commercial paper and other short-term borrowings			13		8
	Long-term debt			1,254		1,313
	Securities sold under agreements to repurchase
		and Securities loaned		463		471
	Other			(174)		(5)
Total Interest expense			$	1,601	$	1,853
Net interest			$	(59)	$	6

_____________

(1)       Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument's fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

(2)       Interest expense on Financial instruments sold, not yet purchased is reported as a reduction to Interest income on Financial instruments owned.

XML

Variable Interest Entitiesand Securitization Activities (Information Regarding SPEs) (Details) (Special Purpose Entities, USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Retained interests (fair value)	$ 2,242		$ 2,884
Interests purchased in the secondary market (fair value)	947		882
Derivative assets (fair value)	1,377		1,441
Derivative liabilities (fair value)	443		571
Investment Grade
Retained interests (fair value)	529		1,189
Interests purchased in the secondary market (fair value)	705		640
Non-Investment Grade
Retained interests (fair value)	1,713		1,695
Interests purchased in the secondary market (fair value)	242		242
Residential Mortgage Loans
SPE assets (unpaid principal balance)	40,146	[1]	41,977	[1]
Retained interests (fair value)	126		120
Interests purchased in the secondary market (fair value)	177		194
Derivative assets (fair value)	12		18
Derivative liabilities (fair value)	28		30
Residential Mortgage Loans | Investment Grade
Retained interests (fair value)	13		14
Interests purchased in the secondary market (fair value)	24		45
Residential Mortgage Loans | Non-Investment Grade
Retained interests (fair value)	113		106
Interests purchased in the secondary market (fair value)	153		149
Commercial Mortgage Loans
SPE assets (unpaid principal balance)	78,844	[1]	85,333	[1]
Retained interests (fair value)	71		66
Interests purchased in the secondary market (fair value)	303		246
Derivative assets (fair value)	1,214		1,200
Derivative liabilities (fair value)	23		31
Commercial Mortgage Loans | Investment Grade
Retained interests (fair value)	20		22
Interests purchased in the secondary market (fair value)	227		164
Commercial Mortgage Loans | Non-Investment Grade
Retained interests (fair value)	51		44
Interests purchased in the secondary market (fair value)	76		82
U.S. Agency Collateralized Mortgage Obligations [Member]
SPE assets (unpaid principal balance)	23,591	[1]	33,728	[1]
Retained interests (fair value)	493		1,151
Interests purchased in the secondary market (fair value)	60		20
Derivative assets (fair value)	0		0
Derivative liabilities (fair value)	0		0
U.S. Agency Collateralized Mortgage Obligations [Member] | Investment Grade
Retained interests (fair value)	493		1,151
Interests purchased in the secondary market (fair value)	60		20
U.S. Agency Collateralized Mortgage Obligations [Member] | Non-Investment Grade
Retained interests (fair value)	0		0
Interests purchased in the secondary market (fair value)	0		0
Credit-Linked Notes and Other
SPE assets (unpaid principal balance)	13,824	[1]	14,315	[1]
Retained interests (fair value)	1,552		1,547
Interests purchased in the secondary market (fair value)	407		422
Derivative assets (fair value)	151		223
Derivative liabilities (fair value)	392		510
Credit-Linked Notes and Other | Investment Grade
Retained interests (fair value)	3		2
Interests purchased in the secondary market (fair value)	394		411
Credit-Linked Notes and Other | Non-Investment Grade
Retained interests (fair value)	1,549		1,545
Interests purchased in the secondary market (fair value)	$ 13		$ 11

[1] Amounts include assets transferred by unrelated transferors.

XML

Equity Method Investments (Narratives) (Details) In Millions, unless otherwise specified	3 Months Ended			0 Months Ended		3 Months Ended
	Mar. 31, 2012 USD ($)	Mar. 31, 2011 USD ($)	Dec. 31, 2011 USD ($)	May 01, 2010 MUMSS USD ($)	May 01, 2010 MUMSS JPY (¥)	Mar. 31, 2012 MUMSS USD ($)	Mar. 31, 2011 MUMSS USD ($)	May 01, 2010 MSMS
Schedule of Equity Method Investments [Line Items]
Equity method investment	$ 4,384		$ 4,524
Income (loss) from equity method investments	(32)	(660)				27	(655)
Percent ownership			40.00%
Gain (loss) on sale of equity method investments	0	0
Cash contribution received from partner(s) of the joint venture				247	23,000
Economic interest held by joint venture partners				60.00%	60.00%
Voting interest in joint venture				40.00%	40.00%			51.00%
Voting interest held by noncontrolling interest				60.00%	60.00%			49.00%
Proceeds from transfer of fixed income trading positions							$ 659

XML

Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 134	$ 1,130
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Deferred income taxes	0	0
Loss on equity method investees	32	660
Compensation payable in common stock and options	372	340
Depreciation and amortization	375	379
Gain on business dispositions	0	0
Gain on sale of stake in China International Capital Corporation Limited	0	0
Gains on curtailments of pension and postretirement plans	0	0
Gain on sale of securities available for sale	(1)	(12)
(Gain) loss on retirement of long-term debt	(14)	23
Insurance reimbursement	0	0
Loss on assets held for sale	0	0
Impairment charges and other-than-temporary impairment charges	12	3
Changes in assets and liabilities:
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements	(698)	(2,752)
Financial instruments owned, net of financial instruments sold, not yet purchased	14,176	7,568
Securities borrowed	(14,536)	(4,207)
Securities loaned	3,969	6,990
Receivables, loans and other assets	(6,784)	(7,417)
Payables and other liabilities	11,115	1,350
Federal funds sold and securities purchased under agreements to resell	(6,296)	(14,670)
Securities sold under agreements to repurchase	5,575	9,293
Net cash provided by (used for) operating activities	7,431	(1,322)
Net proceeds from (payments for):
Premises, equipment and software costs	(212)	(409)
Business acquisitions, net of cash acquired	0	0
Business dispositions, net of cash disposed	0	0
Sale of stake in China International Capital Corporation Limited	0	0
Japanese securities joint venture with MUFG	0	0
Purchases of securities available for sale	(3,487)	(3,357)
Sales, maturities and redemptions of securities available for sale	1,003	6,311
Net cash provided by (used for) investing activities	(2,696)	2,545
Net proceeds from (payments for):
Commercial paper and other short-term borrowings	(826)	46
Distributions related to noncontrolling interests	(7)	(7)
Derivatives financing activities	(169)	89
Other secured financings	(1,674)	2,312
Deposits	779	(317)
Net proceeds from:
Excess tax benefits associated with stock-based awards	34	29
Public offerings and other issuances of common stock	0	0
Issuance of long-term borrowings	5,320	14,285
Payments for:
Long-term borrowings	(16,043)	(13,046)
Series D Preferred Stock and Warrant	0	0
Redemption of junior subordinated debentures related to China Investment Corporation Ltd.	0	0
Repurchases of common stock for employee tax withholding	(183)	(273)
Cash dividends	(112)	(302)
Net cash provided by (used for) financing activities	(12,881)	2,816
Effect of exchange rate changes on cash and cash equivalents	93	644
Effect of cash and cash equivalents related to variable interest entities	(534)	310
Net increase in cash and cash equivalents	(8,587)	4,993
Cash and cash equivalents, at beginning of period	47,312	47,615
Cash and cash equivalents, at end of period	38,725	52,608
Cash and cash equivalents include:
Cash and due from banks	10,133	8,120
Interest bearing deposits with banks	28,592	44,488
Cash and cash equivalents, at end of period	$ 38,725	$ 52,608

XML

Condensed Consolidated Statements Of Financial Condition (unaudited) (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Cash and due from banks	$ 10,133		$ 13,165
Financial instruments owned, at fair value, pledged to various parties	144,873		140,749
Corporate and other debt	69,518		68,923
Corporate equities	59,063	[1]	47,966	[1]
Investments	8,329		8,195
Federal funds sold and securities purchased under agreement to resell, fair value	318		112
Loans, allowances	26		17
Premises, equipment and software costs, accumulated depreciation	5,079		4,852
Premises, equipment and software costs	6,410		6,457
Intangible assets, accumulated amortization	994		910
Intangible assets, fair value	99		133
Deposits, fair value	1,980		2,101
Other assets	11,772		12,106
Commercial paper and other short-term borrowings, fair value	1,321		1,339
Securities sold under agreement to repurchase, fair value	347		348
Other secured financings, fair value	13,081		14,594
Other secured financings	21,435	[2]	20,719	[2]
Other liabilities and accrued expenses	13,815		15,944
Long-term borrowings, fair value	43,224		39,663
Common stock, par value (per share)	$ 0.01		$ 0.01
Common stock, shares authorized	3,500,000,000		3,500,000,000
Common stock, shares issued	2,038,893,979		1,989,377,171
Common stock, shares outstanding	1,978,337,922		1,926,986,130
Common stock held in treasury, shares	60,556,057		62,391,041
Variable Interest Entity, Primary Beneficiary [Member]
Cash and due from banks	534		511
Corporate and other debt	3,442		3,007
Corporate equities	0		0
Investments	1,797		1,666
Premises, equipment and software costs	231		234
Other assets	343		446
Other secured financings	1,918		2,316
Other liabilities and accrued expenses	$ 117		$ 121

[1] The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

[2] Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

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Goodwill and Net Intangible Assets

3 Months Ended

Mar. 31, 2012

Goodwill and Net Intangible Assets

Goodwill And Net Intangible Assets

8.Goodwill and Net Intangible Assets.

The Company tests goodwill for impairment on an annual basis and on an interim basis when certain events or circumstances exist. The Company tests for impairment at the reporting unit level, which is generally at the level of or one level below its business segments.For both the annual and interim tests, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques the Company believes market participants would use for each of the reporting units.

The estimated fair values of the reporting units are generally determined utilizing methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies. The Company also utilizes a discounted cash flow methodology for certain reportingunits.

The Company completed its annual goodwill impairment testing at July 1, 2011. The Company's testing did not indicate any goodwill impairment. Due to the volatility in the equity markets, the economic outlook and the Company's common shares trading below book value during the quarter ended March 31, 2012, the Company performed additional impairment testing at March 31, 2012, which did not result in any goodwill impairment. Adverse market or economic events could result in impairment charges in future periods.

Goodwill.

Changes in the carrying amount of the Company's goodwill, net of accumulated impairment losses for the quarter ended March 31, 2012, were as follows:

		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
Goodwill at December 31, 2011(1)	$	330	$	5,616	$	740	$	6,686
Foreign currency translation adjustments and other		14		─		─		14
Goodwill at March 31, 2012(1)	$	344	$	5,616	$	740	$	6,700

_____________

• The amount of the Company's goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27million related to the Asset Management business segment,was $7,400million and $7,386million at March 31, 2012and December 31, 2011, respectively.

Net Intangible Assets.

Changes in the carrying amount of the Company's intangible assets for the quarter endedMarch 31, 2012 were as follows:

		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Mortgage servicing rights (see Note 6)		122		11		—		133
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at December 31, 2011	$	351	$	3,932	$	2	$	4,285
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Foreign currency translation adjustments and other		3		—		—		3
Amortization expense		(4)		(80)		—		(84)
Impairment losses(1)		(2)		—		—		(2)
Intangible assets acquired during the period		2		—		—		2
Amortizable net intangible assets at March 31, 2012		228		3,561		2		3,791
Mortgage servicing rights (see Note 6)		87		12		—		99
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at March 31, 2012	$	315	$	3,853	$	2	$	4,170

_____________

• Impairment losses are recorded within Other expenses.

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Segment and Geographic Information (Selected Financial Information by Segments) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011		Dec. 31, 2011
Total non-interest revenues	$ 6,994		$ 7,568
Net interest	(59)		6
Net revenues	6,935	[1]	7,574	[1]
Income (loss) from continuing operations before income taxes	203		901
Provision for (benefit from) income taxes	54		(244)
Income (loss) from continuing operations	149		1,145
Discontinued operations:
Gain (loss) from discontinued operations	27	[2]	(28)	[2]
Provision for (benefit from) income taxes	42	[2]	(13)	[2]
Net gain (loss) on discontinued operations	(15)	[2]	(15)	[2]
Net income (loss)	134		1,130
Net income (loss) applicable to noncontrolling interests	228		162
Net income (loss) applicable to Morgan Stanley	(94)		968
Value of performance based fee revenue at risk	175				179
Institutional Securities
Total non-interest revenues	3,484		3,895
Net interest	(461)		(327)
Net revenues	3,023	[1]	3,568	[1]
Income (loss) from continuing operations before income taxes	(312)		432
Provision for (benefit from) income taxes	(105)		(363)
Income (loss) from continuing operations	(207)		795
Discontinued operations:
Gain (loss) from discontinued operations	24	[2]	(38)	[2]
Provision for (benefit from) income taxes	41	[2]	(15)	[2]
Net gain (loss) on discontinued operations	(17)	[2]	(23)	[2]
Net income (loss)	(224)		772
Net income (loss) applicable to noncontrolling interests	89		61
Net income (loss) applicable to Morgan Stanley	(313)		711
Global Wealth Management Group
Total non-interest revenues	3,004		3,063
Net interest	410		341
Net revenues	3,414	[1]	3,404	[1]
Income (loss) from continuing operations before income taxes	387		344
Provision for (benefit from) income taxes	121		89
Income (loss) from continuing operations	266		255
Discontinued operations:
Gain (loss) from discontinued operations	2	[2]	3	[2]
Provision for (benefit from) income taxes	1	[2]	1	[2]
Net gain (loss) on discontinued operations	1	[2]	2	[2]
Net income (loss)	267		257
Net income (loss) applicable to noncontrolling interests	74		74
Net income (loss) applicable to Morgan Stanley	193		183
Asset Management
Total non-interest revenues	541		630
Net interest	(8)		(8)
Net revenues	533	[1]	622	[1]
Income (loss) from continuing operations before income taxes	128		125
Provision for (benefit from) income taxes	38		30
Income (loss) from continuing operations	90		95
Discontinued operations:
Gain (loss) from discontinued operations	1	[2]	6	[2]
Provision for (benefit from) income taxes	0	[2]	0	[2]
Net gain (loss) on discontinued operations	1	[2]	6	[2]
Net income (loss)	91		101
Net income (loss) applicable to noncontrolling interests	65		27
Net income (loss) applicable to Morgan Stanley	26		74
Intersegment Eliminations
Total non-interest revenues	(35)		(20)
Net interest	0		0
Net revenues	(35)	[1]	(20)	[1]
Income (loss) from continuing operations before income taxes	0		0
Provision for (benefit from) income taxes	0		0
Income (loss) from continuing operations	0		0
Discontinued operations:
Gain (loss) from discontinued operations	0	[2]	1	[2]
Provision for (benefit from) income taxes	0	[2]	1	[2]
Net gain (loss) on discontinued operations	0	[2]	0	[2]
Net income (loss)	0		0
Net income (loss) applicable to noncontrolling interests	0		0
Net income (loss) applicable to Morgan Stanley	$ 0		$ 0

[1] In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179 million at December 31, 2011 (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

[2] See Notes 1 and 20 for discussion of discontinued operations.

XML

Total Equity (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Treasury Shares
Remaining amount under its current share repurchase authorization	$ 1,600,000,000
Equity Unit Purchase Agreement
Common stock, par value (per share)	$ 0.01	$ 0.01
Principal amount of debt issued	5,000,000,000
Preferred Stock
Preferred stock, face value	$ 1,508,000,000	$ 1,508,000,000

XML

Regulatory Requirements (Capital Measures) (Details) (USD $)	12 Months Ended
	Dec. 31, 2011		Mar. 31, 2012
Balance
Tier 1 common capital, amount	$ 39,785,000,000	[1],[2]	$ 42,151,000,000
Tier 1 capital, amount	51,114,000,000	[2]	53,527,000,000
Total capital, amount	54,956,000,000	[2]	57,587,000,000
RWAs	314,055,000,000	[2]	317,693,000,000
Adjusted average assets	769,578,000,000	[2]	760,071,000,000
Tier 1 leverage capital, amount	0		0
Ratio
Tier 1 common capital, ratio	12.70%	[1],[2]	13.30%
Tier 1 capital to RWAs, ratio	16.30%	[2]	16.80%
Total capital to RWAs, ratio	17.50%	[2]	18.10%
Tier 1 leverage, ratio	6.60%	[2]	7.00%
Increase (decrease) of Tier 1 common capital	4,200,000,000
Increase (decrease) of Tier 1 common capital ratio	(1.32%)
Increase of deferred tax asset disallowance	$ 1,200,000,000
Change in Deferred Tax Asset Disallowance
Ratio
Increase (decrease) of Tier 1 common capital ratio	(0.30%)
Increase (decrease) of Tier 1 capital ratio	(0.30%)
Increase (decrease) of Total capital ratio	(0.30%)
Increase (decrease) of Tier 1 leverage ratio	(0.20%)

[1] Tier 1 common capital ratio equals Tier 1 common capital divided by RWAs. On December 30, 2011, the Federal Reserve formalized regulatory definitions for Tier 1 common capital and Tier 1 common capital ratio. The Federal Reserve defined Tier 1 common capital as Tier 1 capital less non-common elements in Tier 1 capital, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities. Previously, the Company’s definition of Tier 1 common capital included all of the items noted in the Federal Reserve’s definition, but it also included an adjustment for the portion of goodwill and non-servicing intangible assets associated with MSSB’s noncontrolling interests (i.e., Citigroup, Inc.’s (“Citi”) share of MSSB’s goodwill and intangibles). The Company’s conformance to the Federal Reserve’s definition under the final rule reduced its Tier 1 common capital and Tier 1 common ratio by approximately $4.2 billion and 132 basis points, respectively at December 31, 2011.   

[2] The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company’s Tier 1 common capital, Tier 1 capital, Total capital, RWAs and adjusted average assets by such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratio by approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points. 

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 30, 2012
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Trading Symbol	MS
Entity Registrant Name	MORGAN STANLEY
Entity Central Index Key	0000895421
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,977,775,881

XML

Borrowings and Other Secured Financings

3 Months Ended

Mar. 31, 2012

Borrowings and Other Secured Financings

Long-Term Borrowings and Other Secured Financings

9.Long-Term Borrowings and Other Secured Financings.

The Company's long-term borrowings included the following components:

		At March 31,		At December 31,
		2012		2011
	(dollars in millions)
Senior debt	$	167,986	$	175,471
Subordinated debt		3,899		3,910
Junior subordinated debentures		4,838		4,853
Total	$	176,723	$	184,234

During the quarterendedMarch 31, 2012, the Company issued notes with a principal amount of approximately $5 billion. During the quarterended March 31, 2012, approximately $16 billion of notes were matured or retired.

The weighted average maturity of the Company's long-term borrowings, based upon stated maturity dates, was approximately 5.3years and5.0years at March 31, 2012 and December 31, 2011, respectively.

FDIC's Temporary Liquidity Guarantee Program.

At March 31, 2012 and December 31, 2011, the Company had long-term debt outstanding of $4.7billion and $12.1billion, respectively, under the Temporary Liquidity Guarantee Program (“TLGP”). The issuance of debt under the TLPGexpired on December 31, 2010, but the existing long-term debt outstanding is guaranteed until June 30, 2012. These borrowings are senior unsecured debt obligations of the Company and guaranteed by the FDIC under the TLGP. The FDIC has concluded that the guarantee is backed by the full faith and credit of the U.S. government.

Other Secured Financings.

Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Company is deemed to be the primary beneficiary, pledged commodities, certain equity-linked notes and other secured borrowings. See Note 6 for further information on other secured financings related to variable interest entities and securitization activities.

The Company's other secured financings consisted of the following:

			At		At
			March 31,		December 31,
			2012		2011
			(dollars in millions)
Secured financings with original maturities greater than one year		$	19,883	$	18,696
Secured financings with original maturities one year or less			305		275
Failed sales(1)			1,247		1,748
	Total(2)	$	21,435	$	20,719

___________

• For more information on failed sales, see Note 6.
• Amounts include $13,081million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

XML

Borrowings and Other Secured Financings (Schedule of Failed Sales) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Long-term debt outstanding	$ 176,723		$ 184,234
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	21,435	[1]	20,719	[1]
Failed Sales
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	$ 1,247	[2]	$ 1,748	[2]

[1] Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

[2] For more information on failed sales, see Note 6.

XML

Regulatory Requirements (Narrative) (Details) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Tier 1 capital to RWAs, being well-capitalized for regulatory purposes	6.00%
Total capital to RWAs, being well-capitalized for regulatory purposes	10.00%
Tier 1 leverage ratio, being well-capitalized for regulatory purposes	5.00%
MS&Co. [Member]
Net capital	$ 7,842,000,000	$ 8,249,000,000
Amount of capital that exceeds the minimum required	6,660,000,000	7,215,000,000
Net capital, minimum amount required to hold	1,000,000,000
Net capital, minimum amount required to hold in accordance with the market and credit risk standards	500,000,000
Amount by which if net capital falls below, the company is required to notify the SEC	$ 5,000,000,000

XML

Condensed Consolidated Statements Of Income (unaudited) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Revenues:
Investment banking	$ 1,063		$ 1,214
Principal transactions:
Trading	2,407		2,977
Investments	85		329
Commissions and fees	1,177		1,439
Asset management, distribution and administration fees	2,152		2,083
Other	110		(474)
Total non-interest revenues	6,994		7,568
Interest income	1,542	[1]	1,859	[1]
Interest expense	1,601	[1]	1,853	[1]
Net interest	(59)		6
Net revenues	6,935	[2]	7,574	[2]
Non-interest expenses:
Compensation and benefits	4,431		4,285
Occupancy and equipment	392		397
Brokerage, clearing and exchange fees	403		401
Information processing and communications	459		440
Marketing and business development	146		142
Professional services	412		403
Other	489		605
Total non-interest expenses	6,732		6,673
Income from continuing operations before income taxes	203		901
Provision for (benefit from) income taxes	54		(244)
Income from continuing operations	149		1,145
Discontinued operations:
Gain (loss) from discontinued operations	27	[3]	(28)	[3]
Provision for (benefit from) income taxes	42	[3]	(13)	[3]
Net gain (loss) from discontinued operations	(15)	[3]	(15)	[3]
Net income	134		1,130
Net income applicable to noncontrolling interests	228		162
Net income (loss) applicable to Morgan Stanley	(94)		968
Earnings (loss) applicable to Morgan Stanley common shareholders	(119)		736
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations	(78)		984
Net gain (loss) from discontinued operations	(16)		(16)
Net income (loss) applicable to Morgan Stanley	$ (94)		$ 968
Earnings (loss) per basic common share:
Income (loss) from continuing operations	$ (0.05)		$ 0.52
Net gain (loss) from discontinued operations	$ (0.01)		$ (0.01)
Earnings (loss) per basic common share	$ (0.06)		$ 0.51
Earnings (loss) per diluted common share:
Income (loss) from continuing operations	$ (0.05)		$ 0.51
Net gain (loss) from discontinued operations	$ (0.01)		$ (0.01)
Earnings (loss) per diluted common share	$ (0.06)		$ 0.50
Average common shares outstanding:
Basic	1,876,961,836		1,456,015,979
Diluted	1,876,961,836		1,472,307,592

[1] Interest income and expense are recorded within the condensed consolidated statements of income depending on the nature of the instrument and related market conventions. When interest is included as a component of the instrument’s fair value, interest is included within Principal transactions—Trading revenues or Principal transactions—Investments revenues. Otherwise, it is included within Interest income or Interest expense.

[2] In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179 million at December 31, 2011 (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

[3] See Notes 1 and 20 for discussion of discontinued operations.

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Fair Value Disclosures

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures

Fair Value Disclosures

3.Fair Value Disclosures.

Fair Value Measurements.

A description of the valuation techniques applied to the Company's major categories of assets and liabilities measured at fair value on a recurring basis follows.

Financial Instruments Owned and Financial Instruments Sold, Not Yet Purchased.

U.S. Government and Agency Securities.

•       U.S. Treasury Securities.    U.S. Treasury securities are valued using quoted market prices. Valuation adjustments are not applied. Accordingly, U.S. Treasury securities are generally categorized in Level 1 of the fair value hierarchy.

•        U.S. Agency Securities.    U.S. agency securities are composed of three main categories consisting of agency-issued debt, agency mortgage pass-through pool securities and collateralized mortgage obligations. Non-callable agency-issued debt securities are generally valued using quoted market prices. Callable agency-issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of agency mortgage pass-through pool securities is model-driven based on spreads of the comparable To-be-announced (“TBA”) security. Collateralized mortgage obligations are valued using quoted market prices and trade data adjusted by subsequent changes in related indicesfor identical or comparable securities. Actively traded non-callable agency-issued debt securities are generally categorized in Level 1 of the fair value hierarchy. Callable agency-issued debt securities, agency mortgage pass-through pool securities and collateralized mortgage obligations are generally categorized in Level 2 of the fair value hierarchy.

Other Sovereign Government Obligations.

•       Foreign sovereign government obligations are valued using quoted prices in active markets when available. To the extent quoted prices are not available, fair value is determined based on a valuation model that has as inputs interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the bond in terms of issuer, maturity and seniority. These bonds are generally categorized in Level 1 or Level 2 of the fair value hierarchy.

Corporate and Other Debt.

•       State and Municipal Securities.    The fair value of state and municipal securities is determined using recently executed transactions, market price quotations and pricing models that factor in, where applicable, interest rates, bond or credit default swap spreads and volatility. These bonds are generally categorized in Level 2 of the fair value hierarchy.

•       Residential Mortgage-Backed Securities (“RMBS”), Commercial Mortgage-Backed Securities (“CMBS”) and other Asset-Backed Securities (“ABS”).    RMBS, CMBS and other ABS may be valued based on price or spread data obtained from observed transactions or independent external parties such as vendors or brokers. When position-specific external price data are not observable, the fair value determination may require benchmarking to similar instruments and/or analyzing expected credit losses, default and recovery rates. In evaluating the fair value of each security, the Company considers security collateral-specific attributes, including payment priority, credit enhancement levels, type of collateral, delinquency rates and loss severity. In addition, for RMBS borrowers, Fair Isaac Corporation (“FICO”) scores and the level of documentation for the loan are also considered. Market standard models, such as Intex, Trepp or others, may be deployed to model the specific collateral composition and cash flow structure of each transaction. Key inputs to these models are market spreads, forecasted credit losses, default and prepayment rates for each asset category. Valuation levels of RMBS and CMBS indices are also used as an additional data point for benchmarking purposes or to price outright index positions.

RMBS, CMBS and other ABS are generally categorized in Level 2 of the fair value hierarchy. If external prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity related to property type differences, cash flows, performance and other inputs, then RMBS, CMBS and other ABS are categorized in Level 3 of the fair value hierarchy.

•       Corporate Bonds.    The fair value of corporate bonds is determined using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads obtained from independent external parties such as vendors and brokers adjusted for any basis difference between cash and derivative instruments. The spread data used are for the same maturity as the bond. If the spread data do not reference the issuer, then data that reference a comparable issuer are used. When position-specific external price data are not observable, fair value is determined based on either benchmarking to similar instruments or cash flow models with yield curves, bond or single name credit default swap spreads and recovery rates as significant inputs. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where prices, spreads or any of the other aforementioned key inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

•       Collateralized Debt Obligations (“CDO”).    The Company holds cash CDOs that typically reference a tranche of an underlying synthetic portfolio of single name credit default swapscollateralized by corporate bonds (“credit-linked notes”) or cash portfolio of asset-backed securities (“asset-backed CDOs”). Credit correlation, a primary input used to determine the fair value of credit-linked notes, is usually unobservable and derived using a benchmarking technique. The other credit-linked note model inputs such as credit spreads, including collateral spreads, and interest rates are typically observable. Asset-backed CDOs are valued based on an evaluation of the market and model input parameters sourced from similar positions as indicated by primary and secondary market activity. Each asset-backed CDO position is evaluated independently taking into consideration available comparable market levels, underlying collateral performance and pricing, deal structures, as well as liquidity.Cash CDOs are categorized in Level 2 of the fair value hierarchy when either the credit correlation input is insignificant or comparable market transactions are observable. In instances where the credit correlation input is deemed to be significantor comparable market transactions are unobservable, cash CDOs are categorized in Level 3 of the fair value hierarchy.

•       Corporate Loans and Lending Commitments.    The fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, and market observable credit default swap spread levels obtained from independent external parties such as vendors and brokers adjusted for any basis difference between cash and derivative instruments, along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable. The fair value of contingent corporate lending commitments is determined by using executed transactions on comparable loans and the anticipated market price based on pricing indications from syndicate banks and customers. The valuation of loans and lending commitments also takes into account fee income that is considered an attribute of the contract. Corporate loans and lending commitments are categorized in Level 2 of the fair value hierarchy except in instances where prices or significant spread inputs are unobservable, in which case they are categorized in Level 3 of the fair value hierarchy. Corporate loans and lending commitments are presented within Loans and lending commitments in the fair value hierarchy table.

•       Mortgage Loans.    Mortgage loans are valued using observable prices based on transactional data or third party pricing for identical or comparable instruments, when available. Where position-specific external prices are not observable, the Company estimates fair value based on benchmarking to prices and rates observed in the primary market for similar loan or borrower types or based on the present value of expected future cash flows using its best estimates of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved or a methodology that utilizes the capital structure and credit spreads of recent comparable securitization transactions. Mortgage loans valued based on observable market data for identical or comparable instruments are categorized in Level 2 of the fair value hierarchy. Where observable prices are not available, due to the subjectivity involved in the comparability assessment related to mortgage loan vintage, geographical concentration, prepayment speed and projected loss assumptions, mortgage loans are categorized in Level 3 of the fair value hierarchy. Mortgage loans are presented within Loans and lending commitments in the fair value hierarchy table.

•       Auction Rate Securities (“ARS”).    The Company primarily holds investments in Student Loan Auction Rate Securities (“SLARS”) and Municipal Auction Rate Securities (“MARS”) with interest rates that are reset through periodic auctions. SLARS are ABS backed by pools of student loans. MARS are municipal bonds often wrapped by municipal bond insurance. ARS were historically traded and valued as floating rate notes, priced at par due to the auction mechanism. Beginning in fiscal 2008, uncertainties in the credit markets have resulted in auctions failing for certain types of ARS. Once the auctions failed, ARS could no longer be valued using observations of auction market prices. Accordingly, the fair value of ARS is determined using independent external market data where available and an internally developed methodology to discount for the lack of liquidity and non-performance risk.

Inputs that impact the valuation of SLARS are independent external market data, the underlying collateral types, level of seniority in the capital structure, amount of leverage in each structure, credit rating and liquidity considerations. Inputs that impact the valuation of MARS are independent external market data when available, the maximum rate, quality of underlying issuers/insurers and evidence of issuer calls. ARS are generally categorized in Level 2 of the fair value hierarchy as the valuation technique relies on observable external data. SLARS and MARS are presented within Asset-backed securities and State and municipal securities, respectively, in the fair value hierarchy table.

Corporate Equities.

•       Exchange-Traded Equity Securities.    Exchange-traded equity securities are generally valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in Level 1 of the fair value hierarchy; otherwise, they are categorized in Level 2 or Level 3 of the fair value hierarchy.

•       Unlisted Equity Securities.    Unlisted equity securities are valued based on an assessment of each underlying security, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable company transactions, trading multiples and changes in market outlook, among other factors. These securities are generally categorized in Level 3 of the fair value hierarchy.

•       Fund Units. Listed fund units are generally marked to the exchange-traded price or net asset value (“NAV”) and are categorized in Level 1 of the fair value hierarchy if actively traded on an exchange or in Level 2 of the fair value hierarchy if trading is not active.Unlisted fund units are generally marked to NAV and categorized as Level 2; however, positions which are not redeemable at the measurement date or in the near future are categorized in Level 3 of the fair value hierarchy.

Derivative and Other Contracts.

•       Listed Derivative Contracts.    Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Listed derivatives that are not actively traded are valued using the same approaches as those applied to over-the-counter (“OTC”) derivatives; they are generally categorized in Level 2 of the fair value hierarchy.

•       OTC Derivative Contracts.    OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices or commodity prices.

Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be either observed or modeled using a series of techniques and model inputs from comparable benchmarks, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, and simulation models or a combination thereof. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgment, and the pricing inputs are observed from actively quoted markets, as is the case for generic interest rate swaps, certain option contracts and certain credit default swaps. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. A substantial majority of OTC derivative products valued by the Company using pricing models fall into this category and are categorized in Level 2 of the fair value hierarchy.

Other derivative products, including complex products that have become illiquid, require more judgment in the implementation of the valuation technique applied due to the complexity of the valuation assumptions and the reduced observability of inputs. This includes certain types of interest rate derivatives with both volatility and correlation exposure and credit derivatives including credit default swaps on certain mortgage-backed or asset-backed securities, basket credit default swaps and CDO-squared positions (a CDO-squared position is a special purpose vehicle that issues interests, or tranches, that are backed by tranches issued by other CDOs) where direct trading activity or quotes are unobservable. These instruments involve significant unobservable inputs and are categorized in Level 3 of the fair value hierarchy.

Derivative interests in credit default swaps on certain mortgage-backed or asset-backed securities, for which observability of external price data is limited, are valued based on an evaluation of the market and model input parameters sourced from similar positions as indicated by primary and secondary market activity. Each position is evaluated independently taking into consideration available comparable market levels as well as cash-synthetic basis, or the underlying collateral performance and pricing, behavior of the tranche under various cumulative loss and prepayment scenarios, deal structures (e.g., non-amortizing reference obligations, call features, etc.) and liquidity. While these factors may be supported by historical and actual external observations, the determination of their value as it relates to specific positions nevertheless requires significant judgment.

For basket credit default swaps and CDO-squared positions, the correlation input between reference credits is unobservable for each specific swap or position and is benchmarked to standardized proxy baskets for which correlation data are available. The other model inputs such as credit spread, interest rates and recovery rates are observable. In instances where the correlation input is deemed to be significant, these instruments are categorized in Level 3 of the fair value hierarchy; otherwise, these instruments are categorized in Level 2 of the fair value hierarchy.

The Company trades various derivative structures with commodity underlyings. Depending on the type of structure, the model inputs generally include interest rate yield curves, commodity underlier price curves, implied volatility of the underlying commodities and, in some cases, the implied correlation between these inputs. The fair value of these products is determined using executed trades and broker and consensus data to provide values for the aforementioned inputs. Where these inputs are unobservable, relationships to observable commodities and data points, based on historic and/or implied observations, are employed as a technique to estimate the model input values. Commodity derivatives are generally categorized in Level 2 of the fair value hierarchy; in instances where significant inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

For further information on derivative instruments and hedging activities, see Note 10.

Investments.

•       The Company's investments include direct investments in equity securities as well as investments in private equity funds, real estate funds and hedge funds, which include investments made in connection with certain employee deferred compensation plans. Direct investments are presented in the fair value hierarchy table as Principal investments and Other. Initially, the transaction price is generally considered by the Company as the exit price and is the Company's best estimate of fair value.

After initial recognition, in determining the fair value of non-exchange-traded internally and externally managed funds, the Company generally considers the NAV of the fund provided by the fund manager to be the best estimate of fair value. For non-exchange-traded investments either held directly or held within internally managed funds, fair value after initial recognition is based on an assessment of each underlying investment, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable company transactions, trading multiples and changes in market outlook, among other factors. Exchange-traded direct equity investments are generally valued based on quoted prices from the exchange.

Exchange-traded direct equity investments that are actively traded are categorized in Level 1 of the fair value hierarchy. Non-exchange-traded direct equity investments and investments in private equity and real estate funds are generally categorized in Level 3 of the fair value hierarchy. Investments in hedge funds that are redeemable at the measurement date or in the near future are categorized in Level 2 of the fair value hierarchy; otherwise, they are categorized in Level 3 of the fair value hierarchy.

Physical Commodities.

•       The Company trades various physical commodities, including crude oil and refined products, natural gas, base and precious metals and agricultural products. Fair value for physical commodities is determined using observable inputs, including broker quotations and published indices. Physical commodities are categorized in Level 2 of the fair value hierarchy; in instances where significant inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy.

Securities Available for Sale.

•       Securities available for sale are composed of U.S. government and agency securities (e.g., U.S. Treasury securities, agency-issued debt, agency mortgage pass-through securities and collateralized mortgage obligations), Federal Family Education Loan Program (“FFELP”) student loan asset-backed securities, auto loan asset-backed securities, corporate bonds and equity securities. Actively traded U.S. Treasury securities, non-callable agency-issued debt securities and equity securities are generally categorized in Level 1 of the fair value hierarchy. Callable agency-issued debt securities, agency mortgage pass-through securities, collateralized mortgage obligations and FFELP student loan asset-backed securities, auto loan asset-backed securities and corporate bondsare generally categorized in Level 2 of the fair value hierarchy. For further information on securities available for sale, see Note 4.

Deposits.

•       Time Deposits.    The fair value of certificates of deposit is determined using third-party quotations. These deposits are generally categorized in Level 2 of the fair value hierarchy.

Commercial Paper and Other Short-term Borrowings/Long-term Borrowings.

•       Structured Notes.    The Company issues structured notes that have coupon or repayment terms linked to the performance of fixed income or equity securities, indices, currencies or commodities. Fair value of structured notes is determined using valuation models for the derivative and debt portions of the notes. These models incorporate observable inputs referencing identical or comparable securities, including prices that the notes are linked to, interest rate yield curves, option volatility and currency, commodity or equity prices. Independent, external and traded prices for the notes are also considered. The impact of the Company's own credit spreads is also included based on the Company's observed secondary bond market spreads. Most structured notes are categorized in Level 2 of the fair value hierarchy.

Securities Purchased under Agreements to Resell, and Securities Sold under Agreements to Repurchase.

•       The fair value of a reverse repurchase agreement or repurchase agreement is computed using a standard cash flow discounting methodology. The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks, interest rate yield curves and option volatilities. In instances where the unobservable inputs are deemed significant, reverse repurchase agreements and repurchase agreements are categorized in Level 3 of the fair value hierarchy; otherwise, they are categorized in Level 2 of the fair value hierarchy.

The following fair value hierarchy tables present information about the Company's assets and liabilities measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2012.

				Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting		Balance at March 31, 2012
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. government and agency securities:
		U.S. Treasury securities		$	35,781	$	—	$	—	$	—	$	35,781
		U.S. agency securities			1,804		22,082		23		—		23,909
			Total U.S. government and agency securities		37,585		22,082		23		—		59,690
	Other sovereign government obligations				29,069		3,158		8		—		32,235
	Corporate and other debt:
		State and municipal securities			—		2,676		3		—		2,679
		Residential mortgage-backed securities			—		1,548		43		—		1,591
		Commercial mortgage-backed securities			—		1,829		127		—		1,956
		Asset-backed securities			—		1,076		3		—		1,079
		Corporate bonds			—		25,115		899		—		26,014
		Collateralized debt obligations			—		957		1,165		—		2,122
		Loans and lending commitments			—		14,940		8,597		—		23,537
		Other debt			—		10,483		57		—		10,540
			Total corporate and other debt		—		58,624		10,894		—		69,518
	Corporate equities(1)				56,582		1,927		554		—		59,063
	Derivative and other contracts:
		Interest rate contracts			914		786,488		4,117		—		791,519
		Credit contracts			—		90,206		9,790		—		99,996
		Foreign exchange contracts			1		47,378		720		—		48,099
		Equity contracts			991		44,359		1,188		—		46,538
		Commodity contracts			7,325		30,287		2,504		—		40,116
		Other			—		61		—		—		61
		Netting(2)			(8,687)		(895,017)		(7,896)		(74,713)		(986,313)
			Total derivative and other contracts		544		103,762		10,423		(74,713)		40,016
	Investments:
		Private equity funds			—		—		1,994		—		1,994
		Real estate funds			—		6		1,338		—		1,344
		Hedge funds			—		318		623		—		941
		Principal investments			98		—		3,194		—		3,292
		Other			157		74		527		—		758
			Total investments		255		398		7,676		—		8,329
	Physical commodities				—		9,573		—		—		9,573
		Total financial instruments owned			124,035		199,524		29,578		(74,713)		278,424
Securities available for sale					13,822		18,706		—		—		32,528
Securities received as collateral					17,542		186		—		—		17,728
Federal funds sold and securities purchased
	under agreements to resell				—		318		—		—		318
Intangible assets(3)					—		—		99		—		99
Total assets measured at fair value				$	155,399	$	218,734	$	29,677	$	(74,713)	$	329,097
Liabilities at Fair Value
Deposits				$	—	$	1,980	$	—	$	—	$	1,980
Commercial paper and other short-term borrowings					—		1,306		15		—		1,321
Financial instruments sold, not yet purchased:
	U.S. government and agency securities:
		U.S. Treasury securities			23,544		—		—		—		23,544
		U.S. agency securities			1,727		318		—		—		2,045
			Total U.S. government and agency securities		25,271		318		—		—		25,589
	Other sovereign government obligations				24,979		1,374		1		—		26,354
	Corporate and other debt:
		State and municipal securities			—		4		—		—		4
		Residential mortgage-backed securities			—		2		61		—		63
		Commercial mortgage-backed securities			—		9		—		—		9
		Corporate bonds			—		6,888		193		—		7,081
		Collateralized debt obligations			—		17		—		—		17
		Unfunded lending commitments			—		931		60		—		991
		Other debt			—		349		33		—		382
			Total corporate and other debt		—		8,200		347		—		8,547
	Corporate equities(1)				26,271		1,452		2		—		27,725
	Derivative and other contracts:
		Interest rate contracts			1,053		757,445		4,095		—		762,593
		Credit contracts			—		88,357		5,409		—		93,766
		Foreign exchange contracts			2		50,275		654		—		50,931
		Equity contracts			1,226		47,293		2,630		—		51,149
		Commodity contracts			8,177		30,628		1,701		—		40,506
		Other			—		49		23		—		72
		Netting(2)			(8,687)		(895,017)		(7,896)		(44,652)		(956,252)
			Total derivative and other contracts		1,771		79,030		6,616		(44,652)		42,765
		Total financial instruments sold, not yet purchased			78,292		90,374		6,966		(44,652)		130,980
Obligation to return securities received as collateral					23,167		199		—		—		23,366
Securities sold under agreements to repurchase					—		161		186		—		347
Other secured financings					—		12,487		594		—		13,081
Long-term borrowings					2		41,079		2,143		—		43,224
Total liabilities measured at fair value				$	101,461	$	147,586	$	9,904	$	(44,652)	$	214,299

_____________

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3) Amount represents mortgage servicing rights (“MSR”) accounted for at fair value. See Note 6 for further information on MSRs.

Transfers Between Level 1 and Level 2Duringthe Quarter Ended March 31, 2012.

For assets and liabilities that were transferred between Level 1 and Level 2 during the period,fair values are ascribed as if the assets or liabilities had been transferred as of the beginning of the period.

Financial instruments owned—Derivative and other contracts and Financial instruments sold, not yetpurchased—Derivative and other contracts. During the quarter ended March 31, 2012, the Companyreclassified approximately $1.1 billion of derivative assets and approximately $1.2 billion of derivative liabilitiesfrom Level 2 to Level 1 as these listed derivatives became actively traded and were valued based on quotedprices from the exchange. Also during the quarter ended March 31, 2012, the Company reclassified approximately $0.3 billion of derivative assets and approximately $0.4 billion of derivative liabilities from Level 1 to Level 2 as transactions in these contracts did not occur with sufficient frequency and volume to constitute an active market.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2011.

				Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting		Balance at December 31, 2011
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. government and agency securities:
		U.S. Treasury securities		$	38,769	$	1	$	—	$	—	$	38,770
		U.S. agency securities			4,332		20,339		8		—		24,679
			Total U.S. government and agency securities		43,101		20,340		8		—		63,449
	Other sovereign government obligations				22,650		6,290		119		—		29,059
	Corporate and other debt:
		State and municipal securities			—		2,261		—		—		2,261
		Residential mortgage-backed securities			—		1,304		494		—		1,798
		Commercial mortgage-backed securities			—		1,686		134		—		1,820
		Asset-backed securities			—		937		31		—		968
		Corporate bonds			—		25,873		675		—		26,548
		Collateralized debt obligations			—		1,711		980		—		2,691
		Loans and lending commitments			—		14,854		9,590		—		24,444
		Other debt			—		8,265		128		—		8,393
			Total corporate and other debt		—		56,891		12,032		—		68,923
	Corporate equities(1)				45,173		2,376		417		—		47,966
	Derivative and other contracts:
		Interest rate contracts			1,493		906,082		5,301		—		912,876
		Credit contracts			—		123,689		15,102		—		138,791
		Foreign exchange contracts			—		61,770		573		—		62,343
		Equity contracts			929		44,558		800		—		46,287
		Commodity contracts			6,356		31,246		2,176		—		39,778
		Other			—		292		306		—		598
		Netting(2)			(7,596)		(1,045,912)		(11,837)		(87,264)		(1,152,609)
			Total derivative and other contracts		1,182		121,725		12,421		(87,264)		48,064
	Investments:
		Private equity funds			—		7		1,936		—		1,943
		Real estate funds			—		5		1,213		—		1,218
		Hedge funds			—		473		696		—		1,169
		Principal investments			161		104		2,937		—		3,202
		Other			141		21		501		—		663
			Total investments		302		610		7,283		—		8,195
	Physical commodities				—		9,651		46		—		9,697
		Total financial instruments owned			112,408		217,883		32,326		(87,264)		275,353
Securities available for sale					13,437		17,058		—		—		30,495
Securities received as collateral					11,530		121		—		—		11,651
Federal funds sold and securities purchased under
	agreements to resell				—		112		—		—		112
Intangible assets(3)					—		—		133		—		133
Total assets measured at fair value				$	137,375	$	235,174	$	32,459	$	(87,264)	$	317,744
Liabilities at Fair Value
Deposits				$	—	$	2,101	$	—	$	—	$	2,101
Commercial paper and other short-term borrowings					—		1,337		2		—		1,339
Financial instruments sold, not yet purchased:
	U.S. government and agency securities:
		U.S. Treasury securities			17,776		—		—		—		17,776
		U.S. agency securities			1,748		106		—		—		1,854
			Total U.S. government and agency securities		19,524		106		—		—		19,630
	Other sovereign government obligations				14,981		2,152		8		—		17,141
	Corporate and other debt:
		State and municipal securities			—		3		—		—		3
		Residential mortgage-backed securities			—		—		355		—		355
		Commercial mortgage-backed securities			—		14		—		—		14
		Corporate bonds			—		6,217		219		—		6,436
		Collateralized debt obligations			—		3		—		—		3
		Unfunded lending commitments			—		1,284		85		—		1,369
		Other debt			—		157		73		—		230
			Total corporate and other debt		—		7,678		732		—		8,410
	Corporate equities(1)				24,347		149		1		—		24,497
	Derivative and other contracts:
		Interest rate contracts			1,680		873,466		4,881		—		880,027
		Credit contracts			—		121,438		9,288		—		130,726
		Foreign exchange contracts			—		64,218		530		—		64,748
		Equity contracts			877		45,375		2,034		—		48,286
		Commodity contracts			7,144		31,248		1,606		—		39,998
		Other			—		879		1,396		—		2,275
		Netting(2)			(7,596)		(1,045,912)		(11,837)		(54,262)		(1,119,607)
			Total derivative and other contracts		2,105		90,712		7,898		(54,262)		46,453
	Physical commodities				—		16		—		—		16
		Total financial instruments sold, not yet purchased			60,957		100,813		8,639		(54,262)		116,147
Obligation to return securities received as collateral					15,267		127		—		—		15,394
Securities sold under agreements to repurchase					—		8		340		—		348
Other secured financings					—		14,024		570		—		14,594
Long-term borrowings					10		38,050		1,603		—		39,663
Total liabilities measured at fair value				$	76,234	$	156,460	$	11,154	$	(54,262)	$	189,586

_____________

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

(3)       Amount represents MSRs accounted for at fair value. See Note 6 for further information on MSRs.

Transfers Between Level 1 and Level 2 During Quarter Ended March 31, 2011.

Financial instruments owned—Derivative and other contracts and Financial instruments sold, not yet purchased—Derivative and other contracts.  During the quarter ended March 31, 2011, the Company reclassified approximately $0.6 billion of derivative assets and approximately $0.8 billion of derivative liabilities from Level 2 to Level 1 as these listed derivatives became actively traded and were valued based on quoted prices from the exchange.

Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis.

The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters ended March 31, 2012 and 2011, respectively. Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities within the Level 3 category presented in the tables below do not reflect the related realized and unrealized gains (losses) on hedging instruments that have been classified by the Company within the Level 1 and/or Level 2 categories.

Additionally, both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains (losses) during the period for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value during the period that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

For assets and liabilities that were transferred into Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred into Level 3 at the beginning of the period; similarly, for assets and liabilities that were transferred out of Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred out at the beginning of the period.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2012.

					Beginning Balance at December 31, 2011		Total Realized and Unrealized Gains (Losses) (1)		Purchases		Sales		Issuances		Settlements		Net Transfers		Ending Balance at March 31, 2012		Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2012(2)
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. agency securities			$	8	$	—	$	42	$	(26)	$	—	$	—	$	(1)	$	23	$	—
	Other sovereign government obligations				119		(1)		8		(118)		—		—		—		8		—
	Corporate and other debt:
		State and municipal securities			—		—		—		—		—		—		3		3		—
		Residential mortgage-backed securities			494		(21)		6		(245)		—		—		(191)		43		(18)
		Commercial mortgage-backed securities			134		23		5		(21)		—		(1)		(13)		127		16
		Asset-backed securities			31		1		—		(28)		—		—		(1)		3		1
		Corporate bonds			675		45		426		(225)		—		—		(22)		899		39
		Collateralized debt obligations			980		123		296		(161)		—		—		(73)		1,165		82
		Loans and lending commitments			9,590		(20)		496		(1,018)		—		(421)		(30)		8,597		(35)
		Other debt			128		2		27		(123)		—		—		23		57		—
			Total corporate and other debt		12,032		153		1,256		(1,821)		—		(422)		(304)		10,894		85
	Corporate equities				417		(45)		901		(758)		—		—		39		554		(9)
	Net derivative and other contracts(3):
		Interest rate contracts			420		170		6		—		(5)		(139)		(430)		22		179
		Credit contracts			5,814		(1,381)		63		—		(10)		(47)		(58)		4,381		(1,786)
		Foreign exchange contracts			43		(99)		—		—		—		162		(40)		66		(83)
		Equity contracts			(1,234)		(99)		199		(58)		(50)		(250)		50		(1,442)		(161)
		Commodity contracts			570		199		4		—		(4)		37		(3)		803		101
		Other			(1,090)		58		—		—		—		269		740		(23)		56
			Total net derivative and
			other contracts		4,523		(1,152)		272		(58)		(69)		32		259		3,807		(1,694)
	Investments:
		Private equity funds			1,936		(7)		101		(36)		—		—		—		1,994		1
		Real estate funds			1,213		52		87		(14)		—		—		—		1,338		5
		Hedge funds			696		25		22		(33)		—		—		(87)		623		23
		Principal investments			2,937		38		180		(65)		—		—		104		3,194		57
		Other			501		(33)		34		(3)		—		—		28		527		(41)
			Total investments		7,283		75		424		(151)		—		—		45		7,676		45
	Physical commodities				46		—		—		—		—		(46)		—		—		—
Intangible assets					133		(34)		—		—		—		—		—		99		(34)
Liabilities at Fair Value
Commercial paper and other
	short-term borrowings			$	2	$	—	$	—	$	—	$	13	$	—	$	—	$	15	$	—
Financial instruments sold, not yet purchased:
	Other sovereign government obligations				8		—		(7)		—		—		—		—		1		—
	Corporate and other debt:
		Residential mortgage-backed securities			355		—		(294)		—		—		—		—		61		(61)
		Corporate bonds			219		(59)		(186)		126		—		—		(25)		193		(74)
		Unfunded lending commitments			85		25		—		—		—		—		—		60		25
		Other debt			73		1		—		—		—		(55)		16		33		3
			Total corporate and other debt		732		(33)		(480)		126		—		(55)		(9)		347		(107)
	Corporate equities				1		(2)		(2)		10		—		—		(9)		2		—
Securities sold under agreements to repurchase					340		1		—		—		—		—		(153)		186		3
Other secured financings					570		(44)		—		—		12		(32)		—		594		(44)
Long-term borrowings					1,603		(173)		—		—		262		(78)		183		2,143		(171)

___________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $75 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for the quarter ended March 31, 2012 related to assets and liabilities still outstanding at March 31, 2012.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Financial instruments owned – Net derivative and other contracts.The net loss in Net derivative and other contracts were primarily driven by tightening of credit spreads on underlying reference entities of basket credit default swaps.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2011.

					Beginning Balance at December 31, 2010		Total Realized and Unrealized Gains (Losses) (1)		Purchases		Sales		Issuances		Settlements		Net Transfers		Ending Balance at March 31, 2011		Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at March 31, 2011(2)
					(dollars in millions)
Assets at Fair Value
Financial instruments owned:
	U.S. agency securities			$	13	$	—	$	103	$	(52)	$	—	$	—	$	(7)	$	57	$	—
	Other sovereign government obligations				73		—		59		—		—		—		(6)		126		—
	Corporate and other debt:
		State and municipal securities			110		(1)		4		(96)		—		—		(13)		4		—
		Residential mortgage-backed securities			319		(58)		198		(183)		—		(1)		86		361		(21)
		Commercial mortgage-backed securities			188		16		9		(30)		—		—		(51)		132		10
		Asset-backed securities			13		—		12		(19)		—		—		(6)		—		—
		Corporate bonds			1,368		33		255		(215)		—		—		(75)		1,366		55
		Collateralized debt obligations			1,659		254		355		(595)		—		(36)		(44)		1,593		93
		Loans and lending commitments			11,666		386		1,023		(643)		—		(1,024)		(190)		11,218		382
		Other debt			193		(6)		1		(22)		—		—		(1)		165		(16)
			Total corporate and other debt		15,516		624		1,857		(1,803)		—		(1,061)		(294)		14,839		503
	Corporate equities				484		(53)		101		(98)		—		—		68		502		(18)
	Net derivative and other contracts(3):
		Interest rate contracts			424		169		1		—		(663)		(114)		125		(58)		100
		Credit contracts			6,594		(673)		128		—		(152)		71		111		6,079		(245)
		Foreign exchange rate contracts			46		(124)		—		—		—		127		(3)		46		(100)
		Equity contracts			(762)		75		65		(12)		(85)		15		59		(645)		75
		Commodity contracts			188		(9)		161		—		(132)		85		37		330		(4)
		Other			(913)		209		—		—		(5)		205		(4)		(508)		203
			Total net derivative and other contracts		5,577		(353)		355		(12)		(1,037)		389		325		5,244		29
	Investments:
		Private equity funds			1,986		107		32		(190)		—		—		71		2,006		95
		Real estate funds			1,176		64		14		(3)		—		—		—		1,251		102
		Hedge funds			901		(9)		135		(189)		—		—		33		871		(9)
		Principal investments			3,131		66		202		(301)		—		—		(41)		3,057		(85)
		Other			560		8		1		(14)		—		—		(157)		398		3
			Total investments		7,754		236		384		(697)		—		—		(94)		7,583		106
Securities received as collateral					1		—		—		(1)		—		—		—		—		—
Intangible assets					157		(15)		3		(1)		—		—		—		144		(14)
Liabilities at Fair Value
Deposits				$	16	$	2	$	—	$	—	$	—	$	(14)	$	—	$	—	$	—
Commercial paper and other short-term borrowings					2		—		—		—		4		(2)		—		4		—
Financial instruments sold, not yet purchased:
	Corporate and other debt:
		Corporate bonds			44		1		(27)		155		—		—		(21)		150		8
		Collateralized debt obligations			—		1		—		3		—		—		—		2		1
		Unfunded lending commitments			263		92		—		—		—		—		—		171		92
		Other debt			194		—		—		—		—		—		(14)		180		—
	Total corporate and other debt				501		94		(27)		158		—		—		(35)		503		101
	Corporate equities				15		(1)		(8)		1		—		—		—		9		—
Obligation to return securities received as collateral					1		—		(1)		—		—		—		—		—		—
Securities sold under agreements to repurchase					351		(2)		—		—		—		(1)		—		352		(2)
Other secured financings					1,016		(12)		—		—		—		(117)		(306)		605		(12)
Long-term borrowings					1,316		(84)		—		—		141		(180)		13		1,374		(83)

____________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the condensed consolidated statements of income except for $236 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for the quarter ended March 31,2011 related to assets and liabilities still outstanding at March 31, 2011.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 10.

Financial instruments owned—Corporate and other debt.    During the quarter ended March 31, 2011, the Company reclassified approximately $1.6 billion of certain Corporate and other debt, primarily corporate loans, from Level 3 to Level 2. The Company reclassified the corporate loansas external prices and/or spread inputs for these instruments became observable.

The Company also reclassified approximately $1.3 billion of certain Corporate and other debt from Level 2 to Level 3. The reclassifications were primarily related to certain corporate loans and were generally due to a reduction in market price quotations for these or comparable instruments, or a lack of available broker quotes, such that unobservable inputs had to be utilized for the fair value measurement of these instruments.

Quantitative Information about and Sensitivity of Significant Unobservable Inputs used in Recurring Level 3 Fair Value Measurements at March 31, 2012

The disclosures below provide information on the valuation techniques, significant unobservable inputs and their ranges for each major category of assets and liabilities measured at fair value on a recurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm's inventory. The disclosures below also include qualitative information on the sensitivity of the fair value measurements to changes in the significant unobservable inputs.

Balance at

Significant Unobservable Input(s) /

March 31,

Valuation

Sensitivity of the Fair Value to Changes

2012

Technique(s)

in the Unobservable Inputs

Range

(dollars in millions)

Assets(1)

Financial instruments owned:

Corporate and other debt:

Commercial mortgage-backed securities

$

127

Comparable pricing(2)

Comparable bond price / (A)

0 to 85 points

Corporate bonds

899

Comparable pricing(2)

Comparable bond price / (A)

2 to 120 points

Collateralized debt obligations

1,165

Comparable pricing(2)

Comparable bond price / (A)

15 to 82 points

Correlation model

Credit correlation / (B)

21% to 39%

Loans and lending commitments

8,597

Corporate loan model

Credit spread / (C)

26 to 1,109 basis points

Comparable pricing(2)

Comparable bond or loan price / (A)

10 to 100 points

Other debt

57

Comparable pricing(2)

Comparable bond price / (A)

1 to 9 points

Corporate equities(3)

554

Net asset value

Discount to net asset value / (C)

0% to 31%

Discounted cash flow

Implied weighted average cost of capital / (C)

9% to 40%

Market approach

Earnings before interest, taxes, depreciation and amortization ("EBITDA") multiple / (A)

3 to 21 times

Net derivative and other contracts:

Interest rate contracts

22

Option model

Interest rate volatility concentration liquidity multiple / (C)(D)

0 to 12 times

Interest rate volatility skew / (A)(D)

-1% to 81%

Credit contracts

4,381

Comparable pricing(2)

Cash synthetic basis / (C)

0 to 10 points

Comparable bond price / (C)

5 to 97 points

Correlation model

Credit correlation / (B)

9% to 82%

Foreign exchange contracts

66

Option model

Interest rate - Foreign exchange correlation / (A)

5% to 68%

Equity contracts

(1,442)

Option model

At the money volatility / (C)(D)

8% to 26%

Volatility skew / (C)(D)

-5% to 0%

Equity - Equity correlation / (C)(D)

40% to 97%

Equity - Foreign exchange correlation / (C)(D)

-45% to 35%

Equity - Interest rate correlation / (C)(D)

8% to 65%

Commodity contracts

803

Option model

Forward power price / (C)(D)

$22 to $134 per Megawatt hour

Commodity volatility / (A)(D)

13% to 113%

Cross commodity correlation / (C)(D)

21% to 99%

Investments (3):

Principal investments

3,194

Discounted cash flow

Implied weighted average cost of capital / (C)(D)

10% to 19%

Exit multiple / (A)(D)

5 to 10 times

Discounted cash flow

Capitalization rate / (C)(D)

5% to 9%

Equity discount rate / (C)(D)

16% to 35%

Market approach

EBITDA multiple / (A)

3 to 24 times

Other

527

Discounted cash flow

Implied weighted average cost of capital / (C)(D)

9% to 14%

Exit multiple / (A)(D)

4 to 10 times

Market approach

EBITDA multiple / (A)

3 to 11 times

Liabilities

Financial instruments sold, not yet purchased:

Corporate and other debt:

Residential mortgage-backed securities

$

61

Comparable pricing(2)

Comparable bond price / (A)

0 to 100 points

Corporate bonds

193

Comparable pricing(2)

Comparable bond price / (A)

6 to 121 points

Unfunded lending commitments

60

Corporate loan model

Credit spread / (C)

45 to 1,014 basis points

Securities sold under agreements to repurchase

186

Discounted cash flow

Funding spread / (A)

45 to 300 basis points

Other secured financings

594

Comparable pricing(2)

Comparable bond price / (A)

34 to 108 points

Discounted cash flow

Funding spread / (A)

267 to 269 basis points

Long-term borrowings

2,143

Option model

At the money volatility / (A)(D)

10% to 15%

Volatility skew / (A)(D)

-2% to 0%

Equity - Equity correlation / (C)(D)

70% to 97%

Equity - Foreign exchange correlation / (A)(D)

-70% to -40%

		At March 31, 2012				At December 31, 2011
					Unfunded				Unfunded
			Fair Value		Commitment		Fair Value		Commitment
		(dollars in millions)
Private equity funds		$	1,955	$	813	$	1,906	$	938
Real estate funds			1,310		288		1,188		448
Hedge funds(1):
	Long-short equity hedge funds		511		─		545		5
	Fixed income/credit-related hedge funds		23		─		124		─
	Event-driven hedge funds		71		─		163		─
	Multi-strategy hedge funds		336		2		335		─
Total		$	4,206	$	1,103	$	4,261	$	1,391

(1)       Fixed income/credit-related hedge funds, event-driven hedge funds, and multi-strategy hedge funds are redeemable at least on a six-month period basisprimarily with a notice period of 90 days or less. At March 31, 2012, approximately 36% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 34% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at March 31, 2012is primarily greater than six months. At December 31, 2011, approximately 38% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 32% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at December 31, 2011is primarily greater than six months.

Private Equity Funds.    Amount includes several private equity funds that pursue multiple strategies including leveraged buyouts, venture capital, infrastructure growth capital, distressed investments, and mezzanine capital. In addition, the funds may be structured with a focus on specific domestic or foreign geographic regions. These investments are generally not redeemable with the funds. Instead, the nature of the investments in this category is that distributions are received through the liquidation of the underlying assets of the fund. At March 31, 2012, it is estimated that 6% of the fair value of the funds will be liquidated in the next five years, another 33% of the fair value of the funds will be liquidated between five to 10 years and the remaining 61% of the fair value of the funds have a remaining life of greater than 10 years.

Real Estate Funds.    Amount includes several real estate funds that invest in real estate assets such as commercial office buildings, retail properties, multi-family residential properties, developments or hotels. In addition, the funds may be structured with a focus on specific geographic domestic or foreign regions. These investments are generally not redeemable with the funds. Distributions from each fund will be received as the underlying investments of the funds are liquidated. At March 31, 2012, it is estimated that 4% of the fair value of the funds will be liquidated within the next five years, another 40% of the fair value of the funds will be liquidated between five to 10 years and the remaining56% of the fair value of the funds have a remaining life of greater than 10 years.

Hedge Funds.    Investments in hedge funds may be subject to initial period lock-up restrictions or gates. A hedge fund lock-up provision is a provision that provides that, during a certain initial period, an investor may not make a withdrawal from the fund. The purpose of a gate is to restrict the level of redemptions that an investor in a particular hedge fund can demand on any redemption date.

•       Long-short Equity Hedge Funds.    Amount includes investments in hedge funds that invest, long or short, in equities. Equity value and growth hedge funds purchase stocks perceived to be undervalued and sell stocks perceived to be overvalued. Investments representing approximately 8% of the fair value of the investments in this category cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions ranged from three years or less at March 31, 2012. Investments representing approximately 7% of the fair value of the investments in long-short equity hedge funds cannot be redeemed currently because an exit restriction has been imposed by the hedge fund manager. The restriction period for these investments subject to an exit restriction was primarilyone year or lessat March 31, 2012.

•        Fixed Income/Credit-Related Hedge Funds.    Amount includes investments in hedge funds that employ long-short, distressed or relative value strategies in order to benefit from investments in undervalued or overvalued securities that are primarily debt or credit related. At March 31, 2012, investments representing approximately 17% of the fair value of the investments in fixed income/credit-related hedge funds cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions was primarilyone year or less at March 31, 2012.

•       Event-Driven Hedge Funds.    Amount includes investments in hedge funds that invest in event-driven situations such as mergers, hostile takeovers, reorganizations, or leveraged buyouts. This may involve the simultaneous purchase of stock in companies being acquired and the sale of stock in its acquirer, hoping to profit from the spread between the current market price and the ultimate purchase price of the target company. At March 31, 2012,there were no restrictions on redemptions.

•       Multi-strategy Hedge Funds.    Amount includes investments in hedge funds that pursue multiple strategies to realize short- and long-term gains. Management of the hedge funds has the ability to overweight or underweight different strategies to best capitalize on current investment opportunities. At March 31, 2012, investments representing approximately 74% of the fair value of the investments in this category cannot be redeemed currently because the investments include certain initial period lock-up restrictions. The remaining restriction period for these investments subject to lock-up restrictions was primarily two years or less at March 31, 2012.

Fair Value Option.

The Company elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models. The following tables present net gains (losses) due to changes in fair value for items measured at fair value pursuant to the fair value option election for the quarters ended March 31, 2012 and2011, respectively.

		Principal		Interest		Gains (Losses)
		Transactions-		Income		Included in
		Trading		(Expense)		Net Revenues
		(dollars in millions)
Three Months Ended March 31, 2012
Federal funds sold and securities purchased under
agreements to resell	$	(4)	$	1	$	(3)
Deposits		10		(22)		(12)
Commercial paper and other short-term borrowings		(129)		─		(129)
Securities sold under agreements to repurchase		(2)		(1)		(3)
Long-term borrowings		(2,951)		(344)		(3,295)
Three Months Ended March 31, 2011
Deposits	$	13	$	(30)	$	(17)
Commercial paper and other short-term borrowings		(5)		─		(5)
Securities sold under agreements to repurchase		(2)		─		(2)
Long-term borrowings		(1,266)		(290)		(1,556)

In addition to the amounts in the above table, as discussed in Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K, all of the instruments within Financial instruments owned or Financial instruments sold, not yet purchased are measured at fair value, either through the election of the fair value option, or as required by other accounting guidance. The amounts in the above table are included within Net revenues and do not reflect gains or losses on related hedging instruments, if any.

The changes in overall fair value of the short-term and long-term borrowings (primarily structured notes) are attributable to changes in foreign currency exchange rates, interest rates, movements in the reference price or index for structured notes and (as presented in the table below) an adjustment to reflect the change in the Company's credit spreads and other credit factors.

The following tables present information on the Company's short-term and long-term borrowings (primarily structured notes), loans and unfunded lending commitments for which the fair value option was elected.

Gains (Losses) due to Changes in Instrument Specific Credit Risk.

		Three Months Ended
		March 31,
		2012		2011
		(dollars in millions)
Short-term and long-term borrowings(1)	$	(1,978)	$	(189)
Loans(2)		293		140
Unfunded lending commitments(3)		407		10

_____________

(1)       The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company's secondary bond market spreads.

(2)       Instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates.

(3)       Gains (losses) were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period end.

Net Difference between Contractual Principal Amount and Fair Value.

		Contractual Principal Amount Exceeds Fair Value
		At		At
		March 31,		December 31,
		2012		2011
	(dollars in billions)
Short-term and long-term borrowings(1)	$	1.2	$	2.5
Loans(2)		23.9		27.2
Loans 90 or more days past due and/or on non-accrual status(2)(3)		21.3		22.1

_____________

(1)       These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index.

(2)       The majority of this difference between principal and fair value amounts emanates from the Company's distressed debt trading business, which purchases distressed debt at amounts well below par.

(3)       The aggregate fair value of loans that were in non-accrual status, which includes all loans 90 or more days past due, was $1.5 billion and $2.0 billion at March 31, 2012 and December 31, 2011, respectively. The aggregate fair value of loans that were 90 or more days past due was $0.9 billion and $1.5 billion at March 31, 2012 and December 31, 2011, respectively.

The tables above exclude non-recourse debt from consolidated VIEs, liabilities related to failed sales of financial assets, pledged commodities and other liabilities that have specified assets attributable to them.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis.

Certain assets were measured at fair value on a non-recurring basis and are not included in the tables above. These assets may include loans, equity method investments, premises and equipment, intangible assets and real estate investments.

The following tables present, by caption on the condensed consolidated statements of financial condition, the fair value hierarchy for those assets measured at fair value on a non-recurring basis for which the Company recognized a non-recurring fair value adjustment forthe quarters ended March 31, 2012 and 2011, respectively.

Three Months Ended March 31, 2012.

				Fair Value Measurements Using:
				Quoted Prices						Total
				in Active						Gains (Losses)
		Carrying		Markets for		Significant		Significant		for the
		Value At		Identical		Observable		Unobservable		Three Months Ended
		March 31,		Assets		Inputs		Inputs		March 31,
		2012		(Level 1)		(Level 2)		(Level 3)		2012(1)
	(dollars in millions)
Loans(2)	$	298	$	─	$	144	$	154	$	(6)
Other investments(3)		47		─		─		47		(3)
Premises, equipment and software costs(3)		3		─		─		3		(1)
Intangible assets(4)		2		2		─		─		(2)
Total	$	350	$	2	$	144	$	204	$	(12)

_____________

(1)       Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2)       Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses were determined primarily using discounted cash flow models or a valuation technique incorporating an observable market index.

In addition to the losses included in the table above, there was a pre-tax gain of approximately $51 million (related to Other assets) included in discontinued operations in the quarter ended March 31, 2012 in connection with the planned disposition of Saxon (see Notes 1 and 20). This pre-tax gain was primarily due to the subsequent increase in fair value of Saxon, which had incurred impairment losses of $98 million in the quarter ended December 31, 2011. The fair value of Saxon was determined based on the revised purchase price agreed upon with the buyer.

There were no liabilities measured at fair value on a non-recurring basis during the quarter ended March 31, 2012.

Three Months Ended March 31, 2011.

				Fair Value Measurements Using:
				Quoted Prices						Total
				in Active						Gains (Losses)
		Carrying		Markets for		Significant		Significant		for the
		Value At		Identical		Observable		Unobservable		Three Months Ended
		March 31,		Assets		Inputs		Inputs		March 31,
		2011		(Level 1)		(Level 2)		(Level 3)		2011(1)
	(dollars in millions)
Loans(2)	$	559	$	─	$	46	$	513	$	16
Other investments(3)		77		─		─		77		(9)
Intangible assets(4)		─		─		─		─		(3)
Total	$	636	$	─	$	46	$	590	$	4

____________

(1)       Losses are recorded within Other expenses in the condensed consolidated statement of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2) Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models.The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses primarily related to investment management contracts, including contracts associated with FrontPoint, and were determined primarily using discounted cash flow models.

There were no liabilities measured at fair value on a non-recurring basis during the quarter ended March 31, 2011.

Financial Instruments Not Measured at Fair Value.

The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value in the condensed consolidated statements of financial condition. The table below excludes certain financial instruments such as equity method investments and all non-financial assets and liabilities such as the value of the long-term relationships with our deposit customers.

The carrying value of cash and cash equivalents, including Interest bearing deposits with banks, and other short-term financial instruments such as Federal funds sold and securities purchased under agreements to resell, Securities borrowed, Securities sold under agreements to repurchase, Securities loaned, certain receivables and payables arising in the ordinary course of business, certain Deposits, Commercial paper and other short-term borrowings and Other secured financings approximate fair value because of the relatively short period of time between their origination and expected maturity.

The fair value of sweep facilities whereby cash balances are swept into separate money market savings deposits and transaction accounts included within Deposits is determined from observable market data, where available. Otherwise, the fair value is determined using a standard cash flow discounting methodology.

For longer-dated Federal funds sold and securities purchased under agreements to resell, Securities borrowed, Securities sold under agreements to repurchase, Securities loaned and Other secured financings, fair value is determined using a standard cash flow discounting methodology. The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks and interest rate yield curves.

For consumer and residential real estate loans where position-specific external price data is not observable, the fair value is based on the credit risks of the borrower using a probability of default and loss given default method, discounted at the estimated external cost of funding level. The fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, and market observable credit default swap spread levels along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable.

Quoted prices are used when available for long-term borrowings. Where quoted prices are not available, fair value is determined based on current interest rates and credit spreads for debt instruments with similar terms and maturity.

Financial Instruments Not Measured at Fair Value at March 31, 2012.

			At March 31, 2012				Fair Value Measurements using:
			Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(dollars in millions)
Financial Assets:
Cash and due from banks		$	10,133	$	10,133	$	10,133	$	—	$	—
Interest bearing deposits with banks			28,592		28,592		28,592		—		—
Cash deposited with clearing organizations or segregated under federal and
	other regulations or requirements		30,152		30,152		30,152		—		—
Federal funds sold and securities purchased under agreements to resell			136,133		135,773		—		135,161		612
Securities borrowed			141,610		141,609		—		141,484		125
Receivables:(1)
	Customers		38,962		38,962		—		38,962		—
	Brokers, dealers and clearing organizations		5,718		5,718		—		5,718		—
	Fees, interest and other		6,220		5,922		—		—		5,922
Loans(2)			16,729		16,791		—		1,923		14,868
Financial Liabilities:
Deposits		$	64,461	$	64,603	$	—	$	64,603	$	—
Commercial paper and other short-term borrowings			696		696		—		439		257
Securities sold under agreements to repurchase			106,983		107,041		—		99,539		7,502
Securities loaned			34,431		34,913		—		34,646		267
Other secured financings			8,354		8,383		—		6,527		1,856
Payables:(1)
	Customers		119,045		119,045		—		119,045		—
	Brokers, dealers and clearing organizations		12,143		12,143		—		12,143		—
Long-term borrowings			133,499		127,962		—		120,471		7,491

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Significant Accounting Policies

2.Significant Accounting Policies.

For a detailed discussion about the Company's significant accounting policies, see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

During the quarter ended March 31, 2012, other than the following, no other updates were made to the Company's significant accounting policies.

Financial Instruments and Fair Value—Valuation Process.

The Valuation Review Group (“VRG”) within the Financial Control Group (“FCG”) is responsible for the Company's fair value valuation policies, processes and procedures. VRG is independent of the business units and reports to the Chief Financial Officer (“CFO”), who has final authority over the valuation of the Company's financial instruments.  VRG implements valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

The Company's control processes include:

Model Review. VRG, in conjunction with the Market Risk Department (“MRD”) and, where appropriate, the Credit Risk Management Department, both of which report to the Chief Risk Officer, independently review the valuation model's theoretical soundness, the appropriateness of the valuation methodology and calibration techniques developed by the business units using observable inputs. Where inputs are not observable, VRG reviews the appropriateness of the proposed valuation methodology to ensure it is consistent with how a market participant would arrive at the unobservable input. The valuation methodologies utilized in the absence of observable inputs may include extrapolation techniques and the use of comparable observable inputs. As part of the review, VRG develops a methodology to independently verify the fair value generated by the business unit's valuation model. Before trades are executed using new valuation models, those models are required to be independently reviewed. All ofthe Company's valuation models are subject to an independent annual review.

Independent Price Verification. The business units are responsible for determining the fair value of financial instruments using approved valuation models and valuation methodologies. Generally on a monthly basis,VRG independently validates the fair values of financial instruments determined using valuation models by determining the appropriateness of the inputs used by the business units and testing compliance with the documented valuation methodologies approved in the model review process described above.

VRG uses recently executed transactions, other observable market data such as exchange data, broker/dealer quotes, third-party pricing vendors and aggregation services for validating the fair values of financial instruments generated using valuation models. VRG assesses the external sources and their valuation methodologies to determine if the external providers meet the minimum standards expected of a third-party pricing source. Pricing data provided by approved external sources is evaluated using a number of approaches; for example, by corroborating the external sources' prices to executed trades, analyzing the methodology and assumptions used by the external source to generate a price and/or by evaluating how active the third-party pricing source (or originating sources used by the third-party pricing source) is in the market. Based on this analysis, VRG generates a ranking of the observable market data to ensure that the highest-ranked market data source is used to validate the business unit's fair value of financial instruments.

For financial instruments categorized within Level 3 of the fair value hierarchy, VRG reviews the business unit's valuation techniques to ensure these are consistent with market participant assumptions.

The results of this independent price verification and any adjustments made by VRG to the fair value generated by the business units are presented to management of the three business segments (i.e., Institutional Securities, Global Wealth Management Group and Asset Management), the CFO and the Chief Risk Officer on a regular basis.

Review of New Level 3 Transactions. VRG reviews the model and valuation methodology used to price all new material Level 3 transactions and both FCG and MRD management must approve the fair value of the trade that is initially recognized.

Securities Available for Sale – Other-than-temporary Impairment.

For available for sale (“AFS”) debt securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. When determining if a credit loss exists, the Company considers all relevant information including the length of time and the extent to which the fair value has been less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors; the historical and implied volatility of the fair value of the security; the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; failure of the issuer of the security to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency and recoveries or additional declines in fair value after the balance sheet date. When estimating the present value of expected cash flows, information shall include the remaining payment terms of the security, prepayment speeds, financial condition of the issuer(s), expected defaults and the value of any underlying collateral.

For AFS equity securities, the Company considers various factors including the intent and ability to hold the equity security for a period of time sufficient to allow for any anticipated recovery in market value in evaluating whether another-than-temporary impairment(“OTTI”) exists. If the equity security is considered other-than-temporarily impaired, the security will be written down to fair value, with the full difference between fair value and cost recognized in earnings.

Accounting Developments.

Reconsideration of Effective Control for Repurchase Agreements.

In April 2011, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance that modifies the criteria that must be satisfied for a transfer of financial assets to be accounted for as a sale. If the transferor maintains effective control over the transferred assets, the transaction is to be accounted for as a financing. This guidance eliminates from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. This guidance is effective for transfers occurring on and after January 1, 2012.The adoption of this accounting guidance did not have a material impact on the Company's condensed consolidated financial statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.

In May 2011, the FASB issued an accounting update that clarifies existing fair value measurement guidance and changes certain principles or requirements for measuring fair value or disclosing information about fair value measurements. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurement in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The guidance became effective for the Company beginning on January 1, 2012. See Note 3 for additional disclosures as required by this accounting guidance.

Goodwill Impairment Test.

In September 2011, the FASB issued accounting guidance that simplifies how entities test goodwill for impairment. This guidance allows entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity no longer would be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This guidance became effective for the Company beginning on January 1, 2012. The adoption of this accounting guidance did not have a material impact on the Company's condensed consolidated financial statements.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Common Share

14.Earnings per Common Share.

Basic earnings per common share (“EPS”)is computed by dividing earnings (loss) available to Morgan Stanley common shareholders by the weighted average number of common shares outstanding for the period. Common shares outstanding include common stock and vested restricted stock units (“RSUs”) where recipients have satisfied either the explicit vesting terms or retirement eligibility requirements. Diluted EPS reflects the assumed conversion of all dilutive securities. The Company calculates EPS using the two-class method and determines whether instruments granted in share-based payment transactions are participating securities (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 in the Form 10-K). The following table presents the calculation of basic and diluted EPS (in millions, except for per share data):

				Three Months Ended
				March 31,
				2012		2011
Basic EPS:
	Income from continuing operations		$	149	$	1,145
	Net gain (loss) from discontinued operations			(15)		(15)
	Net income			134		1,130
	Net income applicable to noncontrolling interests			228		162
	Net income (loss) applicable to Morgan Stanley			(94)		968
	Less: Preferred dividends (Series A Preferred Stock)			(11)		(11)
	Less: Preferred dividends (Series B Preferred Stock)			—		(196)
	Less: Preferred dividends (Series C Preferred Stock)			(13)		(13)
	Less: Allocation of earnings to participating RSUs(1):
		From continuing operations		(1)		(12)
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	(119)	$	736
	Weighted average common shares outstanding			1,877		1,456
Earnings (loss) per basic common share:
	Income (loss) from continuing operations		$	(0.05)	$	0.52
	Net gain (loss) from discontinued operations			(0.01)		(0.01)
		Earnings (loss) per basic common share	$	(0.06)	$	0.51
Diluted EPS:
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	(119)	$	736
	Weighted average common shares outstanding			1,877		1,456
	Effect of dilutive securities:
		Stock options and RSUs(1)		—		16
	Weighted average common shares outstanding and common stock equivalents			1,877		1,472
Earnings (loss) per diluted common share:
	Income (loss) from continuing operations		$	(0.05)	$	0.51
	Net income (loss) from discontinued operations			(0.01)		(0.01)
		Earnings (loss) per diluted common share	$	(0.06)	$	0.50

_____________

(1)RSUs that are considered participating securities participate in all of the earnings of the Company in the computation of basic EPS, and therefore, such RSUs are not included as incremental shares in the diluted calculation.

The following securities were considered antidilutive and, therefore, were excluded from the computation of diluted EPS:

		Three Months Ended
		March 31,
Number of Antidilutive Securities Outstanding at End of Period:		2012	2011
		(shares in millions)
RSUs and Performance-based stock units		103	26
Stock options		45	60
Series B Preferred Stock		—	311
	Total	148	397

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2012

Derivative Instrument Detail [Abstract]

Derivative Instruments and Hedging Activities

10.    Derivative Instruments and Hedging Activities.

The Company trades, makes markets and takes proprietary positions globally in listed futures, OTC swaps, forwards, options and other derivatives referencing, among other things, interest rates, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, asset-backed security indices, property indices, mortgage-related and other asset-backed securities, and real estate loan products. The Company uses these instruments for trading, foreign currency exposure management and asset and liability management.

The Company manages its trading positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). The Company manages the market risk associated with its trading activities on a Company-wide basis, on a worldwide trading division level and on an individual product basis.

The Company's derivative products consist of the following:

			At March 31, 2012				At December 31, 2011
			Assets		Liabilities		Assets		Liabilities
			(dollars in millions)
Exchange traded derivative products		$	3,882	$	6,071	$	4,103	$	4,969
OTC derivative products			36,134		36,694		43,961		41,484
	Total	$	40,016	$	42,765	$	48,064	$	46,453

The Company incurs credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the failure of a counterparty to perform according to the terms of the contract. The Company's exposure to credit risk at any point in time is represented by the fair value of the derivative contracts reported as assets. The fair value of a derivative represents the amount at which the derivative could be exchanged in an orderly transaction between market participants and is further described in Notes 2 and 3.

In connection with its OTC derivative activities, the Company generally enters into master netting agreements and collateral arrangements with counterparties. These agreements provide the Company with the ability to offset a counterparty's rights and obligations, request additional collateral when necessary or liquidate the collateral in the event of counterparty default.

The tables below present a summary by counterparty credit rating and remaining contract maturity of the fair value of OTC derivatives in a gain position at March 31, 2012 and December 31, 2011, respectively. Fair value is presented in the final column, net of collateral received (principally cash and U.S. government and agency securities):

OTC Derivative Products—Financial Instruments Owned at March 31, 2012(1)

											Cross-Maturity and Cash  Collateral Netting(3)		Net  Exposure Post-Cash Collateral		Net  Exposure Post-Collateral
			Years to Maturity
Credit Rating(2)			Less than 1		1 - 3		3 - 5		Over 5
			(dollars in millions)
AAA		$	224	$	1,058	$	1,276	$	7,837	$	(5,813)	$	4,582	$	4,408
AA			2,983		5,988		5,226		16,675		(22,926)		7,946		5,959
A			6,867		5,478		10,791		28,012		(41,189)		9,959		6,769
BBB			3,456		3,638		2,838		14,690		(16,673)		7,949		6,544
Non-investment grade			2,931		2,991		1,832		4,216		(6,272)		5,698		3,144
	Total	$	16,461	$	19,153	$	21,963	$	71,430	$	(92,873)	$	36,134	$	26,824

(1)       Fair values shown represent the Company's net exposure to counterparties related to the Company's OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2)       Obligor credit ratings are determined by the Company's Credit Risk Management Department.

(3)       Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

OTC Derivative Products—Financial Instruments Owned at December 31, 2011(1)

		Years to Maturity									Cross-Maturity and Cash Collateral Netting(3)		Net Exposure Post-Cash Collateral		Net Exposure Post-Collateral
Credit Rating(2)			Less  than 1		1 - 3		3 - 5		Over 5
			(dollars in millions)
AAA		$	621	$	1,615	$	1,586	$	10,375	$	(7,513)	$	6,684	$	6,389
AA			5,578		7,547		5,972		21,068		(31,074)		9,091		7,048
A			7,576		5,538		10,224		27,417		(41,608)		9,147		7,117
BBB			4,437		4,448		3,231		17,758		(17,932)		11,942		10,337
Non-investment grade			2,819		2,949		2,703		5,084		(6,458)		7,097		4,158
	Total	$	21,031	$	22,097	$	23,716	$	81,702	$	(104,585)	$	43,961	$	35,049

_____________

(1)       Fair values shown represent the Company's net exposure to counterparties related to the Company's OTC derivative products. Amounts include centrally cleared derivatives. The table does not include listed derivatives and the effect of any related hedges utilized by the Company.

(2)       Obligor credit ratings are determined by the Company's Credit Risk Management Department.

(3)       Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

Hedge Accounting.

The Company applies hedge accounting using various derivative financial instruments to hedge interest rate and foreign exchange risk arising from assets and liabilities not held at fair value as part of asset and liability management and foreign currency exposure management.

The Company's hedges are designated and qualify for accounting purposes as one of the following types of hedges: hedges of exposure to changes in fair value of assets and liabilities being hedged (fair value hedges) and hedges of net investments in foreign operations whose functional currency is different from the reporting currency of the parent company (net investment hedges).

For all hedges where hedge accounting is being applied, effectiveness testing and other procedures to ensure the ongoing validity of the hedges are performed at least monthly.

Fair Value Hedges—Interest Rate Risk.     The Company's designated fair value hedges consisted primarily of interest rate swaps designated as fair value hedges of changes in the benchmark interest rate of fixed rate senior long-term borrowings. The Company uses regression analysis to perform an ongoing prospective and retrospective assessment of the effectiveness of these hedging relationships (i.e., the Company applies the “long-haul” method of hedge accounting). A hedging relationship is deemed effective if the fair values of the hedging instrument (derivative) and the hedged item (debt liability) change inversely within a range of 80% to 125%. The Company considers the impact of valuation adjustments related to the Company's own credit spreads and counterparty credit spreads to determine whether they would cause the hedging relationship to be ineffective.

For qualifying fair value hedges of benchmark interest rates, the changes in the fair value of the derivative and the changes in the fair value of the hedged liability provide offset of one another and, together with any resulting ineffectiveness, are recorded in Interest expense. When a derivative is de-designated as a hedge, any basis adjustment remaining on the hedged liability is amortized to Interest expense over the remaining life of the liability using the effective interest method.

Net Investment Hedges.     The Company may utilize forward foreign exchange contracts to manage the currency exposure relating to its net investments in non-U.S. dollar functional currency operations. No hedge ineffectiveness is recognized in earnings since the notional amounts of the hedging instruments equal the portion of the investments being hedged and the currencies being exchanged are the functional currencies of the parent and investee. The gain or loss from revaluing hedges of net investments in foreign operations at the spot rate is deferred and reported within Accumulated other comprehensive income (loss) in Total Equity, net of tax effects. The forward points on the hedging instruments are recorded in Interest income.

The following tables summarize the fair value of derivative instruments designated as accounting hedges and the fair value of derivative instruments not designated as accounting hedges by type of derivative contract on a gross basis. Fair values of derivative contracts in an asset position are included in Financial instruments owned—Derivative and other contracts. Fair values of derivative contracts in a liability position are reflected in Financial instruments sold, not yet purchased—Derivative and other contracts.

				Assets at				Liabilities at
				March 31, 2012				March 31, 2012
				Fair Value		Notional		Fair Value		Notional
				(dollars in millions)
Derivatives designated as accounting hedges:
	Interest rate contracts		$	7,759	$	72,728	$	—	$	—
	Foreign exchange contracts			392		12,845		148		9,692
		Total derivatives designated as accounting hedges		8,151		85,573		148		9,692
Derivatives not designated as accounting hedges(1):
	Interest rate contracts			783,760		20,207,486		762,593		19,864,081
	Credit contracts			99,996		2,382,764		93,766		2,331,035
	Foreign exchange contracts			47,707		1,718,721		50,783		1,803,265
	Equity contracts			46,538		673,987		51,149		689,748
	Commodity contracts			40,116		430,298		40,506		385,031
	Other			61		3,448		72		6,058
		Total derivatives not designated as accounting hedges		1,018,178		25,416,704		998,869		25,079,218
Total derivatives			$	1,026,329	$	25,502,277	$	999,017	$	25,088,910
Cash collateral netting				(68,587)		—		(38,526)		—
Counterparty netting				(917,726)		—		(917,726)		—
	Total derivatives		$	40,016	$	25,502,277	$	42,765	$	25,088,910

_____________

(1)       Notional amounts include net notionals related to long and short futures contracts of $85 billion and $75 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $189 million and $36 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

				Assets at				Liabilities at
				December 31, 2011				December 31, 2011
				Fair Value		Notional		Fair Value		Notional
				(dollars in millions)
Derivatives designated as accounting hedges:
	Interest rate contracts		$	8,151	$	71,706	$	—	$	—
	Foreign exchange contracts			348		12,222		57		7,111
		Total derivatives designated as accounting hedges		8,499		83,928		57		7,111
Derivatives not designated as accounting hedges(1):
	Interest rate contracts			904,725		21,099,876		880,027		21,005,733
	Credit contracts			138,791		2,466,623		130,726		2,428,042
	Foreign exchange contracts			61,995		1,582,364		64,691		1,604,493
	Equity contracts			46,287		603,290		48,286		595,146
	Commodity contracts			39,778		411,661		39,998		374,594
	Other			598		11,662		2,275		24,905
		Total derivatives not designated as accounting hedges		1,192,174		26,175,476		1,166,003		26,032,913
Total derivatives			$	1,200,673	$	26,259,404	$	1,166,060	$	26,040,024
Cash collateral netting				(77,938)		—		(44,936)		—
Counterparty netting				(1,074,671)		—		(1,074,671)		—
	Total derivatives		$	48,064	$	26,259,404	$	46,453	$	26,040,024

_____________

(1)       Notional amounts include net notionals related to long and short futures contracts of $77 billion and $66 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $605million and $37 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

The following tables summarize the gains or losses reported on derivative instruments designated and qualifying as accounting hedges for the quarters ended March 31, 2012 and 2011, respectively.

Derivatives Designated as Fair Value Hedges.

The following table presents gains (losses) reported on derivative instruments and the related hedge item as well as the hedge ineffectiveness included in Interest expense in the condensed consolidated statements of income from interest rate contracts:

	Gains (Losses) Recognized
	Three Months Ended
	March 31,
Product Type	2012		2011
	(dollars in millions)
Derivatives	$	(546)	$	(1,095)
Borrowings		698		1,258
Total	$	152	$	163

Derivatives Designated as Net Investment Hedges.

			Gains (Losses) Recognized in OCI (effective portion)
			Three Months Ended
			March 31,
Product Type			2012		2011
			(dollars in millions)
Foreign exchange contracts(1)		$	21	$	(126)
	Total	$	21	$	(126)

_____________

(1)       Losses of $66million and $47 million wererecognized in income related to amounts excluded from hedge effectiveness testing during the quarters ended March 31, 2012 and 2011, respectively.

The table below summarizes gains (losses) on derivative instruments not designated as accounting hedges for the quarters ended March 31, 2012 and 2011, respectively:

			Gains (Losses) Recognized in Income(1)(2)
			Three Months Ended
			March 31,
Product Type			2012		2011
			(dollars in millions)
Interest rate contracts		$	1,607	$	925
Credit contracts			(672)		(697)
Foreign exchange contracts			595		(339)
Equity contracts			(828)		(1,319)
Commodity contracts			(576)		(271)
Other contracts			55		208
	Total derivative instruments	$	181	$	(1,493)

____________

(1)       Gains (losses) on derivative contracts not designated as hedges are primarily included in Principal transactions—Trading.

(2)       Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Principal transactions—Trading.

The Company also has certain embedded derivatives that have been bifurcated from the related structured borrowings. Such derivatives are classified in Long-term borrowings and had a net fair value of $42million and $53 million at March 31, 2012 and December 31, 2011, respectively, and a notional value of $3,299million and $3,312million at March 31, 2012 and December 31, 2011, respectively. The Company recognized gains of $7 million and losses of $19 million related to changes inthe fair value of its bifurcated embedded derivatives for the quarters ended March 31, 2012 and 2011, respectively.

At March 31, 2012 and December 31, 2011, the amount of payables associated with cash collateral received that was netted against derivative assets was $68.6 billion and $77.9 billion, respectively, and the amount of receivables in respect of cash collateral paid that was netted against derivative liabilities was $38.5 billion and $44.9 billion, respectively. Cash collateral receivables and payables of $276 million and $32 million, respectively, at March 31, 2012 and $268 million and $9 million, respectively, at December 31, 2011, were not offset against certain contracts that did not meet the definition of a derivative.

Credit-Risk-Related Contingencies.

In connection with certain OTC trading agreements, the Company may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit ratings downgrade. At March 31, 2012, the aggregate fair value of OTC derivative contracts that contain credit-risk-related contingent features that are in a net liability position totaled $34,669million, for which the Company has posted collateral of $28,717million, in the normal course of business.The long-term credit ratings on the CompanybyMoody's Investors Service (“Moody's”) and Standard & Poor's Ratings Services (“S&P”) are currently at different levels (commonly referred to as “split ratings”).At March 31, 2012,the following are the amounts of additional collateral termination payments or other contractual amounts that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company's long-term credit rating under various scenarios: $135 million (A3 Moody's/A- S&P) and $3,432million (Baa1 Moody's/ BBB+ S&P).Of these amounts, $2,883million at March 31, 2012 related to bilateral arrangements between the Company and other parties where upon the downgrade of one party, the downgraded party must deliver incremental collateral to the other party. These bilateral downgrade arrangements are a risk management tool used extensively by the Company as credit exposures are reduced if counterparties are downgraded.

Credit Derivatives and Other Credit Contracts.

The Company enters into credit derivatives, principally through credit default swaps, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Company's counterparties are banks, broker-dealers, insurance and other financial institutions, and monoline insurers.

The tables below summarize the notional and fair value of protection sold and protection purchased through credit default swaps at March 31, 2012 and December 31, 2011:

		At March 31, 2012
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	1,285,767	$	21,182	$	1,266,956	$	(20,328)
Index and basket credit default swaps		716,615		13,068		548,335		(11,560)
Tranched index and basket credit default swaps		349,543		8,100		546,583		(16,692)
Total	$	2,351,925	$	42,350	$	2,361,874	$	(48,580)

		At December 31, 2011
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	1,325,045	$	47,045	$	1,315,333	$	(45,345)
Index and basket credit default swaps		787,228		29,475		601,452		(24,373)
Tranched index and basket credit default swaps		320,131		17,109		545,476		(31,976)
Total	$	2,432,404	$	93,629	$	2,462,261	$	(101,694)

The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at March 31, 2012:

			Protection Sold
			Maximum Potential Payout/Notional										Fair Value
			Years to Maturity										(Asset)/
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total		Liability(1)(2)
			(dollars in millions)
Single name credit default swaps:
	AAA	$	1,733	$	5,488	$	16,458	$	10,828	$	34,507	$	673
	AA		11,876		19,269		23,462		12,448		67,055		603
	A		77,436		116,747		85,603		46,123		325,909		4,760
	BBB		139,019		207,126		113,761		57,297		517,203		(2,771)
	Non-investment grade		95,683		124,621		79,016		41,773		341,093		17,917
Total			325,747		473,251		318,300		168,469		1,285,767		21,182
Index and basket credit default swaps(3):
	AAA		49,836		68,416		48,295		26,424		192,971		(1,688)
	AA		3,945		7,973		10,567		9,691		32,176		202
	A		4,023		11,023		29,450		16,832		61,328		1,708
	BBB		8,605		82,109		186,346		77,980		355,040		1,519
	Non-investment grade		111,557		119,125		125,080		68,881		424,643		19,427
Total			177,966		288,646		399,738		199,808		1,066,158		21,168
Total credit default swaps sold		$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350
Other credit contracts(4)(5)		$	186	$	1,125	$	527	$	2,721	$	4,559	$	(1,787)
Total credit derivatives and
	other credit contracts	$	503,899	$	763,022	$	718,565	$	370,998	$	2,356,484	$	40,563

_____________

(1)       Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2)       Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3)       Credit ratings are calculated internally.

(4)       Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5)       Fair value amount shown represents the fair value of the hybrid instruments.

The table below summarizes the credit ratings and maturities of protection sold through credit default swaps and other credit contracts at December 31, 2011:

			Protection Sold
			Maximum Potential Payout/Notional										Fair Value
			Years to Maturity										(Asset)/
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total		Liability(1)(2)
			(dollars in millions)
Single name credit default swaps:
	AAA	$	1,290	$	5,681	$	24,087	$	12,942	$	44,000	$	1,536
	AA		12,416		22,043		23,341		10,986		68,786		1,597
	A		67,344		124,445		85,543		47,640		324,972		8,683
	BBB		131,588		218,262		115,320		64,347		529,517		4,789
	Non-investment grade		94,105		133,867		82,163		47,635		357,770		30,440
Total			306,743		504,298		330,454		183,550		1,325,045		47,045
Index and basket credit default swaps(3):
	AAA		48,115		49,997		33,584		19,110		150,806		(907)
	AA		6,584		15,349		9,498		15,745		47,176		1,053
	A		5,202		18,996		17,396		12,286		53,880		2,470
	BBB		8,525		99,004		235,888		32,057		375,474		8,365
	Non-investment grade		112,451		141,042		160,537		65,993		480,023		35,603
Total			180,877		324,388		456,903		145,191		1,107,359		46,584
Total credit default swaps sold		$	487,620	$	828,686	$	787,357	$	328,741	$	2,432,404	$	93,629
Other credit contracts(4)(5)		$	65	$	2,356	$	717	$	2,469	$	5,607	$	(1,146)
Total credit derivatives and other
	credit contracts	$	487,685	$	831,042	$	788,074	$	331,210	$	2,438,011	$	92,483

_____________

(1)       Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2)       Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the terms of the contracts.

(3)       Credit ratings are calculated internally.

(4)       Other credit contracts include CLNs, CDOs and credit default swaps that are considered hybrid instruments.

(5)       Fair value amount shown represents the fair value of the hybrid instruments.

Single Name Credit Default Swaps.    A credit default swap protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a periodic premium (generally quarterly) over the life of the contract and is protected for the period. The Company in turn will have to perform under a credit default swap if a credit event as defined under the contract occurs. Typical credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay and restructuring of the obligations of the referenced entity. In order to provide an indication of the current payment status or performance risk of the credit default swaps, the external credit ratings of the underlying reference entity of the credit default swaps are disclosed.

Index and Basket Credit Default Swaps.    Index and basket credit default swaps are credit default swaps that reference multiple names through underlying baskets or portfolios of single name credit default swaps. Generally, in the event of a default on one of the underlying names, the Company will have to pay a pro rata portion of the total notional amount of the credit default index or basket contract. In order to provide an indication of the current payment status or performance risk of these credit default swaps, the weighted average external credit ratings of the underlying reference entities comprising the basket or index were calculated and disclosed.

The Company also enters into index and basket credit default swaps where the credit protection provided is based upon the application of tranching techniques. In tranched transactions, the credit risk of an index or basket is separated into various portions of the capital structure, with different levels of subordination. The most junior tranches cover initial defaults, and once losses exceed the notional of the tranche, they are passed on to the next most senior tranche in the capital structure.

When external credit ratings are not available, credit ratings were determined based upon an internal methodology.

Credit Protection Sold through CLNs and CDOs.    The Company has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Company.

Purchased Credit Protection with Identical Underlying Reference Obligations.    For single name credit default swaps and non-tranched index and basket credit default swaps, the Company has purchased protection with a notional amount of approximately $2.0trillion and $1.9 trillion at March 31, 2012 and December 31, 2011, compared with a notional amount of approximately $1.8trillion and $2.1 trillion, at March 31, 2012 and December 31, 2011, respectively, of credit protection sold with identical underlying reference obligations. In order to identify purchased protection with the same underlying reference obligations, the notional amount for individual reference obligations within non-tranched indices and baskets was determined on a pro rata basis and matched off against single name and non-tranched index and basket credit default swaps where credit protection was sold with identical underlying reference obligations.

The purchase of credit protection does not represent the sole manner in which the Company risk manages its exposure to credit derivatives. The Company manages its exposure to these derivative contracts through a variety of risk mitigation strategies, which include managing the credit and correlation risk across single name, non-tranched indices and baskets, tranched indices and baskets, and cash positions. Aggregate market risk limits have been established for credit derivatives, and market risk measures are routinely monitored against these limits. The Company may also recover amounts on the underlying reference obligation delivered to the Company under credit default swaps where credit protection was sold.

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Derivative Instruments aand Hedging Activities (Fair Value of Derivative Instruments Designated and Not Designated as Accounting Hedges by Type of Derivative Contract on a Gross Basis) (Details) (USD $)	Mar. 31, 2012		Dec. 31, 2011
Derivatives, Fair Value
Derivative assets	$ 40,016,000,000		$ 48,064,000,000
Total derivative assets	1,026,329,000,000		1,200,673,000,000
Derivative assets, cash collateral netting	(68,587,000,000)		(77,938,000,000)
Derivative assets, counterparty netting	(917,726,000,000)		(1,074,671,000,000)
Derivative asset, fair value, amount not offset again collateral	40,016,000,000		48,064,000,000
Derivative liabilities	42,765,000,000		46,453,000,000
Total derivative liabilities	999,017,000,000		1,166,060,000,000
Derivative liabilities, cash collateral netting	(38,526,000,000)		(44,936,000,000)
Derivative liabilities, counterparty netting	(917,726,000,000)		(1,074,671,000,000)
Derivative liability, fair value, amount not offset again collateral	42,765,000,000		46,453,000,000
Derivatives, Notional Amount
Derivative assets, notional amount	25,502,277,000,000		26,259,404,000,000
Derivative liabilities, notional amount	25,088,910,000,000		26,040,024,000,000
Receivables
Derivatives, Notional Amount
Variation margin	189,000,000		605,000,000
Payables
Derivatives, Notional Amount
Variation margin	36,000,000		37,000,000
Designated as Accounting Hedges
Derivatives, Fair Value
Derivative assets	8,151,000,000		8,499,000,000
Derivative liabilities	148,000,000		57,000,000
Derivatives, Notional Amount
Derivative assets, notional amount	85,573,000,000		83,928,000,000
Derivative liabilities, notional amount	9,692,000,000		7,111,000,000
Designated as Accounting Hedges | Interest Rate Contracts
Derivatives, Fair Value
Derivative assets	7,759,000,000		8,151,000,000
Derivative liabilities	0		0
Derivatives, Notional Amount
Derivative assets, notional amount	72,728,000,000		71,706,000,000
Derivative liabilities, notional amount	0		0
Designated as Accounting Hedges | Foreign Exchange Contracts
Derivatives, Fair Value
Derivative assets	392,000,000		348,000,000
Derivative liabilities	148,000,000		57,000,000
Derivatives, Notional Amount
Derivative assets, notional amount	12,845,000,000		12,222,000,000
Derivative liabilities, notional amount	9,692,000,000		7,111,000,000
Not Designated as Accounting Hedges
Derivatives, Fair Value
Derivative assets	1,018,178,000,000	[1]	1,192,174,000,000	[2]
Derivative liabilities	998,869,000,000	[1]	1,166,003,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	25,416,704,000,000	[1]	26,175,476,000,000	[2]
Derivative liabilities, notional amount	25,079,218,000,000	[1]	26,032,913,000,000	[2]
Not Designated as Accounting Hedges | Interest Rate Contracts
Derivatives, Fair Value
Derivative assets	783,760,000,000	[1]	904,725,000,000	[2]
Derivative liabilities	762,593,000,000	[1]	880,027,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	20,207,486,000,000	[1]	21,099,876,000,000	[2]
Derivative liabilities, notional amount	19,864,081,000,000	[1]	21,005,733,000,000	[2]
Not Designated as Accounting Hedges | Foreign Exchange Contracts
Derivatives, Fair Value
Derivative assets	47,707,000,000	[1]	61,995,000,000	[2]
Derivative liabilities	50,783,000,000	[1]	64,691,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	1,718,721,000,000	[1]	1,582,364,000,000	[2]
Derivative liabilities, notional amount	1,803,265,000,000	[1]	1,604,493,000,000	[2]
Not Designated as Accounting Hedges | Credit Risk Contracts
Derivatives, Fair Value
Derivative assets	99,996,000,000	[1]	138,791,000,000	[2]
Derivative liabilities	93,766,000,000	[1]	130,726,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	2,382,764,000,000	[1]	2,466,623,000,000	[2]
Derivative liabilities, notional amount	2,331,035,000,000	[1]	2,428,042,000,000	[2]
Not Designated as Accounting Hedges | Equity Contracts
Derivatives, Fair Value
Derivative assets	46,538,000,000	[1]	46,287,000,000	[2]
Derivative liabilities	51,149,000,000	[1]	48,286,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	673,987,000,000	[1]	603,290,000,000	[2]
Derivative liabilities, notional amount	689,748,000,000	[1]	595,146,000,000	[2]
Not Designated as Accounting Hedges | Commodity Contracts
Derivatives, Fair Value
Derivative assets	40,116,000,000	[1]	39,778,000,000	[2]
Derivative liabilities	40,506,000,000	[1]	39,998,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	430,298,000,000	[1]	411,661,000,000	[2]
Derivative liabilities, notional amount	385,031,000,000	[1]	374,594,000,000	[2]
Not Designated as Accounting Hedges | Other Contracts
Derivatives, Fair Value
Derivative assets	61,000,000	[1]	598,000,000	[2]
Derivative liabilities	72,000,000	[1]	2,275,000,000	[2]
Derivatives, Notional Amount
Derivative assets, notional amount	3,448,000,000	[1]	11,662,000,000	[2]
Derivative liabilities, notional amount	6,058,000,000	[1]	24,905,000,000	[2]
Not Designated as Accounting Hedges | Long Futures Contract
Derivatives, Notional Amount
Net notionals	85,000,000,000		77,000,000,000
Not Designated as Accounting Hedges | Short Futures Contract
Derivatives, Notional Amount
Net notionals	$ 75,000,000,000		$ 66,000,000,000

[1] Notional amounts include net notionals related to long and short futures contracts of $85 billion and $75 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $189 million and $36 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

[2] Notional amounts include net notionals related to long and short futures contracts of $77 billion and $66 billion, respectively. The variation margin on these futures contracts (excluded from the table above) of $605 million and $37 million is included in Receivables—Brokers, dealers and clearing organizations and Payables—Brokers, dealers and clearing organizations, respectively, on the condensed consolidated statements of financial condition.

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Variable Interest Entities and Securitization Activities

3 Months Ended

Mar. 31, 2012

Securitization Activities and Variable Interest Entities [Abstract]

Variable Interest Entity Disclosures

6.Variable Interest Entities and Securitization Activities.

The Company is involved with various special purpose entities (“SPEs”) in the normal course of business. In most cases, these entities are deemed to be VIEs.

The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors do not have the characteristics of a controlling financial interest. Excluding entities subject to the Deferral (as defined in Note 2 to the consolidated financial statements included in the Form 10-K), the primary beneficiary of a VIE is the party that both (1) has the power to direct the activities of a VIE that most significantly affect the VIE's economic performance and (2) has an obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Company consolidates entities of which it is the primary beneficiary.

The Company's variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Company's involvement with VIEs arises primarily from:

•       Interests purchased in connection with market-making activities, securities held in its available for sale portfolio and retained interests held as a result of securitization activities, including re-securitization transactions.

•       Guarantees issued and residual interests retained in connection with municipal bond securitizations.

•       Servicing residential and commercial mortgage loans held by VIEs.

•       Loans made to and investments in VIEs that hold debt, equity, real estate or other assets.

•       Derivatives entered into with VIEs.

•       Structuring of credit-linked notes (“CLN”) or other asset-repackaged notes designed to meet the investment objectives of clients.

•       Other structured transactions designed to provide tax-efficient yields to the Company or its clients.

The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE's structure and activities, the power to make significant economic decisions held by the Company and by other parties, and the variable interests owned by the Company and other parties.

The power to make the most significant economic decisions may take a number of different forms in different types of VIEs. The Company considers servicing or collateral management decisions as representing the power to make the most significant economic decisions in transactions such as securitizations or CDOs. As a result, the Company does not consolidate securitizations or CDOs for which it does not act as the servicer or collateral manager unless it holds certain other rights to replace the servicer or collateral manager or to require the liquidation of the entity. If the Company serves as servicer or collateral manager, or has certain other rights described in the previous sentence, the Company analyzes the interests in the VIE that it holds and consolidates only those VIEs for which it holds a potentially significant interest of the VIE.

The structure of securitization vehicles and CDOs are driven by several parties, including loan seller(s) in securitization transactions, the collateral manager in a CDO, one or more rating agencies, a financial guarantor in some transactions and the underwriter(s) of the transactions, who serve to reflect specific investor demand. In addition, subordinate investors, such as the “B-piece” buyer in commercial mortgage backed securitizations or equity investors in CDOs, can influence whether specific loans are excluded from a CMBS transaction or investment criteria in a CDO. 

For many transactions, such as re-securitization transactions, CLNs and other asset-repackaged notes, there are no significant economic decisions made on an ongoing basis. In these cases, the Company focuses its analysis on decisions made prior to the initial closing of the transaction and at the termination of the transaction. Based upon factors, which include an analysis of the nature of the assets, including whether the assets were issued in a transaction sponsored by the Company and the extent of the information available to the Company and to investors, the number, nature and involvement of investors, other rights held by the Company and investors, the standardization of the legal documentation and the level of the continuing involvement by the Company, including the amount and type of interests owned by the Company and by other investors, the Company concluded in most of these transactions that decisions made prior to the initial closing were shared between the Company and the initial investors. The Company focused its control decision on any right held by the Company or investors related to the termination of the VIE. Most re-securitization transactions, CLNs and other asset-repackaged notes have no such termination rights.

Except for consolidated VIEs included in other structured financings and managed real estate partnerships in the tables below, the Company accounts for the assets held by the entities primarily in Financial instruments owned and the liabilities of the entities as Other secured financings in the condensed consolidated statements of financial condition. For consolidated VIEs included in other structured financings, the Company accounts for the assets held by the entities primarily in Premises, equipment and software costs, and Other assets in the condensed consolidated statements of financial condition. For consolidated VIEs included in managed real estate partnerships, the Company accounts for the assets held by the entities primarily in Financial instruments owned--Investments in the condensed consolidated statements of financial condition. Except for consolidated VIEs included in other structured financings, the assets and liabilities are measured at fair value, with changes in fair value reflected in earnings.

The assets owned by many consolidated VIEs cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many consolidated VIEs are non-recourse to the Company. In certain other consolidated VIEs, the Company has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

The following tables present information at March 31, 2012 and December 31, 2011 about VIEs that the Company consolidates. Consolidated VIE assets and liabilities are presented after intercompany eliminations and include assets financed on a non-recourse basis.

		At March 31, 2012
		Mortgage and Asset-backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
		(dollars in millions)
VIE assets	$	1,977	$	129	$	2,308	$	896	$	2,796
VIE liabilities	$	1,304	$	65	$	115	$	2,611	$	549

		At December 31, 2011
		Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other
		(dollars in millions)
VIE assets	$	2,414	$	102	$	2,207	$	918	$	1,937
VIE liabilities	$	1,699	$	69	$	102	$	2,576	$	556

In general, the Company's exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE's assets recognized in its financial statements, net of losses absorbed by third-party holders of the VIE's liabilities. At March 31, 2012 and December 31, 2011, managed real estate partnerships reflected noncontrolling interests in the Company's condensed consolidated financial statements of $1,719 million and $1,653 million, respectively. The Company also had additional maximum exposure to losses of approximately $194 million and $200 million at March 31, 2012and December 31, 2011, respectively. This additional exposure related primarily to certain derivatives (e.g., instead of purchasing senior securities, the Company has sold credit protection to synthetic CDOs through credit derivatives that are typically related to the most senior tranche of the CDO) and commitments, guarantees and other forms of involvement.

The following tables present information about certain non-consolidated VIEs in which the Company had variable interests at March 31, 2012and December 31, 2011. The tables include all VIEs in which the Company has determined that its maximum exposure to loss is greater than specific thresholds or meets certain other criteria. Most of the VIEs included in the tables below are sponsored by unrelated parties; the Company's involvement generally is the result of the Company's secondary market-making activities or through securities held in its available for sale portfolio (see Note 4).

			At March 31, 2012
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	195,492	$	20,910	$	6,650	$	1,899	$	28,678
Maximum exposure to loss:
	Debt and equity interests(2)		$	16,785	$	748	$	134	$	937	$	2,436
	Derivative and other contracts			92		98		4,133		—		1,102
	Commitments, guarantees and other			592		—		—		775		990
		Total maximum exposure to loss	$	17,469	$	846	$	4,267	$	1,712	$	4,528
Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	16,785	$	748	$	134	$	596	$	2,436
	Derivative and other contracts			91		42		7		—		338
		Total carrying value of exposure to loss—Assets	$	16,876	$	790	$	141	$	596	$	2,774
Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	13	$	3	$	1	$	—	$	128
	Commitments, guarantees and other			—		—		—		13		168
		Total carrying value of exposure to loss—Liabilities	$	13	$	3	$	1	$	13	$	296

(1)       Mortgage and asset-backed securitizations include VIE assets as follows: $11.3 billion of residential mortgages; $55.4 billion of commercial mortgages; $110.3 billion of U.S. agency collateralized mortgage obligations; and $18.5 billion of other consumer or commercial loans.

(2)       Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.7 billion of residential mortgages; $0.9 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.7 billion of other consumer or commercial loans.

			At December 31, 2011
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other
			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	231,110	$	7,593	$	6,833	$	1,944	$	20,997
Maximum exposure to loss:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	978	$	2,413
	Derivative and other contracts			103		843		4,141		—		1,209
	Commitments, guarantees and other			208		—		—		804		561
		Total maximum exposure to loss	$	16,780	$	1,334	$	4,342	$	1,782	$	4,183
Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	640	$	2,413
	Derivative and other contracts			101		657		24		—		338
		Total carrying value of exposure to loss—Assets	$	16,570	$	1,148	$	225	$	640	$	2,751
Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	13	$	159	$	—	$	—	$	114
	Commitments, guarantees and other			—		—		—		14		176
		Total carrying value of exposure to loss—Liabilities	$	13	$	159	$	—	$	14	$	290

(1)       Mortgage and asset-backed securitizations include VIE assets as follows: $9.1 billion of residential mortgages; $81.7 billion of commercial mortgages; $121.6 billion of U.S. agency collateralized mortgage obligations; and $18.7 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

(2)       Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $1.1 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.3 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

The Company's maximum exposure to loss often differs from the carrying value of the VIE's assets. The maximum exposure to loss is dependent on the nature of the Company's variable interest in the VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, total return swaps, written put options, and the fair value of certain other derivatives and investments the Company has made in the VIEs. Liabilities issued by VIEs generally are non-recourse to the Company. Where notional amounts are utilized in quantifying maximum exposure related to derivatives, such amounts do not reflect fair value writedowns already recorded by the Company.

The Company's maximum exposure to loss does not include the offsetting benefit of any financial instruments that the Company may utilize to hedge these risks associated with the Company's variable interests. In addition, the Company's maximum exposure to loss is not reduced by the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.

Securitization transactions generally involve VIEs. Primarily as a result of its secondary market-making activities, the Company owned additional securities issued by securitization SPEs for which the maximum exposure to loss is less than specific thresholds. These additional securities totaled $3.7 billion at March 31, 2012. These securities were either retained in connection with transfers of assets by the Company, acquired in connection with secondary market-making activities or held in the Company's available for sale portfolio. Securities issued by securitization SPEs consist of $0.7 billion of securities backed primarily by residential mortgage loans, $1.0 billion of securities backed by U.S. agency collateralized mortgage obligations, $0.8 billion of securities backed by commercial mortgage loans, $0.6 billion of securities backed by collateralized debt obligations or collateralized loan obligations and $0.6 billion backed by other consumer loans, such as credit card receivables, automobile loans and student loans. The Company's primary risk exposure is to the securities issued by the SPE owned by the Company, with the risk highest on the most subordinate class of beneficial interests. These securities generally are included in Financial instruments owned—Corporate and other debt or Securities available for sale and are measured at fair value. The Company does not provide additional support in these transactions through contractual facilities, such as liquidity facilities, guarantees or similar derivatives. The Company's maximum exposure to loss generally equals the fair value of the securities owned.

The Company's transactions with VIEs primarily include securitizations, municipal tender option bond trusts, credit protection purchased through CLNs, other structured financings, collateralized loan and debt obligations, equity-linked notes, managed real estate partnerships and asset management investment funds. The Company's continuing involvement in VIEs that it does not consolidate can include ownership of retained interests in Company-sponsored transactions, interests purchased in the secondary market (both for Company-sponsored transactions and transactions sponsored by third parties), derivatives with securitization SPEs (primarily interest rate derivatives in commercial mortgage and residential mortgage securitizations and credit derivatives in which the Company has purchased protection in synthetic CDOs), and as servicer in residential mortgage securitizations in the U.S. and Europe and commercial mortgage securitizations in Europe.Such activities are further described in Note 7 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

Transfers of Assets with Continuing Involvement.

The following tables present information at March 31, 2012 regarding transactions with SPEs in which the Company, acting as principal, transferred financial assets with continuing involvement and received sales treatment.

				At March 31, 2012
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and  Other
				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	40,146	$	78,844	$	23,591	$	13,824
Retained interests (fair value):
	Investment grade		$	13	$	20	$	493	$	3
	Non-investment grade			113		51		—		1,549
		Total retained interests (fair value)	$	126	$	71	$	493	$	1,552
Interests purchased in the secondary market (fair value):
	Investment grade		$	24	$	227	$	60	$	394
	Non-investment grade			153		76		—		13
		Total interests purchased in the secondary market (fair value)	$	177	$	303	$	60	$	407
Derivative assets (fair value)			$	12	$	1,214	$	—	$	151
Derivative liabilities (fair value)			$	28	$	23	$	—	$	392

_____________

(1)Amounts include assets transferred by unrelated transferors.

				At March 31, 2012
				Level 1		Level 2		Level 3		Total
				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	526	$	3	$	529
	Non-investment grade			—		154		1,559		1,713
		Total retained interests (fair value)	$	—	$	680	$	1,562	$	2,242
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	705	$	—	$	705
	Non-investment grade			—		223		19		242
		Total interests purchased in the secondary market (fair value)	$	—	$	928	$	19	$	947
Derivative assets (fair value)			$	—	$	745	$	632	$	1,377
Derivative liabilities (fair value)			$	—	$	380	$	63	$	443

The following tables present information at December 31, 2011 regarding transactions with SPEs in which the Company, acting as principal, transferred assets with continuing involvement and received sales treatment.

				At December 31, 2011
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and  Other
				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	41,977	$	85,333	$	33,728	$	14,315
Retained interests (fair value):
	Investment grade		$	14	$	22	$	1,151	$	2
	Non-investment grade			106		44		—		1,545
		Total retained interests (fair value)	$	120	$	66	$	1,151	$	1,547
Interests purchased in the secondary market (fair value):
	Investment grade		$	45	$	164	$	20	$	411
	Non-investment grade			149		82		—		11
		Total interests purchased in the secondary market (fair value)	$	194	$	246	$	20	$	422
Derivative assets (fair value)			$	18	$	1,200	$	—	$	223
Derivative liabilities (fair value)			$	30	$	31	$	—	$	510

_____________

(1)Amounts include assets transferred by unrelated transferors.

				At December 31, 2011
				Level 1		Level 2		Level 3		Total
				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	1,186	$	3	$	1,189
	Non-investment grade			—		74		1,621		1,695
		Total retained interests (fair value)	$	—	$	1,260	$	1,624	$	2,884
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	638	$	2	$	640
	Non-investment grade			—		126		116		242
		Total interests purchased in the secondary market (fair value)	$	—	$	764	$	118	$	882
Derivative assets (fair value)			$	—	$	869	$	572	$	1,441
Derivative liabilities (fair value)			$	—	$	541	$	30	$	571

Transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the condensed consolidated statements of income. The Company may act as underwriter of the beneficial interests issued by securitization vehicles. Investment banking underwriting net revenues are recognized in connection with these transactions. The Company may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are included in the condensed consolidated statements of financial condition at fair value. Any changes in the fair value of such retained interests are recognized in the condensed consolidated statements of income.

Net gains on sales of assets in securitization transactions at the time of the sale were not material in the quarters ended March 31, 2012 and 2011.

During thequarters ended March 31, 2012 and 2011, the Company received proceeds from new securitization transactions of $6.0 billion and $7.9 billion, respectively. During the quarters ended March 31, 2012 and 2011, the Company received proceeds from cash flows from retained interests in securitization transactions of $1.7 billionand $2.4 billion, respectively.

The Company has provided, or otherwise agreed to be responsible for,representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Company (see Note 11).

Failed Sales.

In order to be treated as a sale of assets for accounting purposes, a transaction must meet all of the criteria stipulated in the accounting guidance for the transfer of financial assets. If the transfer fails to meet these criteria, that transfer of financial assets is treated as a failed sale. In such case, the Company continues to recognize the assets in Financial instruments owned, and the Company recognizes the associated liabilities in Other secured financings in the condensed consolidated statements of financial condition.

The assets transferred to many unconsolidated VIEs in transactions accounted for as failed sales cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many unconsolidated VIEs are non-recourse to the Company. In certain other failed sale transactions, the Company has the unilateral right to remove assets or provide additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

The following table presents information about the carrying value (equal to fair value) of assets and liabilities resulting from transfers of financial assets treated by the Company as secured financings:

		At March 31, 2012				At December 31, 2011
		Carrying Value of				Carrying Value of
		Assets		Liabilities		Assets		Liabilities
		(dollars in millions)
Commercial mortgage loans	$	111	$	111	$	121	$	121
Credit-linked notes		318		268		383		339
Equity-linked transactions		812		778		1,243		1,214
Other		90		90		75		74

Mortgage Servicing Activities.

Mortgage Servicing Rights.     The Company may retain servicing rights to certain mortgage loans that are sold. These transactions create an asset referred to as MSRs, which totaled approximately $99million and $133 million at March 31, 2012 and December 31, 2011, respectively, and are included within Intangible assets and carried at fair value in the condensed consolidated statements of financial condition.

SPE Mortgage Servicing Activities.    The Company services residential mortgage loans in the U.S. and commercial mortgage loans in Europe owned by SPEs, including SPEs sponsored by the Company and SPEs not sponsored by the Company. The Company generally holds retained interests in Company-sponsored SPEs. In some cases, as part of its market-making activities, the Company may own some beneficial interests issued by both Company-sponsored and non-Company sponsored SPEs.

The Company provides no credit support as part of its servicing activities. The Company is required to make servicing advances to the extent that it believes that such advances will be reimbursed. Reimbursement of servicing advances is a senior obligation of the SPE, senior to the most senior beneficial interests outstanding. Outstanding advances are included in Other assets and are recorded at cost, net of allowances. Advances at March 31, 2012 and December 31, 2011 totaled approximately $1.2 billion and $1.3 billion, respectively, net of allowances of $5million and $14 million at March 31, 2012 and December 31, 2011, respectively.

The following tables present information about the Company's mortgage servicing activities for SPEs to which the Company transferred loans at March 31, 2012 and December 31, 2011:

		At March 31, 2012
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
			(dollars in millions)
Assets serviced (unpaid principal balance)		$	9,545	$	2,119	$	6,157	$	924
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	2,867	$	339	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		30.0%		16.0%		—		—
Credit losses		$	167	$	18	$	—	$	—

_____________

(1)Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

		At December 31, 2011
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs
			(dollars in millions)
Assets serviced (unpaid principal balance)		$	9,821	$	2,180	$	5,750	$	1,596
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	3,087	$	354	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		31.4%		16.2%		—		—
Credit losses		$	631	$	81	$	—	$	—

_____________

(1)       Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

The Company also serviced residential and commercial mortgage loans for SPEs sponsored by unrelated parties with unpaid principal balances totaling $10 billion and $11billion at March 31, 2012 and December 31, 2011, respectively.

The agreement to sell Saxon assets includes MSRs which totaled approximately $84 million and approximately $119 million at March 31, 2012 and December 31, 2011, respectively. After the completion of this asset sale, the Company will retain the servicing rights for residential mortgage loans held by consolidated SPEs with an unpaid principal balance of approximately $836 million and approximately $872 million at March 31, 2012 and December 31, 2011, respectively (see Notes 1 and 20).

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Securities Available for Sale (Schedule of Amortized Cost and Fair Value of Available for Sale Debt Securities by Contractual Date) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
Amortized Cost, Total	$ 32,331
Fair Value, Total	32,514
Annualized Average Yield, Total	1.10%
U.S. Government and Agency Securities
Amortized Cost, Total	30,032
Fair Value, Total	30,212
Annualized Average Yield, Total	1.10%
U.S. Treasury Securities
Amortized Cost, Due within 1 year	2,298
Fair Value, Due within 1 year	2,319
Annualized Average Yield, Due within 1 year	1.40%
Amortized Cost, After 1 year but through 5 years	10,214
Fair Value, After 1 year but through 5 years	10,314
Annualized Average Yield, After 1 year but through 5 years	0.90%
Amortized Cost, After 5 years	1,168
Fair value, After 5 years	1,175
Annualized Average Yield, After 5 years	1.40%
Amortized Cost, Total	13,680
Fair Value, Total	13,808
U.S. Agency Securities
Amortized Cost, After 5 years	16,352
Fair value, After 5 years	16,404
Amortized Cost, Total	16,352
Fair Value, Total	16,404
Annualized Average Yield, Total	1.20%
Corporate and Other Debt
Amortized Cost, Total	2,299
Fair Value, Total	2,302
Annualized Average Yield, Total	1.10%
Auto Loan Asset-backed Securities
Amortized Cost, Due within 1 year	0
Fair Value, Due within 1 year	0
Amortized Cost, After 1 year but through 5 years	237
Fair Value, After 1 year but through 5 years	237
Annualized Average Yield, After 1 year but through 5 years	0.80%
Amortized Cost, After 5 years	0
Fair value, After 5 years	0
Amortized Cost, Total	237
Fair Value, Total	237
Corporate Bonds
Amortized Cost, Due within 1 year	43
Fair Value, Due within 1 year	43
Annualized Average Yield, Due within 1 year	0.70%
Amortized Cost, After 1 year but through 5 years	570
Fair Value, After 1 year but through 5 years	570
Annualized Average Yield, After 1 year but through 5 years	1.10%
Amortized Cost, After 5 years	18
Fair value, After 5 years	18
Annualized Average Yield, After 5 years	1.70%
Amortized Cost, Total	631
Fair Value, Total	631
FFELP Student Loan Asset-backed Securities
Amortized Cost, Due within 1 year	0
Fair Value, Due within 1 year	0
Amortized Cost, After 1 year but through 5 years	0
Fair Value, After 1 year but through 5 years	0
Amortized Cost, After 5 years	1,431
Fair value, After 5 years	1,434
Annualized Average Yield, After 5 years	1.20%
Amortized Cost, Total	1,431
Fair Value, Total	$ 1,434

XML

Subsequent Events (Details) (USD $) In Billions, except Per Share data, unless otherwise specified	1 Months Ended	0 Months Ended
	Apr. 30, 2012	Jan. 19, 2012 Quarterly Dividend Declared
Subsequent Event [Line Items]
Dividends declared to common shareholders		$ 0.05
Increase (decrease) in long-term borrowings (net of repayments/issuances)	$ (1.6)

XML

Securities Available for Sale

3 Months Ended

Mar. 31, 2012

Securities Available For Sale

Securities Available For Sale

4. Securities Available for Sale.

The following tables present information about the Company's available for sale securities:

					At March 31, 2012
					Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than-Temporary Impairment		Fair Value
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	13,680	$	129	$	1	$	—	$	13,808
		U.S. agency securities			16,352		69		17		—		16,404
			Total U.S. government and agency securities		30,032		198		18		—		30,212
	Corporate and other debt:
		Auto loan asset-backed securities			237		—		—		—		237
		Corporate bonds			631		1		1		—		631
		FFELP student loan asset-backed securities(1)			1,431		4		1		—		1,434
			Total Corporate and other debt		2,299		5		2		—		2,302
	Total debt securities available for sale				32,331		203		20		—		32,514
Equity securities available for sale					15		—		1		—		14
Total				$	32,346	$	203	$	21	$	—	$	32,528
(1)	Amounts are backed by a guarantee from the U.S. Department of Education of at least 95% of the principal balance and interest on such loans.
					At December 31, 2011
					Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Other-than-Temporary Impairment		Fair Value
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	13,240	$	182	$	—	$	—	$	13,422
		U.S. agency securities			16,083		54		20		—		16,117
	Corporate and other debt(1)				944		—		3		—		941
		Total debt securities available for sale			30,267		236		23		—		30,480
Equity securities available for sale					15		—		—		—		15
Total				$	30,282	$	236	$	23	$	—	$	30,495
(1)	Amounts represent FFELP student loan asset-backed securities, in which the loans are backed by a guarantee from the U.S. Department of Education of
	at least 95% of the principal balance and interest on such loans.

The tables below present the fair value of investments in securities available for sale that have been in an unrealized loss position:

					Less than 12 Months				12 Months or Longer				Total
At March 31, 2012					Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. Treasury securities		$	1,923	$	1	$	—	$	—	$	1,923	$	1
		U.S. agency securities			3,973		12		1,292		5		5,265		17
			Total U.S. government and agency securities		5,896		13		1,292		5		7,188		18
	Corporate and other debt:
		Corporate bonds			458		1		—		—		458		1
		FFELP student loan asset-backed securities			450		1		—		—		450		1
			Total Corporate and other debt		908		2		—		—		908		2
	Total debt securities available for sale				6,804		15		1,292		5		8,096		20
Equity securities available for sale					14		1		—		—		14		1
Total				$	6,818	$	16	$	1,292	$	5	$	8,110	$	21
					Less than 12 Months				12 Months or Longer				Total
At December 31, 2011					Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
				(dollars in millions)
Debt securities available for sale:
	U.S. government and agency securities:
		U.S. agency securities		$	6,250	$	15	$	1,492	$	5	$	7,742	$	20
	Corporate and other debt				679		3		—		—		679		3
Total				$	6,929	$	18	$	1,492	$	5	$	8,421	$	23

Gross unrealized losses are recorded in Accumulated other comprehensive income.

For the debt securities available for sale, the Company does not intend to sell these securities or expect to be required to sell these securities prior to recovery of the amortized cost basis. In addition, the Company does not expect the U.S. government and agency securities to experience a credit loss given the explicit and implicit guarantee provided by the U.S. government. The Company believes that the debt securities with an unrealized loss in Accumulated other comprehensive income were not other-than-temporarily impaired at March 31, 2012and December 31, 2011.

For the equity securities available for sale, the Company does not intend to sell these securities or expect to be required to sell these securities prior to the recovery of the amortized cost basis. The Company believes that the equity securities with an unrealized loss in Accumulated other comprehensive income were not other-than-temporarily impaired at March 31, 2012.

The following table presents the amortized cost and fair value of debt securities available for sale by contractual maturity dates at March 31, 2012.

March 31, 2012				Amortized Cost		Fair Value	Annualized Average Yield
			(dollars in millions)
U.S. government and agency securities:
	U.S. Treasury securities:
		Due within 1 year	$	2,298	$	2,319	1.4%
		After 1 year but through 5 years		10,214		10,314	0.9%
		After 5 years		1,168		1,175	1.4%
		Total		13,680		13,808
	U.S. agency securities:
		After 5 years		16,352		16,404
		Total		16,352		16,404	1.2%
		Total U.S. government and agency securities		30,032		30,212	1.1%
Corporate and other debt:
	Auto loan asset-backed securities:
		After 1 year but through 5 years		237		237	0.8%
		Total		237		237
	Corporate bonds:
		Due within 1 year		43		43	0.7%
		After 1 year but through 5 years		570		570	1.1%
		After 5 years		18		18	1.7%
		Total		631		631
	FFELP student loan asset-backed securities:
		After 5 years		1,431		1,434	1.2%
		Total		1,431		1,434
		Total Corporate and other debt		2,299		2,302	1.1%
		Total debt securities available for sale	$	32,331	$	32,514	1.1%

See Note 6 for additional information on securities issued by VIEs, including U.S. agency residential mortgage-backed securities, auto loan asset-backed securities and FFELP student loan asset-backed securities.

The following table presents information pertaining to sales of securities available for sale duringthe three months ended March 31, 2012 and 2011:

		Three Months Ended
		March 31,
		2012		2011
	(dollars in millions)
Gross realized gains	$	1	$	12
Gross realized losses	$	1	$	—
Proceeds of sales of securities available for sale	$	—	$	6,121

Gross realized gains and losses are recognized in Other revenues in the condensed consolidated statements of income.

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Collateralized Transactions

3 Months Ended

Mar. 31, 2012

Collateralized Transactions

Collateralized Transactions

5. Collateralized Transactions.

The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers' needs and to finance the Company's inventory positions. The Company's policy is generally to take possession of Securities received as collateral, Securities purchased under agreements to resell and Securities borrowed. The Company manages credit exposure arising from reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate collateral and the right to offset a counterparty's rights and obligations. The Company also monitors the fair value of the underlying securities as compared with the related receivable or payable, including accrued interest, and, as necessary, requests additional collateral to ensure such transactions are adequately collateralized. Where deemed appropriate, the Company's agreements with third parties specify its rights to request additional collateral.

The Company also engages in securities financing transactions for customers through margin lending. Under these agreements and transactions, the Company either receives or provides collateral, including U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. Customer receivables generated from margin lending activity are collateralized by customer-owned securities held by the Company. The Company monitors required margin levels and established credit limits daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary. Margin loans are extended on a demand basis and are not committed facilities. Factors considered in the review of margin loans are the amount of the loan, the intended purpose, the degree of leverage being employed in the account, and overall evaluation of the portfolio to ensure proper diversification or, in the case of concentrated positions, appropriate liquidity of the underlying collateral or potential hedging strategies to reduce risk. Additionally, transactions relating to concentrated or restricted positions require a review of any legal impediments to liquidation of the underlying collateral. Underlying collateral for margin loans is reviewed with respect to the liquidity of the proposed collateral positions, valuation of securities, historic trading range, volatility analysis and an evaluation of industry concentrations. For these transactions, adherence to the Company's collateral policies significantly limits the Company's credit exposure in the event of customer default. The Company may request additional margin collateral from customers, if appropriate, and, if necessary, may sell securities that have not been paid for or purchase securities sold but not delivered from customers. At March 31, 2012and December 31, 2011, there were approximately $19.4billion and $16.2billion, respectively, of customer margin loans outstanding.

Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Company is deemed to be the primary beneficiary, and certain equity-linked notes and other secured borrowings. These liabilities are generally payable from the cash flows of the related assets accounted for as Financial instruments owned (see Note 6).

The Company pledges its financial instruments owned to collateralize repurchase agreements and other securities financings. Pledged financial instruments that can be sold or repledged by the secured party are identified as Financial instruments owned (pledged to various parties) in the consolidated statements of financial condition. The carrying value and classification of financial instruments owned by the Company that have been loaned or pledged to counterparties where those counterparties do not have the right to sell or repledge the collateral were as follows:

				At March 31, 2012		At December 31, 2011
			(dollars in millions)
Financial instruments owned:
	U.S. government and agency securities		$	8,795	$	9,263
	Other sovereign government obligations			4,128		4,047
	Corporate and other debt			11,292		17,024
	Corporate equities			28,719		21,664
		Total	$	52,934	$	51,998

The Company receives collateral in the form of securities in connection with reverse repurchase agreements, securities borrowed and derivative transactions, and customer margin loans. In many cases, the Company is permitted to sell or repledge these securities held as collateral and use the securities to secure repurchase agreements, to enter into securities lending and derivative transactions or for delivery to counterparties to cover short positions. The Company additionally receives securities as collateral in connection with certain securities-for-securities transactions in which the Company is the lender. In instances where the Company is permitted to sell or repledge these securities, the Company reports the fair value of the collateral received and the related obligation to return the collateral in the consolidated statements of financial condition. At March  31, 2012 and December 31, 2011, the fair value of financial instruments received as collateral where the Company is permitted to sell or repledge the securities was $586 billion and $488 billion, respectively, and the fair value of the portion that had been sold or repledged was $420 billion and $335 billion, respectively.

At March 31, 2012 and December 31, 2011, cash and securities deposited with clearing organizations or segregated under federal and other regulations or requirements were as follows:

				At		At
				March 31,		December 31,
				2012		2011
			(dollars in millions)
Cash deposited with clearing organizations or segregated under federal and other
	regulations or requirements		$	30,152	$	29,454
Securities(1)				8,229		15,120
		Total	$	38,381	$	44,574

_____________

(1)       Securities deposited with clearing organizations or segregated under federal and other regulations or requirements are sourced from Federal funds sold and securities purchased under agreements to resell and Financial instruments owned in the consolidated statements of financial condition.

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Financing Receivables

3 Months Ended

Mar. 31, 2012

Financing Receivables [Abstract]

Financing Receivables

7.Financing Receivables.

Loans held for investment.

The Company's loans held for investment are recorded at amortized cost and classified as Loans in the condensed consolidated statements of financial condition.

The Company's loans held for investment at March 31, 2012and December 31, 2011included the following:

			At		At
			March 31, 2012		December 31, 2011
			(dollars in millions)
Commercial and industrial		$	5,358	$	5,083
Consumer loans			5,462		5,170
Residential real estate loans			5,092		4,674
Wholesale real estate loans			406		328
	Total loans held for investment(1)	$	16,318	$	15,255

_______________

(1) Amounts are net of allowances of $26million and $17 million at March 31, 2012 and December 31, 2011, respectively.

The above table does not include loans held for sale of $411million and $114 million at March 31, 2012and December 31, 2011, respectively.

The Company's Credit Risk Management Department evaluates new obligors before credit transactions are initially approved, and at least annually thereafter for consumer and industrial loans. For corporate and commercial loans, credit evaluations typically involve the evaluation of financial statements, assessment of leverage, liquidity, capital strength, asset composition and quality, market capitalization and access to capital markets, cash flow projections and debt service requirements, and the adequacy of collateral, if applicable. The Company's Credit Risk Management Department will also evaluate strategy, market position, industry dynamics, obligor's management and other factors that could affect the obligor's risk profile. For residential real estate and consumer loans, the initial credit evaluation includes, but is not limited to, review of the obligor's income, net worth, liquidity, collateral, loan-to-value ratio, and credit bureau information. Subsequent credit monitoring for residential real estate loans is performed at the portfolio level. Consumer loan collateral values are monitored on an ongoing basis.

At March 31, 2012, the Company collectively evaluated for impairment, gross of the allowance, commercial and industrial loans, consumer loans, residential real estate loans and wholesale real estate loans of $5,326million, $5,465million, $5,094million and $373million, respectively. The Company individually evaluated for impairment, gross of the allowance, commercial and industrial loans and wholesale real estate loans of $52 million and $34million, respectively. Commercial and industrial loans of approximately $31 million and wholesale real estate loans of approximately $34 million were impaired at March 31, 2012. Approximately 99% of the Company's loan portfolio was current at March 31, 2012.

At December 31, 2011, the Company collectively evaluated for impairment gross commercial and industrial loans, consumer loans, residential real estate loans and wholesale real estate loans of $4,934, million, $5,072, million, $4,675 million and $278 million, respectively. The Company individually evaluated for impairment gross commercial and industrial loans, consumer and wholesale real estate loans of $163 million, $100 million and $50 million, respectively. Commercial and industrial loans of approximately $33 million and wholesale real estate loans of approximately $50 million were impaired at December 31, 2011. Approximately 99% of the Company's loan portfolio was current at December 31, 2011.

The Company assigned an internal grade of “doubtful” to certain commercial asset-backed and wholesale real estate loans totaling $35 million and $87 million at March 31, 2012 and December 31, 2011, respectively. Doubtful loans can be classified as current if the borrower is making payments in accordance with the loan agreement. The Company assigned an internal grade of “pass” to the majority of its remaining loan portfolio.

For a description of the Company's loan portfolio and credit quality indicators utilized in its credit monitoring process, see Note 8 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

Employee Loans.

Employee loans are granted primarily in conjunction with a program established in the Global Wealth Management Group business segment to retain and recruit certain employees. These loans are recorded in Receivables—Fees, interest and other in the consolidated statements of financial condition. These loans are full recourse, generally require periodic payments and have repayment terms ranging from one to 12 years. The Company establishes a reserve for loan amounts it does not consider recoverable from terminated employees, which is recorded in Compensation and benefits expense. At March 31, 2012, the Company had $6,053million of employee loans, net of an allowance of approximately $131 million. At December 31, 2011, the Company had $5,610million of employee loans, net of an allowance of approximately $119 million.

The Company has also granted loans to other employees primarily in conjunction with certain after-tax leveraged investment arrangements. At March 31, 2012, the balance of these loans was $167 million, net of an allowance of approximately $131 million. At December 31, 2011, the balance of these loans was $162 million, net of an allowance of approximately $133 million.The Company establishes a reserve for non-recourse loan amounts not recoverable from employees, which is recorded in Other expense.

Collateralized Transactions.

In certain instances, the Company enters into reverse repurchase agreements and securities borrowed transactions to acquire securities to cover short positions, to settle other securities obligations and to accommodate customers' needs. The Company also engages in securities financing transactions for customers through margin lending (see Note 5).

Servicing Advances.

As part of its servicing activities, the Company may make servicing advances to the extent that it believes that such advances will be reimbursed (see Note 6).

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Collateralized Transactions (Cash And Securities Deposited With Clearing Organizations Or Segregated Under Federal And Other Regulations Or Requirements) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Collateralized Transactions
Cash Reserve Deposit Required and Made	$ 30,152		$ 29,454
Securities	8,229	[1]	15,120	[1]
Total	$ 38,381		$ 44,574

[1] Securities deposited with clearing organizations or segregated under federal and other regulations or requirements are sourced from Federal funds sold and securities purchased under agreements to resell and Financial instruments owned in the consolidated statements of financial condition.

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Derivative Instruments and Hedging Activities (Gains or Losses on Derivative Instruments, Related Hedge Items and Hedge Ineffectiveness) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Gain (loss) recognized in income related to amounts excluded from hedge effectiveness testing	$ (66)		$ (47)
Interest Expense
Gains (Losses) on Fair Value Hedges Recognized	152		163
Interest Expense | Derivatives
Gains (Losses) on Fair Value Hedges Recognized	(546)		(1,095)
Interest Expense | Borrowings
Gains (Losses) on Fair Value Hedges Recognized	698		1,258
Net Investment Hedges
Gain (Losses) Recognized in OCI (effective portion)	21		(126)
Net Investment Hedges | Foreign Exchange Contracts
Gain (Losses) Recognized in OCI (effective portion)	21	[1]	(126)	[1]
Not Designated as Accounting Hedges
Gains (Losses) Recognized in Income	181	[2],[3]	(1,493)	[2],[3]
Not Designated as Accounting Hedges | Foreign Exchange Contracts
Gains (Losses) Recognized in Income	595	[2],[3]	(339)	[2],[3]
Not Designated as Accounting Hedges | Interest Rate Contracts
Gains (Losses) Recognized in Income	1,607	[2],[3]	925	[2],[3]
Not Designated as Accounting Hedges | Credit Risk Contracts
Gains (Losses) Recognized in Income	(672)	[2],[3]	(697)	[2],[3]
Not Designated as Accounting Hedges | Equity Contracts
Gains (Losses) Recognized in Income	(828)	[2],[3]	(1,319)	[2],[3]
Not Designated as Accounting Hedges | Commodity Contracts
Gains (Losses) Recognized in Income	(576)	[2],[3]	(271)	[2],[3]
Not Designated as Accounting Hedges | Other Contracts
Gains (Losses) Recognized in Income	$ 55	[2],[3]	$ 208	[2],[3]

[1] Losses of $66 million and $47 million were recognized in income related to amounts excluded from hedge effectiveness testing during the quarters ended March 31, 2012 and 2011, respectively.

[2] Gains (losses) on derivative contracts not designated as hedges are primarily included in Principal transactions—Trading.

[3] Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Principal transactions—Trading.

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Variable Interest Entities and Securitization Activities (Consolidated VIEs) (Details) (Consolidated VIEs, USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Mortgage and Asset-Backed Securities
VIE assets	$ 1,977	$ 2,414
VIE liabilities	1,304	1,699
Collateralized Debt Obligations
VIE assets	129	102
VIE liabilities	65	69
Managed Real Estate Partnerships
VIE assets	2,308	2,207
VIE liabilities	115	102
Other Structured Financings
VIE assets	896	918
VIE liabilities	2,611	2,576
Other
VIE assets	2,796	1,937
VIE liabilities	$ 549	$ 556

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Income Taxes (Significant Components of Deferred Tax Assets and Liabilities) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash paid for income taxes	$ 145	$ 250

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Collateralized Transactions (Financial Instruments Owned That Have Been Loaned Or Pledged To Counterparties) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Financial instruments owned	$ 52,934	$ 51,998
U.S. Government and Agency Securities
Financial instruments owned	8,795	9,263
Other Sovereign Government Obligations
Financial instruments owned	4,128	4,047
Corporate and Other Debt
Financial instruments owned	11,292	17,024
Corporate Equities
Financial instruments owned	$ 28,719	$ 21,664

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Regulatory Requirements (Significant U.S. Bank Operating Subsidiaries' Capital) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Total capital, amount	$ 57,587	$ 54,956	[1]
Tier 1 capital, amount	53,527	51,114	[1]
Tier 1 leverage capital, amount	0	0
Total capital to RWAs, ratio	18.10%	17.50%	[1]
Tier 1 capital to RWAs, ratio	16.80%	16.30%	[1]
Tier 1 leverage, ratio	7.00%	6.60%	[1]
Morgan Stanley Bank, N.A.
Total capital, amount	10,496	10,222
Tier 1 capital, amount	8,980	8,703
Tier 1 leverage capital, amount	8,980	8,703
Total capital to RWAs, ratio	17.40%	17.80%
Tier 1 capital to RWAs, ratio	14.90%	15.10%
Tier 1 leverage, ratio	13.40%	13.20%
Morgan Stanley Private Bank, National Association
Total capital, amount	1,298	1,278
Tier 1 capital, amount	1,295	1,275
Tier 1 leverage capital, amount	$ 1,295	$ 1,275
Total capital to RWAs, ratio	27.80%	31.90%
Tier 1 capital to RWAs, ratio	27.70%	31.80%
Tier 1 leverage, ratio	10.60%	10.20%

[1] The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company’s Tier 1 common capital, Tier 1 capital, Total capital, RWAs and adjusted average assets by such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratio by approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points. 

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Collateralized Transactions (Tables)

3 Months Ended

Mar. 31, 2012

Collateralized Transactions

Financial Instruments Owned That Have Been Loaned or Pledged to Counterparties

				At March 31, 2012		At December 31, 2011
			(dollars in millions)
Financial instruments owned:
	U.S. government and agency securities		$	8,795	$	9,263
	Other sovereign government obligations			4,128		4,047
	Corporate and other debt			11,292		17,024
	Corporate equities			28,719		21,664
		Total	$	52,934	$	51,998

Cash And Securities Deposited With Clearing Organizations Or Segregated Under Federal And Other Regulations Or Requirements

				At		At
				March 31,		December 31,
				2012		2011
			(dollars in millions)
Cash deposited with clearing organizations or segregated under federal and other
	regulations or requirements		$	30,152	$	29,454
Securities(1)				8,229		15,120
		Total	$	38,381	$	44,574

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Fair Value Disclosures (Quantitative Information about Recurring Level 3 Fair Value Measurements) (Details) (USD $) In Millions, unless otherwise specified						3 Months Ended				3 Months Ended						3 Months Ended				3 Months Ended				3 Months Ended				3 Months Ended					3 Months Ended				3 Months Ended			3 Months Ended			3 Months Ended			3 Months Ended			3 Months Ended			3 Months Ended				3 Months Ended			3 Months Ended			3 Months Ended				3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Saxon	Dec. 31, 2011 Saxon	Mar. 31, 2012 Corporate Bonds Net Asset Value, Discounted Cash Flow and Market Approach	Mar. 31, 2012 Recurring Level 3 Commercial Mortgage-backed Securities Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Commercial Mortgage-backed Securities Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Commercial Mortgage-backed Securities Comparable Pricing		Mar. 31, 2012 Recurring Level 3 Corporate Bonds Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Corporate Bonds Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Corporate Bonds Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Corporate Bonds Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Corporate Bonds Comparable Pricing		Mar. 31, 2012 Recurring Level 3 Collateralized Debt Obligations Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Collateralized Debt Obligations Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Collateralized Debt Obligations Comparable Pricing and Correlation Model		Mar. 31, 2012 Recurring Level 3 Loans and Lending Commitments Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Loans and Lending Commitments Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Loans and Lending Commitments Corporate Loan Model and Comparable Pricing		Mar. 31, 2012 Recurring Level 3 Other Debt Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Other Debt Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Other Debt Comparable Pricing		Mar. 31, 2012 Recurring Level 3 Corporate Equities [Member] Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Corporate Equities [Member] Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Interest Rate Contracts Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Interest Rate Contracts Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Interest Rate Contracts Option Model	Mar. 31, 2012 Recurring Level 3 Credit Contracts Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Credit Contracts Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Credit Contracts Comparable Pricing and Correlation Model		Mar. 31, 2012 Recurring Level 3 Foreign Exchange Contracts Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Foreign Exchange Contracts Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Foreign Exchange Contracts Option Model	Mar. 31, 2012 Recurring Level 3 Equity Contracts Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Equity Contracts Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Equity Contracts Option Model	Mar. 31, 2012 Recurring Level 3 Commodity Contracts Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Commodity Contracts Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Commodity Contracts Option Model	Mar. 31, 2012 Recurring Level 3 Principal Investments Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Principal Investments Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Principal Investments Discounted Cash Flow and Market Approach	Mar. 31, 2012 Recurring Level 3 Other Investments Minimum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Other Investments Maximum Financial Instruments Owned	Mar. 31, 2012 Recurring Level 3 Other Investments Discounted Cash Flow and Market Approach	Mar. 31, 2012 Recurring Level 3 Residential Mortgage-backed Securities Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Residential Mortgage-backed Securities Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Residential Mortgage-backed Securities Comparable Pricing		Mar. 31, 2012 Recurring Level 3 Unfunded Lending Commitments Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Unfunded Lending Commitments Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Unfunded Lending Commitments Corporate Loan Model	Mar. 31, 2012 Recurring Level 3 Securities Sold under Agreements to Repurchase Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Securities Sold under Agreements to Repurchase Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Securities Sold under Agreements to Repurchase Discounted Cash Flow	Mar. 31, 2012 Recurring Level 3 Other Secured Financings Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Other Secured Financings Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Other Secured Financings Comparable Pricing And Discounted Cash Flow Valuation Technique [Member]		Mar. 31, 2012 Recurring Level 3 Long-term Borrowings Minimum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Long-term Borrowings Maximum Financial Instruments Sold, Not yet Purchased	Mar. 31, 2012 Recurring Level 3 Long-term Borrowings Option Model
Fair Value Inputs, Assets and Liabilities, Quantitative Information [Line Items]
Assets					$ 554			$ 127	[1]					$ 899	[1]			$ 1,165	[1]			$ 8,597	[1]			$ 57	[1]					$ 22			$ 4,381	[1]			$ 66			$ (1,442)			$ 803			$ 3,194			$ 527
Liabilities														193	[1]																																							61	[1]			60			186			594	[1]			2,143
Fair Value Inputs
Comparable Bond Price						0.00%	85.00%			2.00%	6.00%	120.00%	121.00%			15.00%	82.00%							1.00%	9.00%								5.00%	97.00%																		0.00%	100.00%									34.00%	108.00%
Credit Correlation																21.00%	39.00%																9.00%	82.00%
Credit Spread																				0.26%	11.09%																																			0.45%	10.14%
Comparable Bond or Loan Price																				10.00%	100.00%
Discount to Net Asset Value																												0.00%	31.00%
Implied Weighted Average Cost of Capital																												9.00%	40.00%																	10.00%	19.00%		9.00%	14.00%
EBITDA Multiple																												3	21																	3	24		3	11
Interest Rate Volatility Concentration Liquidity Multiple																														0	12
Interest Rate Volatility Skew																														(1.00%)	(81.00%)
Cash Synthetic Basis																																	0.00%	10.00%
Interest Rate - Foreign Exchange Correlation																																					5.00%	68.00%
At the Money Volatility																																								8.00%	26.00%																									10.00%	15.00%
Volatility Skew																																								(5.00%)	0.00%																									(2.00%)	0.00%
Equity - Equity Correlation																																								40.00%	97.00%																									70.00%	97.00%
Equity - Foreign Exchange Correlation																																								(45.00%)	35.00%																									(70.00%)	(40.00%)
Equity - Interest Rate Correlation																																								8.00%	65.00%
Forward Power Price																																											22	134.00
Commodity Volatility																																											13.00%	113.00%
Cross Commodity Correlation																																											21.00%	99.00%
Exit Multiple																																														5	10		4	10
Capitalization Rate																																														5.00%	9.00%
Equity Discount Rate																																														16.00%	35.00%
Funding Spread																																																											0.45%	3.00%		2.67%	2.69%
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Mortgage servicing rights	$ 99	$ 133	$ 84	$ 119

[1] Prices for the identical instrument are not available and significant subjectivity may be involved when fair value is determined using pricing data available for comparable instruments.

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Regulatory Requirements

3 Months Ended

Mar. 31, 2012

Regulatory Requirements

Regulatory Requirements

12.Regulatory Requirements.

Morgan Stanley.     The Company is a financial holding company under the Bank Holding Company Act of 1956, as amended, and is subject to the regulation and oversight of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Federal Reserve establishes capital requirements for the Company, including well-capitalized standards, and evaluates the Company's compliance with such capital requirements. The Office of the Comptroller of the Currency establishes similar capital requirements and standards for the Company's national bank subsidiaries.

The Company calculates its capital ratios and risk-weighted assets (“RWA”) in accordance with the capital adequacy standards for financial holding companies adopted by the Federal Reserve. These standards are based upon a framework described in the “International Convergence of Capital Measurement and Capital Standards,” July 1988, as amended, also referred to as Basel I. In December 2007, the U.S. banking regulators published final regulation incorporating the Basel II Accord, which requires internationally active banking organizations, as well as certain of their U.S. bank subsidiaries, to implement Basel II standards over the next several years.In July 2010, the Company began reporting its capital adequacy standards on a parallel basis to its regulators under Basel I and Basel II as part of a phased implementation of Basel II.

In June 2011, the U.S. banking regulators published final regulations implementing a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring certain institutions supervised by the Federal Reserve, including the Company, be subject to capital requirements that are not less than the generally applicable risk-based capital requirements. As a result, the generally applicable capital standards, which are based on Basel I standards, but may themselves change over time, will serve as a permanent floor to minimum capital requirements calculated under the Basel II standards the Company is currently required to implement, as well as future capital standards. 

In December 2009, the Basel Committee released proposals on risk-based capital, leverage and liquidity standards, known as “Basel III”.Basel III contains new capital standards that raise the quality of capital and strengthen counterparty credit risk capital requirements and introduces a leverage ratio as a supplemental measure to the risk-based ratio. Basel III includes a new capital conservation buffer, which imposes a common equity requirement above the new minimum that can be depleted under stress, subject to restrictions on capital actions, a new additional loss absorbency capital requirement for global systemically important banks (“GSIB”), such as the Company, and a new countercyclical buffer, which regulators can activate during periods of excessive credit growth in their jurisdiction. The Basel III proposals complement an earlier proposal for revisions to the market risk framework that increases capital requirements for securitizations within the Company's trading book. In 2011, the U.S. regulators issued proposed rules that are intended to implement certain aspects of the market risk framework proposals. While precise dates for the implementation of the new requirements in the U.S. have not been announced, the U.S. regulators will require implementation of Basel III subject to an extended phase-in period.

At March 31, 2012, the Company was in compliance with Basel I capital requirements with ratios of Tier 1 capital to RWAs of 16.8% and total capital to RWAs of 18.1% (6% and 10% being well-capitalized for regulatory purposes, respectively). In addition, financial holding companies are subject to a Tier 1 leverage ratio as defined by the Federal Reserve. The Company calculated its Tier 1 leverage ratio as Tier 1 capital divided by adjusted average total assets (which reflects adjustments for disallowed goodwill, certain intangible assets, deferred tax assets and financial and non-financial equity investments). The adjusted average total assets are derived using weekly balances for the year. At March 31, 2012, the Company was in compliance with this leverage restriction, with a Tier 1 leverage ratio of 7.0% (5%being well-capitalized for regulatory purposes).

At March 31, 2012, the Company calculated its RWAs in accordance with the regulatory capital requirements of the Federal Reserve, which is consistent with guidelines described under Basel I. RWAs reflect both on and off-balance sheet risk of the Company. The risk capital calculations will evolve over time as the Company enhances its risk management methodology and incorporates improvements in modeling techniques while maintaining compliance with the regulatory requirements and interpretations.

The following table summarizes the capital measures for the Company:

	March 31, 2012			December 31, 2011
	Balance		Ratio	Balance		Ratio
	(dollars in millions)
Tier 1 common capital(1)(2)	$	42,151	13.3%	$	39,785	12.7%
Tier 1 capital(2)		53,527	16.8%		51,114	16.3%
Total capital(2)		57,587	18.1%		54,956	17.5%
RWAs(2)		317,693	—		314,055	—
Adjusted average assets(2)		760,071	—		769,578	—
Tier 1 leverage(2)		—	7.0%		—	6.6%

__________________

(1) Tier 1 common capital ratio equals Tier 1 common capital divided by RWAs. On December 30, 2011, the Federal Reserve formalized regulatory definitions for Tier 1 common capital and Tier 1 common capital ratio. The Federal Reserve defined Tier 1 common capital as Tier 1 capital less non-common elements in Tier 1 capital, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities. Previously, the Company's definition of Tier 1 common capital included all of the items noted in the Federal Reserve's definition, but it also included an adjustment for the portion of goodwill and non-servicing intangible assets associated with MSSB's noncontrolling interests (i.e., Citigroup, Inc.'s (“Citi”) share of MSSB's goodwill and intangibles). The Company's conformance to the Federal Reserve's definition under the final rule reduced its Tier 1 common capital and Tier 1 common ratio by approximately $4.2 billion and 132 basis points, respectively at December 31, 2011.   

(2) The December 31, 2011 deferred tax asset disallowance was adjusted by approximately $1.2 billion, resulting in a reduction to the Company's Tier 1 common capital, Tier 1 capital, Total capital, RWAsand adjusted average assetsby such amount, Tier 1 common capital ratio, Tier 1 capital ratio and Total capital ratioby approximately 30 basis points and Tier 1 leverage ratio by approximately 20 basis points. 

Tier 1 capital ratio increasedquarter-over-quarter due to anincrease incapital. Tier 1 leverage ratioincreasedquarter-over-quarter due to adecrease in adjusted average assets.

The Company's U.S. Bank Operating Subsidiaries.     The Company's domestic bank operating subsidiaries are subject to various regulatory capital requirements as administered by U.S. federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's U.S. bank operating subsidiaries' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company's U.S. bank operating subsidiaries must meet specific capital guidelines that involve quantitative measures of the Company's U.S. bank operating subsidiaries' assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

At March 31, 2012, the Company's U.S. bank operating subsidiaries met all capital adequacy requirements to which they are subject and exceeded all regulatory mandated and targeted minimum regulatory capital requirements to be well-capitalized. There are no conditions or events that management believes have changed the Company's U.S. bank operating subsidiaries' category.

The table below sets forth the capital information for the Company's U.S. bank operating subsidiaries, which are U.S. depository institutions:

			March 31, 2012			December 31, 2011
			Amount	Ratio		Amount	Ratio
			(dollars in millions)
Total capital (to RWAs):
	Morgan Stanley Bank, N.A.	$	10,496	17.4%	$	10,222	17.8%
	Morgan Stanley Private Bank, National Association	$	1,298	27.8%	$	1,278	31.9%
Tier I capital (to RWAs):
	Morgan Stanley Bank, N.A.	$	8,980	14.9%	$	8,703	15.1%
	Morgan Stanley Private Bank, National Association	$	1,295	27.7%	$	1,275	31.8%
Leverage ratio:
	Morgan Stanley Bank, N.A.	$	8,980	13.4%	$	8,703	13.2%
	Morgan Stanley Private Bank, National Association	$	1,295	10.6%	$	1,275	10.2%

Under regulatory capital requirements adopted by the U.S. federal banking agencies, U.S. depository institutions, in order to be considered well-capitalized, must maintain a ratio of total capital to RWAs of 10%, a capital ratio of Tier 1 capital to RWAs of 6%, and a ratio of Tier 1 capital to average book assets (leverage ratio) of 5%. EachU.S. depository institution subsidiary of the Company must be well-capitalized in order for the Company to continue to qualify as a financial holding company and to continue to engage in the broadest range of financial activities permitted for financial holding companies. At March 31, 2012 and December 31, 2011, the Company's U.S. depository institutions maintained capital at levels in excess of the universally mandated well-capitalized levels. These subsidiary depository institutions maintain capital at levels sufficiently in excess of the “well-capitalized” requirements to address any additional capital needs and requirements identified by the federal banking regulators.

MS&Co. and Other Broker-Dealers.    MS&Co. is a registered broker-dealer and registered futures commission merchant and, accordingly, is subject to the minimum net capital requirements of the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, Inc. and the U.S. Commodity Futures Trading Commission. MS&Co. has consistently operated with capital in excess of its regulatory capital requirements. MS&Co.'s net capital totaled $7,842 million and $8,249million at March 31, 2012 and December 31, 2011, respectively, which exceeded the amount required by $6,660 million and $7,215million, respectively. MS&Co. is required to hold tentative net capital in excess of $1billion and net capital in excess of $500 million in accordance with the market and credit risk standards of Appendix E of SEC Rule 15c3-1. MS&Co. is also required to notify the SEC in the event that its tentative net capital is less than $5 billion. At March 31, 2012, MS&Co. had tentative net capital in excess of the minimum and the notification requirements.

Morgan Stanley Smith Barney LLC is a registered broker-dealer and registered futures commission merchant and, accordingly, is subject to the minimum net capital requirements of the SEC, the Financial Industry Regulatory Authority, Inc. and the U.S. Commodity Futures Trading Commission. Morgan Stanley Smith Barney LLC has consistently operated with capital in excess of its regulatory capital requirements. Morgan Stanley Smith Barney LLC clears certain customer activity directly and introduces other business to MS&Co. and Citigroup, Inc. MSIP, a London-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Authority, and MSMS, a Tokyo-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Agency. MSIP and MSMS have consistently operated in excess of their respective regulatory capital requirements.

Other Regulated Subsidiaries.    Certain other U.S. and non-U.S. subsidiaries are subject to various securities, commodities and banking regulations, and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries have consistently operated in excess of their local capital adequacy requirements.

Morgan Stanley Derivative Products Inc. (“MSDP”), a derivative products subsidiary rated Aa3 by Moody's and AAA by S&P, maintains certain operating restrictions that have been reviewed by Moody's and S&P. MSDP is operated such that creditors of the Company should not expect to have any claims on the assets of MSDP, unless and until the obligations to its own creditors are satisfied in full. Creditors of MSDP should not expect to have any claims on the assets of the Company or any of its affiliates, other than the respective assets of MSDP.

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes

Income Taxes

17.Income Taxes.

The Company is under continuous examination by the Internal Revenue Service (the “IRS”) and other tax authorities in certain countries, such as Japan and the U.K., and states in which the Company has significant business operations, such as New York. The Company is currently under examination by the IRS Appeals Office for the remaining issues covering tax years 1999 – 2005. Also, the Company is currently at various levels of field examination with respect to audits with the IRS, as well as New YorkState and New York City, for tax years 2006 – 2008 and 2007 – 2009, respectively. During 2012, the Company expects to reach a conclusion with U.K. tax authorities on substantially all issues through tax year 2009. Also during 2012, the Company expects to reach a conclusion with the Japanese tax authorities on substantially all issues covering tax years 2007 – 2008 and commence an audit covering tax years 2009 – 2010.

The Company believes that the resolution of tax matters will not have a material effect on the condensed consolidated statements of financial condition of the Company, although a resolution could have a material impact on the Company's condensed consolidated statements of income for a particular future period and on the Company's effective income tax rate for any period in which such resolution occurs. The Company has established a liability for unrecognized tax benefits that the Company believes is adequate in relation to the potential for additional assessments. Once established, the Company adjusts unrecognized tax benefits only when more information is available or when an event occurs necessitating a change.

It is reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits and impact on the effective tax rate over the next 12 months.

The Company's effective tax rate from continuing operations for the quarter ended March 31, 2011 included a $447 million net tax benefit from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance. The deferred tax asset and valuation allowance were recognized in income from discontinued operations in 2010 in connection with the recognition of a $1.2 billion loss due to writedowns and related costs following the Company's commitment to a plan to dispose of Revel Entertainment Group, LLC (“Revel”). The Company recorded the valuation allowance because the Company did not believe it was more likely than not that it would have sufficient future net capital gain to realize the benefit of the expected capital loss to be recognized upon the disposal of Revel. During the quarter ended March 31, 2011, the disposal of Revel was restructured as a tax-free like kind exchange and the disposal was completed. The restructured transaction changed the character of the future taxable loss to ordinary. The Company reversed the valuation allowance because the Company believes it is more likely than not that it will have sufficient future ordinary taxable income to recognize the recorded deferred tax asset. In accordance with the applicable accounting literature, this reversal of a previously established valuation allowance due to a change in circumstances was recognized in income from continuing operations.

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Total Equity (Changes in Ownership in Subsidiaries) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Net income (loss) applicable to Morgan Stanley	$ (94)	$ 968

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Fair Value Disclosures (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Assets
U.S. government and agency securities	$ 59,690		$ 63,449
Other sovereign government obligations	32,235		29,059
Corporate and other debt	69,518		68,923
Corporate equities	59,063	[1]	47,966	[1]
Derivative and other contracts	40,016		48,064
Investments	8,329		8,195
Physical commodities	9,573		9,697
Total financial instruments owned, at fair value	278,424		275,353
U.S. government and agency securities	32,514
Securities available for sale	32,528		30,495
Federal funds sold and securities purchased under agreement to resell	318		112
Intangible assets	99		133
Liabilities
Deposits	1,980		2,101
Commercial paper and other short-term borrowings	1,321		1,339
U.S. government and agency securities	25,589		19,630
Other sovereign government obligations	26,354		17,141
Corporate and other debt	8,547		8,410
Corporate equities	27,725		24,497
Derivative and other contracts	42,765		46,453
Physical commodities	0		16
Total financial instruments sold, not yet purchased, at fair value	130,980		116,147
Obligation to return securities received as collateral, at fair value	23,366		15,394
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	21,435	[2]	20,719	[2]
Long-term borrowings	43,224		39,663
Level 1
Assets
U.S. government and agency securities			43,101
Level 2
Assets
U.S. government and agency securities			20,340
Level 3
Assets
U.S. government and agency securities			8
Fair Value
Assets
U.S. government and agency securities	59,690		63,449
Liabilities
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	13,081		14,594
Recurring | Level 1
Assets
U.S. government and agency securities	37,585
Other sovereign government obligations	29,069		22,650
Corporate and other debt	0		0
Corporate equities	56,582	[1]	45,173	[1]
Derivative and other contracts	544		1,182
Investments	255		302
Physical commodities	0		0
Total financial instruments owned, at fair value	124,035		112,408
U.S. government and agency securities			13,437
Securities available for sale	13,822
Securities received as collateral	17,542		11,530
Federal funds sold and securities purchased under agreement to resell	0		0
Intangible assets	0	[3]	0	[4]
Total assets measured at fair value	155,399		137,375
Liabilities
Deposits	0		0
Commercial paper and other short-term borrowings	0		0
U.S. government and agency securities	25,271		19,524
Other sovereign government obligations	24,979		14,981
Corporate and other debt	0		0
Corporate equities	26,271	[1]	24,347	[1]
Derivative and other contracts	1,771		2,105
Physical commodities	0		0
Total financial instruments sold, not yet purchased, at fair value	78,292		60,957
Obligation to return securities received as collateral, at fair value	23,167		15,267
Securities sold under agreements to repurchase	0		0
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	0		0
Long-term borrowings	2		10
Total liabilities measure at fair value	101,461		76,234
Recurring | Level 1 | U.S. Treasury Securities
Assets
U.S. government and agency securities	35,781		38,769
Liabilities
U.S. government and agency securities	23,544		17,776
Recurring | Level 1 | U.S. Agency Securities
Assets
U.S. government and agency securities	1,804		4,332
Liabilities
U.S. government and agency securities	1,727		1,748
Recurring | Level 1 | State and Municipal Securities
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Residential Mortgage-backed Securities
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Commercial Mortgage-backed Securities
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Asset-backed Securities
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt			0
Recurring | Level 1 | Corporate Bonds
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Collateralized Debt Obligations
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Loans and Lending Commitments
Assets
Corporate and other debt	0		0
Recurring | Level 1 | Unfunded Lending Commitments
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Other Debt
Assets
Corporate and other debt	0		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 1 | Interest Rate Contracts
Assets
Derivative and other contracts	914		1,493
Liabilities
Derivative and other contracts	1,053		1,680
Recurring | Level 1 | Credit Contracts
Assets
Derivative and other contracts	0		0
Liabilities
Derivative and other contracts	0		0
Recurring | Level 1 | Foreign Exchange Contracts
Assets
Derivative and other contracts	1		0
Liabilities
Derivative and other contracts	2		0
Recurring | Level 1 | Equity Contract [Member]
Assets
Derivative and other contracts	991		929
Liabilities
Derivative and other contracts	1,226		877
Recurring | Level 1 | Commodity Contract [Member]
Assets
Derivative and other contracts	7,325		6,356
Liabilities
Derivative and other contracts	8,177		7,144
Recurring | Level 1 | Other Contract [Member]
Assets
Derivative and other contracts	0		0
Liabilities
Derivative and other contracts	0		0
Recurring | Level 1 | Netting
Assets
Derivative and other contracts	(8,687)	[5]	(7,596)	[5]
Liabilities
Derivative and other contracts	(8,687)	[5]	(7,596)	[5]
Recurring | Level 1 | Private Equity Funds
Assets
Investments	0		0
Recurring | Level 1 | Real Estate Funds
Assets
Investments	0		0
Recurring | Level 1 | Hedge Funds
Assets
Investments	0		0
Recurring | Level 1 | Principal Investments
Assets
Investments	98		161
Recurring | Level 1 | Other Investments
Assets
Investments	157		141
Recurring | Level 2
Assets
U.S. government and agency securities	22,082
Other sovereign government obligations	3,158		6,290
Corporate and other debt	58,624		56,891
Corporate equities	1,927	[1]	2,376	[1]
Derivative and other contracts	103,762		121,725
Investments	398		610
Physical commodities	9,573		9,651
Total financial instruments owned, at fair value	199,524		217,883
U.S. government and agency securities			17,058
Securities available for sale	18,706
Securities received as collateral	186		121
Federal funds sold and securities purchased under agreement to resell	318		112
Intangible assets	0	[3]	0	[4]
Total assets measured at fair value	218,734		235,174
Liabilities
Deposits	1,980		2,101
Commercial paper and other short-term borrowings	1,306		1,337
U.S. government and agency securities	318		106
Other sovereign government obligations	1,374		2,152
Corporate and other debt	8,200		7,678
Corporate equities	1,452	[1]	149	[1]
Derivative and other contracts	79,030		90,712
Physical commodities	0		16
Total financial instruments sold, not yet purchased, at fair value	90,374		100,813
Obligation to return securities received as collateral, at fair value	199		127
Securities sold under agreements to repurchase	161		8
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	12,487		14,024
Long-term borrowings	41,079		38,050
Total liabilities measure at fair value	147,586		156,460
Recurring | Level 2 | U.S. Treasury Securities
Assets
U.S. government and agency securities	0		1
Liabilities
U.S. government and agency securities	0		0
Recurring | Level 2 | U.S. Agency Securities
Assets
U.S. government and agency securities	22,082		20,339
Liabilities
U.S. government and agency securities	318		106
Recurring | Level 2 | State and Municipal Securities
Assets
Corporate and other debt	2,676		2,261
Liabilities
Corporate and other debt	4		3
Recurring | Level 2 | Residential Mortgage-backed Securities
Assets
Corporate and other debt	1,548		1,304
Liabilities
Corporate and other debt	2		0
Recurring | Level 2 | Commercial Mortgage-backed Securities
Assets
Corporate and other debt	1,829		1,686
Liabilities
Corporate and other debt	9		14
Recurring | Level 2 | Asset-backed Securities
Assets
Corporate and other debt	1,076		937
Liabilities
Corporate and other debt			0
Recurring | Level 2 | Corporate Bonds
Assets
Corporate and other debt	25,115		25,873
Liabilities
Corporate and other debt	6,888		6,217
Recurring | Level 2 | Collateralized Debt Obligations
Assets
Corporate and other debt	957		1,711
Liabilities
Corporate and other debt	17		3
Recurring | Level 2 | Loans and Lending Commitments
Assets
Corporate and other debt	14,940		14,854
Recurring | Level 2 | Unfunded Lending Commitments
Liabilities
Corporate and other debt	931		1,284
Recurring | Level 2 | Other Debt
Assets
Corporate and other debt	10,483		8,265
Liabilities
Corporate and other debt	349		157
Recurring | Level 2 | Interest Rate Contracts
Assets
Derivative and other contracts	786,488		906,082
Liabilities
Derivative and other contracts	757,445		873,466
Recurring | Level 2 | Credit Contracts
Assets
Derivative and other contracts	90,206		123,689
Liabilities
Derivative and other contracts	88,357		121,438
Recurring | Level 2 | Foreign Exchange Contracts
Assets
Derivative and other contracts	47,378		61,770
Liabilities
Derivative and other contracts	50,275		64,218
Recurring | Level 2 | Equity Contract [Member]
Assets
Derivative and other contracts	44,359		44,558
Liabilities
Derivative and other contracts	47,293		45,375
Recurring | Level 2 | Commodity Contract [Member]
Assets
Derivative and other contracts	30,287		31,246
Liabilities
Derivative and other contracts	30,628		31,248
Recurring | Level 2 | Other Contract [Member]
Assets
Derivative and other contracts	61		292
Liabilities
Derivative and other contracts	49		879
Recurring | Level 2 | Netting
Assets
Derivative and other contracts	(895,017)	[5]	(1,045,912)	[5]
Liabilities
Derivative and other contracts	(895,017)	[5]	(1,045,912)	[5]
Recurring | Level 2 | Private Equity Funds
Assets
Investments	0		7
Recurring | Level 2 | Real Estate Funds
Assets
Investments	6		5
Recurring | Level 2 | Hedge Funds
Assets
Investments	318		473
Recurring | Level 2 | Principal Investments
Assets
Investments	0		104
Recurring | Level 2 | Other Investments
Assets
Investments	74		21
Recurring | Level 3
Assets
U.S. government and agency securities	23
Other sovereign government obligations	8		119
Corporate and other debt	10,894		12,032
Corporate equities	554	[1]	417	[1]
Derivative and other contracts	10,423		12,421
Investments	7,676		7,283
Physical commodities	0		46
Total financial instruments owned, at fair value	29,578		32,326
U.S. government and agency securities			0
Securities available for sale	0
Securities received as collateral	0		0
Federal funds sold and securities purchased under agreement to resell	0		0
Intangible assets	99	[3]	133	[4]
Total assets measured at fair value	29,677		32,459
Liabilities
Deposits	0		0
Commercial paper and other short-term borrowings	15		2
U.S. government and agency securities	0		0
Other sovereign government obligations	1		8
Corporate and other debt	347		732
Corporate equities	2	[1]	1	[1]
Derivative and other contracts	6,616		7,898
Physical commodities	0		0
Total financial instruments sold, not yet purchased, at fair value	6,966		8,639
Obligation to return securities received as collateral, at fair value	0		0
Securities sold under agreements to repurchase	186		340
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	594		570
Long-term borrowings	2,143		1,603
Total liabilities measure at fair value	9,904		11,154
Recurring | Level 3 | U.S. Treasury Securities
Assets
U.S. government and agency securities	0		0
Liabilities
U.S. government and agency securities	0		0
Recurring | Level 3 | U.S. Agency Securities
Assets
U.S. government and agency securities	23		8
Liabilities
U.S. government and agency securities	0		0
Recurring | Level 3 | State and Municipal Securities
Assets
Corporate and other debt	3		0
Liabilities
Corporate and other debt	0		0
Recurring | Level 3 | Residential Mortgage-backed Securities
Assets
Corporate and other debt	43		494
Liabilities
Corporate and other debt	61		355
Recurring | Level 3 | Commercial Mortgage-backed Securities
Assets
Corporate and other debt	127		134
Liabilities
Corporate and other debt	0		0
Recurring | Level 3 | Asset-backed Securities
Assets
Corporate and other debt	3		31
Liabilities
Corporate and other debt			0
Recurring | Level 3 | Corporate Bonds
Assets
Corporate and other debt	899		675
Liabilities
Corporate and other debt	193		219
Recurring | Level 3 | Collateralized Debt Obligations
Assets
Corporate and other debt	1,165		980
Liabilities
Corporate and other debt	0		0
Recurring | Level 3 | Loans and Lending Commitments
Assets
Corporate and other debt	8,597		9,590
Recurring | Level 3 | Unfunded Lending Commitments
Liabilities
Corporate and other debt	60		85
Recurring | Level 3 | Other Debt
Assets
Corporate and other debt	57		128
Liabilities
Corporate and other debt	33		73
Recurring | Level 3 | Interest Rate Contracts
Assets
Derivative and other contracts	4,117		5,301
Liabilities
Derivative and other contracts	4,095		4,881
Recurring | Level 3 | Credit Contracts
Assets
Derivative and other contracts	9,790		15,102
Liabilities
Derivative and other contracts	5,409		9,288
Recurring | Level 3 | Foreign Exchange Contracts
Assets
Derivative and other contracts	720		573
Liabilities
Derivative and other contracts	654		530
Recurring | Level 3 | Equity Contract [Member]
Assets
Derivative and other contracts	1,188		800
Liabilities
Derivative and other contracts	2,630		2,034
Recurring | Level 3 | Commodity Contract [Member]
Assets
Derivative and other contracts	2,504		2,176
Liabilities
Derivative and other contracts	1,701		1,606
Recurring | Level 3 | Other Contract [Member]
Assets
Derivative and other contracts	0		306
Liabilities
Derivative and other contracts	23		1,396
Recurring | Level 3 | Netting
Assets
Derivative and other contracts	(7,896)	[5]	(11,837)	[5]
Liabilities
Derivative and other contracts	(7,896)	[5]	(11,837)	[5]
Recurring | Level 3 | Private Equity Funds
Assets
Investments	1,994		1,936
Recurring | Level 3 | Real Estate Funds
Assets
Investments	1,338		1,213
Recurring | Level 3 | Hedge Funds
Assets
Investments	623		696
Recurring | Level 3 | Principal Investments
Assets
Investments	3,194		2,937
Recurring | Level 3 | Other Investments
Assets
Investments	527		501
Recurring | Counterparty and Cash Collateral Netting
Assets
Derivative and other contracts	(74,713)		(87,264)
Total financial instruments owned, at fair value	(74,713)		(87,264)
Total assets measured at fair value	(74,713)		(87,264)
Liabilities
Derivative and other contracts	(44,652)		(54,262)
Total financial instruments sold, not yet purchased, at fair value	(44,652)		(54,262)
Total liabilities measure at fair value	(44,652)		(54,262)
Recurring | Counterparty and Cash Collateral Netting | Netting
Assets
Derivative and other contracts	(74,713)	[5]	(87,264)	[5]
Liabilities
Derivative and other contracts	(44,652)	[5]	(54,262)	[5]
Recurring | Fair Value
Assets
Other sovereign government obligations	32,235		29,059
Corporate and other debt	69,518		68,923
Corporate equities	59,063	[1]
Derivative and other contracts	40,016		48,064
Investments	8,329		8,195
Physical commodities	9,573		9,697
Total financial instruments owned, at fair value	278,424		275,353
U.S. government and agency securities			30,495
Securities available for sale	32,528
Securities received as collateral	17,728		11,651
Federal funds sold and securities purchased under agreement to resell	318		112
Intangible assets	99	[3]	133	[4]
Total assets measured at fair value	329,097		317,744
Liabilities
Deposits	1,980		2,101
Commercial paper and other short-term borrowings	1,321		1,339
U.S. government and agency securities	25,589		19,630
Other sovereign government obligations	26,354		17,141
Corporate and other debt	8,547		8,410
Corporate equities	27,725	[1]	24,497	[1]
Derivative and other contracts	42,765		46,453
Physical commodities	0		16
Total financial instruments sold, not yet purchased, at fair value	130,980		116,147
Obligation to return securities received as collateral, at fair value	23,366		15,394
Securities sold under agreements to repurchase	347		348
Other secured financings (includes $13,081 and $14,594 at fair value at March 31, 2012 and December 31, 2011, respectively) ($1,918 and $2,316 at March 31, 2012 and December 31, 2011, respectively, related to consolidated variable interest entities and are non-recourse to the Company)	13,081		14,594
Long-term borrowings	43,224		39,663
Total liabilities measure at fair value	214,299		189,586
Recurring | Fair Value | U.S. Treasury Securities
Assets
U.S. government and agency securities	35,781		38,770
Liabilities
U.S. government and agency securities	23,544		17,776
Recurring | Fair Value | U.S. Agency Securities
Assets
U.S. government and agency securities	23,909		24,679
Liabilities
U.S. government and agency securities	2,045		1,854
Recurring | Fair Value | State and Municipal Securities
Assets
Corporate and other debt	2,679		2,261
Liabilities
Corporate and other debt	4		3
Recurring | Fair Value | Residential Mortgage-backed Securities
Assets
Corporate and other debt	1,591		1,798
Liabilities
Corporate and other debt	63		355
Recurring | Fair Value | Commercial Mortgage-backed Securities
Assets
Corporate and other debt	1,956		1,820
Liabilities
Corporate and other debt	9		14
Recurring | Fair Value | Asset-backed Securities
Assets
Corporate and other debt	1,079		968
Liabilities
Corporate and other debt			0
Recurring | Fair Value | Corporate Bonds
Assets
Corporate and other debt	26,014		26,548
Liabilities
Corporate and other debt	7,081		6,436
Recurring | Fair Value | Collateralized Debt Obligations
Assets
Corporate and other debt	2,122		2,691
Liabilities
Corporate and other debt	17		3
Recurring | Fair Value | Loans and Lending Commitments
Assets
Corporate and other debt	23,537		24,444
Recurring | Fair Value | Unfunded Lending Commitments
Liabilities
Corporate and other debt	991		1,369
Recurring | Fair Value | Other Debt
Assets
Corporate and other debt	10,540		8,393
Liabilities
Corporate and other debt	382		230
Recurring | Fair Value | Interest Rate Contracts
Assets
Derivative and other contracts	791,519		912,876
Liabilities
Derivative and other contracts	762,593		880,027
Recurring | Fair Value | Credit Contracts
Assets
Derivative and other contracts	99,996		138,791
Liabilities
Derivative and other contracts	93,766		130,726
Recurring | Fair Value | Foreign Exchange Contracts
Assets
Derivative and other contracts	48,099		62,343
Liabilities
Derivative and other contracts	50,931		64,748
Recurring | Fair Value | Equity Contract [Member]
Assets
Derivative and other contracts	46,538		46,287
Liabilities
Derivative and other contracts	51,149		48,286
Recurring | Fair Value | Commodity Contract [Member]
Assets
Derivative and other contracts	40,116		39,778
Liabilities
Derivative and other contracts	40,506		39,998
Recurring | Fair Value | Other Contract [Member]
Assets
Derivative and other contracts	61		598
Liabilities
Derivative and other contracts	72		2,275
Recurring | Fair Value | Netting
Assets
Derivative and other contracts	(986,313)	[5]	(1,152,609)	[5]
Liabilities
Derivative and other contracts	(956,252)	[5]	(1,119,607)	[5]
Recurring | Fair Value | Private Equity Funds
Assets
Investments	1,994		1,943
Recurring | Fair Value | Real Estate Funds
Assets
Investments	1,344		1,218
Recurring | Fair Value | Hedge Funds
Assets
Investments	941		1,169
Recurring | Fair Value | Principal Investments
Assets
Investments	3,292		3,202
Recurring | Fair Value | Other Investments
Assets
Investments	$ 758		$ 663

[1] The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

[2] Amounts include $13,081 million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

[3] Amount represents mortgage servicing rights (“MSR”) accounted for at fair value. See Note 6 for further information on MSRs.

[4] Amount represents MSRs accounted for at fair value. See Note 6 for further information on MSRs.

[5] For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 10.

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Segment and Geographic Information (Assets by Segments) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
Total assets	$ 781,030	[1]	$ 749,898	[1]
Institutional Securities
Total assets	670,662	[1]	641,456	[1]
Global Wealth Management Group
Total assets	103,235	[1]	101,427	[1]
Asset Management
Total assets	$ 7,133	[1]	$ 7,015	[1]

[1] Corporate assets have been fully allocated to the Company’s business segments.

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Regulatory Requirements (Tables)

3 Months Ended

Mar. 31, 2012

Regulatory Requirements

Capital Measures

	March 31, 2012			December 31, 2011
	Balance		Ratio	Balance		Ratio
	(dollars in millions)
Tier 1 common capital(1)(2)	$	42,151	13.3%	$	39,785	12.7%
Tier 1 capital(2)		53,527	16.8%		51,114	16.3%
Total capital(2)		57,587	18.1%		54,956	17.5%
RWAs(2)		317,693	—		314,055	—
Adjusted average assets(2)		760,071	—		769,578	—
Tier 1 leverage(2)		—	7.0%		—	6.6%

Capital Information for U.S. Bank Operating Subsidiaries, Which Are U.S. Depository Institutions

			March 31, 2012			December 31, 2011
			Amount	Ratio		Amount	Ratio
			(dollars in millions)
Total capital (to RWAs):
	Morgan Stanley Bank, N.A.	$	10,496	17.4%	$	10,222	17.8%
	Morgan Stanley Private Bank, National Association	$	1,298	27.8%	$	1,278	31.9%
Tier I capital (to RWAs):
	Morgan Stanley Bank, N.A.	$	8,980	14.9%	$	8,703	15.1%
	Morgan Stanley Private Bank, National Association	$	1,295	27.7%	$	1,275	31.8%
Leverage ratio:
	Morgan Stanley Bank, N.A.	$	8,980	13.4%	$	8,703	13.2%
	Morgan Stanley Private Bank, National Association	$	1,295	10.6%	$	1,275	10.2%

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Equity Method Investments (Investees) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Schedule of Equity Method Investments [Line Items]
Percent ownership		40.00%
Equity method investment	$ 4,384	$ 4,524

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Condensed Consolidated Statements Of Comprehensive Income (unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Condensed Consolidated Statements Of Comprehensive Income
Net income	$ 134		$ 1,130
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	20	[1]	37	[1]
Amortization of cash flow hedges	2	[2]	1	[2]
Net unrealized gain on Securities available for sale	(19)	[3]	(36)	[3]
Pension, postretirement and other related adjustments	2	[4]	5	[4]
Total other comprehensive income	5		7
Comprehensive income	139		1,137
Net income applicable to noncontrolling interests	228		162
Other comprehensive income (loss) applicable to noncontrolling interests	(92)		(34)
Comprehensive income applicable to Morgan Stanley	$ 3		$ 1,009

[1] Amounts are net of provision for (benefit from) income taxes of $4 million and $(68) million for the quarters ended March 31, 2012 and 2011, respectively.

[2] Amounts are net of provision for income taxes of $1 million and $2 million for the quarters ended March 31, 2012 and 2011, respectively.

[3] Amounts are net of (benefit from) income taxes of $(13) million and $(24) million for the quarters ended March 31, 2012 and 2011, respectively.

[4] Amounts are net of provision for (benefit from) income taxes of $2 million and $(4) million for the quarters ended March 31, 2012 and 2011, respectively.

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Commitments, Guarantees and Contingencies (Commitments by Period of Expiration) (Details) (USD $)	Mar. 31, 2012
Commitments	$ 153,488,000,000
Letters of Credit and Other Financial Guarantees Obtained to Satisfy Collateral Requirements [Member]
Commitments	2,086,000,000
Investments
Commitments	1,716,000,000
Investment Grade
Commitments	53,810,000,000	[1],[2]
Unfunded commitments accounted for as held for investment	12,200,000,000
Unfunded commitments accounted for as held for sale	68,000,000
Non-Investment Grade
Commitments	15,849,000,000	[2]
Unfunded commitments accounted for as held for investment	3,500,000,000
Unfunded commitments accounted for as held for sale	191,000,000
Secondary Lending Commitments
Commitments	391,000,000	[3]
Commitments for Secured Lending Transactions
Commitments	1,748,000,000
Forward Starting Reverse Repurchase Agreements
Commitments	74,317,000,000	[4]
Commercial and Residential Mortgage-Related Commitments
Commitments	2,055,000,000
Underwriting Commitments
Commitments	0
Other Commitments
Commitments	1,516,000,000
Less than 1 Year
Commitments	93,903,000,000
Less than 1 Year | Letters of Credit and Other Financial Guarantees Obtained to Satisfy Collateral Requirements [Member]
Commitments	2,068,000,000
Less than 1 Year | Investments
Commitments	1,160,000,000
Less than 1 Year | Investment Grade
Commitments	10,181,000,000	[1],[2]
Less than 1 Year | Non-Investment Grade
Commitments	2,182,000,000	[2]
Less than 1 Year | Secondary Lending Commitments
Commitments	56,000,000	[3]
Less than 1 Year | Commitments for Secured Lending Transactions
Commitments	1,299,000,000
Less than 1 Year | Forward Starting Reverse Repurchase Agreements
Commitments	74,317,000,000	[4]
Less than 1 Year | Commercial and Residential Mortgage-Related Commitments
Commitments	1,378,000,000
Less than 1 Year | Underwriting Commitments
Commitments	0
Less than 1 Year | Other Commitments
Commitments	1,262,000,000
1 - 3 Years
Commitments	13,621,000,000
1 - 3 Years | Letters of Credit and Other Financial Guarantees Obtained to Satisfy Collateral Requirements [Member]
Commitments	12,000,000
1 - 3 Years | Investments
Commitments	238,000,000
1 - 3 Years | Investment Grade
Commitments	9,854,000,000	[1],[2]
1 - 3 Years | Non-Investment Grade
Commitments	2,789,000,000	[2]
1 - 3 Years | Secondary Lending Commitments
Commitments	203,000,000	[3]
1 - 3 Years | Commitments for Secured Lending Transactions
Commitments	251,000,000
1 - 3 Years | Forward Starting Reverse Repurchase Agreements
Commitments	0	[4]
1 - 3 Years | Commercial and Residential Mortgage-Related Commitments
Commitments	26,000,000
1 - 3 Years | Underwriting Commitments
Commitments	0
1 - 3 Years | Other Commitments
Commitments	248,000,000
3 - 5 Years
Commitments	42,233,000,000
3 - 5 Years | Letters of Credit and Other Financial Guarantees Obtained to Satisfy Collateral Requirements [Member]
Commitments	6,000,000
3 - 5 Years | Investments
Commitments	44,000,000
3 - 5 Years | Investment Grade
Commitments	31,778,000,000	[1],[2]
3 - 5 Years | Non-Investment Grade
Commitments	9,981,000,000	[2]
3 - 5 Years | Secondary Lending Commitments
Commitments	20,000,000	[3]
3 - 5 Years | Commitments for Secured Lending Transactions
Commitments	198,000,000
3 - 5 Years | Forward Starting Reverse Repurchase Agreements
Commitments	0	[4]
3 - 5 Years | Commercial and Residential Mortgage-Related Commitments
Commitments	201,000,000
3 - 5 Years | Underwriting Commitments
Commitments	0
3 - 5 Years | Other Commitments
Commitments	5,000,000
Over 5 Years
Commitments	3,731,000,000
Over 5 Years | Letters of Credit and Other Financial Guarantees Obtained to Satisfy Collateral Requirements [Member]
Commitments	0
Over 5 Years | Investments
Commitments	274,000,000
Over 5 Years | Investment Grade
Commitments	1,997,000,000	[1],[2]
Over 5 Years | Non-Investment Grade
Commitments	897,000,000	[2]
Over 5 Years | Secondary Lending Commitments
Commitments	112,000,000	[3]
Over 5 Years | Commitments for Secured Lending Transactions
Commitments	0
Over 5 Years | Forward Starting Reverse Repurchase Agreements
Commitments	0	[4]
Over 5 Years | Commercial and Residential Mortgage-Related Commitments
Commitments	450,000,000
Over 5 Years | Underwriting Commitments
Commitments	0
Over 5 Years | Other Commitments
Commitments	1,000,000
Asset-backed Securities | Commercial Paper | Investment Grade
Commitments	275,000,000
Asset-backed Securities | Commercial Paper | Less than 1 Year | Investment Grade
Commitments	138,000,000
Asset-backed Securities | Commercial Paper | 1 - 3 Years | Investment Grade
Commitments	137,000,000
U.S. Agency Securities | Settled within Three Days
Commitments	$ 70,700,000,000

[1] This amount includes commitments to asset-backed commercial paper conduits of $275 million at March 31, 2012, of which $138 million have maturities of less than one year and $137 million of which have maturities of one to three years.

[2] This amount includes $12.2 billion of investment grade and $3.5 billion of non-investment grade unfunded commitments accounted for as held for investment and $68 million of investment grade and $191 million of non-investment grade unfunded commitments accounted for as held for sale at March 31, 2012. The remainder of these lending commitments are carried at fair value.

[3] These commitments are recorded at fair value within Financial instruments owned and Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition (see Note 3).

[4] The Company enters into forward starting reverse repurchase and securities borrowing agreements (agreements that have a trade date at or prior to March 31, 2012 and settle subsequent to period-end) that are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations. These agreements primarily settle within three business days and of the amount at March 31, 2012, $70.7 billion settled within three business days.

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Introduction and Basis of Presentation

3 Months Ended

Mar. 31, 2012

Introduction and Basis of Presentation [Abstract]

Introduction And Basis Of Presentation

1.Introduction and Basis of Presentation.

The Company.    Morgan Stanley, a financial holding company, is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Global Wealth Management Group and Asset Management. Unless the context otherwise requires, the terms “Morgan Stanley” and the “Company” mean Morgan Stanley and its consolidated subsidiaries.

A summary of the activities of each of the Company's business segments is as follows:

Institutional Securities provides capital raising; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; corporate lending; sales, trading, financing and market-making activities in equity and fixed income securities and related products, including foreign exchange and commodities; and investment activities.

Global Wealth Management Group, which includes the Company's 51% interest in Morgan Stanley Smith Barney Holdings LLC (“MSSB”), provides brokerage and investment advisory services to individual investors and small-to-medium sized businesses and institutions covering various investment alternatives; financial and wealth planning services; annuity and other insurance products; credit and other lending products; cash management services; retirement services; and trust and fiduciary services and engages in fixed income principal trading, which primarily facilitates clients' trading or investments in such securities.

Asset Management provides a broad array of investment strategies that span the risk/return spectrum across geographies, asset classes and public and private markets to a diverse group of clients across the institutional and intermediary channels as well as high net worth clients (see “Discontinued Operations—Retail Asset Management Business” herein).

Discontinued Operations.

Saxon.  On October 24, 2011, the Company announced that it had reached an agreement to sell Saxon, a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation. During the first quarter of 2012, the transaction was restructured as a sale of Saxon's assets, the first phase of which was completed in the second quarter of 2012. The remaining operations of Saxon are expected to be wound down within the year.The Company expects to incur incremental wind-down costs in future periods. The results of Saxon are reported as discontinued operations within the Institutional Securities business segment for all periods presented.

Quilter.On April 2, 2012, the Company closed the sale of Quilter Holdings Ltd. (“Quilter”), its retail wealth management business in the United Kingdom (“U.K.”).  The Company has classified Quilter as held for sale within the Global Wealth Management Group business segment and the results of its operations are presented as discontinued operations for all periods presented.

Prior period amounts have been recast for discontinued operations. See Note 20 for additional information on discontinued operations.

Basis of Financial Information.    The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”), which require the Company to make estimates and assumptions regarding the valuations of certain financial instruments, the valuation of goodwill and intangible assets, compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the condensed consolidated financial statements and related disclosures. The Company believes that the estimates utilized in the preparation of the condensed consolidated financial statements are prudent and reasonable. Actual results could differ materially from these estimates.

Intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Consolidation.    The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and other entities in which the Company has a controlling financial interest, including certain variable interest entities (“VIE”) (see Note 6). For condensed consolidated subsidiaries that are less than wholly owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as Net income (loss) applicable to noncontrolling interests in the condensed consolidated statements of income, and the portion of the shareholders' equity of such subsidiaries is presented as Noncontrolling interests in the condensed consolidated statements of financial condition and condensed consolidated statements of changes in total equity.

For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without additional support and (2) the equity holders bear the economic residual risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Company consolidates those entities it controls either through a majority voting interest or otherwise. For VIEs (i.e., entities that do not meet these criteria), the Company consolidates those entities where the Company has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE, except for certain VIEs that are money market funds, investment companies or are entities qualifying for accounting purposes as investment companies. Generally, the Company consolidates those entities when it absorbs a majority of the expected losses or a majority of the expected residual returns, or both, of the entities.

For investments in entities in which the Company does not have a controlling financial interest but has significant influence over operating and financial decisions, the Company generally applies the equity method of accounting with net gains and losses recorded within Other revenues. Where the Company has elected to measure certain eligible investments at fair value in accordance with the fair value option, net gains and losses are recorded within Principal transactions—Investments (see Note 3).

Equity and partnership interests held by entities qualifying for accounting purposes as investment companies are carried at fair value.

The Company's significant regulated U.S. and international subsidiaries include Morgan Stanley & Co. LLC (“MS&Co.”), Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. International plc (“MSIP”), Morgan Stanley MUFG Securities, Co., Ltd. (“MSMS”), Morgan Stanley Bank, N.A. andMorgan Stanley Private Bank, National Association.

Income Statement Presentation.    The Company, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. In connection with the delivery of the various products and services to clients, the Company manages its revenues and related expenses in the aggregate. As such, when assessing the performance of its businesses, primarily in its Institutional Securities business segment, the Company considers its principal trading, investment banking, commissions and fees and interest income, along with the associated interest expense, as one integrated activity.

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Securities Available for Sale (Schedule of Available for Sale Securities) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Amortized Cost	$ 32,346	$ 30,282
Gross Unrealized Gains	203	236
Gross Unrealized Losses	21	23
Other-than-Temporary Impairment	0	0
Securities available for sale, at fair value	32,528	30,495
Debt Securities
Amortized Cost	32,331	30,267
Gross Unrealized Gains	203	236
Gross Unrealized Losses	20	23
Other-than-Temporary Impairment	0	0
Securities available for sale, at fair value	32,514	30,480
U.S. Government and Agency Securities
Amortized Cost	30,032
Gross Unrealized Gains	198
Gross Unrealized Losses	18
Other-than-Temporary Impairment	0
Securities available for sale, at fair value	30,212
U.S. Treasury Securities
Amortized Cost	13,680	13,240
Gross Unrealized Gains	129	182
Gross Unrealized Losses	1	0
Other-than-Temporary Impairment	0	0
Securities available for sale, at fair value	13,808	13,422
U.S. Agency Securities
Amortized Cost	16,352	16,083
Gross Unrealized Gains	69	54
Gross Unrealized Losses	17	20
Other-than-Temporary Impairment	0	0
Securities available for sale, at fair value	16,404	16,117
Corporate and Other Debt
Amortized Cost	2,299	944	[1]
Gross Unrealized Gains	5	0	[1]
Gross Unrealized Losses	2	3	[1]
Other-than-Temporary Impairment	0	0	[1]
Securities available for sale, at fair value	2,302	941	[1]
Auto Loan Asset-backed Securities
Amortized Cost	237
Gross Unrealized Gains	0
Gross Unrealized Losses	0
Other-than-Temporary Impairment	0
Securities available for sale, at fair value	237
Corporate Bonds
Amortized Cost	631
Gross Unrealized Gains	1
Gross Unrealized Losses	1
Other-than-Temporary Impairment	0
Securities available for sale, at fair value	631
FFELP Student Loan Asset-backed Securities
Amortized Cost	1,431
Gross Unrealized Gains	4
Gross Unrealized Losses	1
Other-than-Temporary Impairment	0
Securities available for sale, at fair value	1,434
Equity Securities
Amortized Cost	15	15
Gross Unrealized Gains	0	0
Gross Unrealized Losses	1	0
Other-than-Temporary Impairment	0	0
Securities available for sale, at fair value	$ 14	$ 15

[1] Amounts represent FFELP student loan asset-backed securities, in which the loans are backed by a guarantee from the U.S. Department of Education ofat least 95% of the principal balance and interest on such loans.

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Derivative Instruments and Hedging Activities (Components of Derivative Products) (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Derivative assets	$ 40,016	$ 48,064
Derivative liabilities	42,765	46,453
Exchange Traded Derivative Products
Derivative assets	3,882	4,103
Derivative liabilities	6,071	4,969
OTC Derivative Products
Derivative assets	36,134	43,961
Derivative liabilities	$ 36,694	$ 41,484

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Segment and Geographic Information (Net Revenues and Assets by Geographic Area) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011		Dec. 31, 2011
Net Revenues	$ 6,935	[1]	$ 7,574	[1]
Total assets	781,030	[2]			749,898	[2]
Americas
Net Revenues	4,790		5,466
Europe, Middle East and Africa
Net Revenues	1,154		1,667
Asia
Net Revenues	$ 991		$ 441

[1] In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179 million at December 31, 2011 (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

[2] Corporate assets have been fully allocated to the Company’s business segments.

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Variable Interest Entities and Securitization Activities (Fair Value of Assets and Liabilities) (Details) (Special Purpose Entities, USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Retained interests (fair value)	$ 2,242	$ 2,884
Interests purchased in the secondary market (fair value)	947	882
Derivative assets (fair value)	1,377	1,441
Derivative liabilities (fair value)	443	571
Level 1
Retained interests (fair value)		0
Interests purchased in the secondary market (fair value)	0	0
Derivative assets (fair value)	0	0
Derivative liabilities (fair value)	0	0
Level 2
Retained interests (fair value)	680	1,260
Interests purchased in the secondary market (fair value)	928	764
Derivative assets (fair value)	745	869
Derivative liabilities (fair value)	380	541
Level 3
Retained interests (fair value)	1,562	1,624
Interests purchased in the secondary market (fair value)	19	118
Derivative assets (fair value)	632	572
Derivative liabilities (fair value)	63	30
Investment Grade
Retained interests (fair value)	529	1,189
Interests purchased in the secondary market (fair value)	705	640
Investment Grade | Level 1
Retained interests (fair value)	0	0
Interests purchased in the secondary market (fair value)	0	0
Investment Grade | Level 2
Retained interests (fair value)	526	1,186
Interests purchased in the secondary market (fair value)	705	638
Investment Grade | Level 3
Retained interests (fair value)	3	3
Interests purchased in the secondary market (fair value)	0	2
Non-Investment Grade
Retained interests (fair value)	1,713	1,695
Interests purchased in the secondary market (fair value)	242	242
Non-Investment Grade | Level 1
Retained interests (fair value)		0
Interests purchased in the secondary market (fair value)	0	0
Non-Investment Grade | Level 2
Retained interests (fair value)	154	74
Interests purchased in the secondary market (fair value)	223	126
Non-Investment Grade | Level 3
Retained interests (fair value)	1,559	1,621
Interests purchased in the secondary market (fair value)	$ 19	$ 116

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Segment and Geographic Information

3 Months Ended

Mar. 31, 2012

Segment Reporting [Abstract]

Segment And Geographic Information

18.Segment and Geographic Information.

Segment Information.

The Company structures its segments primarily based upon the nature of the financial products and services provided to customers and the Company's management organization. The Company provides a wide range of financial products and services to its customers in each of its business segments: Institutional Securities, Global Wealth Management Group and Asset Management. For further discussion of the Company's business segments, see Note 1.

Revenues and expenses directly associated with each respective segment are included in determining its operating results. Other revenues and expenses that are not directly attributable to a particular segment are allocated based upon the Company's allocation methodologies, generally based on each segment's respective net revenues, non-interest expenses or other relevant measures.

As a result of treating certain intersegment transactions as transactions with external parties, the Company includes an Intersegment Eliminations category to reconcile the business segment results to the Company's consolidated results. Intersegment eliminations also reflect the effect of fees paid by the Institutional Securities business segment to the Global Wealth Management Group business segment related to the bank deposit program.

Selected financial information for the Company's segments is presented below:

Three Months Ended March 31, 2012				Institutional Securities		Global  Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Total non-interest revenues			$	3,484	$	3,004	$	541	$	(35)	$	6,994
Net interest				(461)		410		(8)		—		(59)
Net revenues(1)			$	3,023	$	3,414	$	533	$	(35)	$	6,935
Income (loss) from continuing operations
	before income taxes		$	(312)	$	387	$	128	$	—	$	203
Provision for (benefit from) income taxes				(105)		121		38		—		54
Income (loss) from continuing operations				(207)		266		90		—		149
Discontinued operations(2):
	Gain from discontinued operations			24		2		1		—		27
	Provision for income taxes			41		1		—		—		42
		Net gain (loss) on discontinued operations		(17)		1		1		—		(15)
Net income (loss)				(224)		267		91		—		134
Net income applicable to noncontrolling
	interests			89		74		65		—		228
Net income (loss) applicable to Morgan Stanley			$	(313)	$	193	$	26	$	—	$	(94)

Three Months Ended March 31, 2011				Institutional Securities		Global Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Total non-interest revenues			$	3,895	$	3,063	$	630	$	(20)	$	7,568
Net interest				(327)		341		(8)		—		6
Net revenues(1)			$	3,568	$	3,404	$	622	$	(20)	$	7,574
Income from continuing operations before income
	taxes		$	432	$	344	$	125	$	—	$	901
Provision for (benefit from) income taxes				(363)		89		30		—		(244)
Income from continuing operations				795		255		95		—		1,145
Discontinued operations(2):
	Gain (loss) from discontinued operations			(38)		3		6		1		(28)
	Provision for (benefit from) income taxes			(15)		1		—		1		(13)
		Net gain (loss) on discontinued operations		(23)		2		6		—		(15)
Net income				772		257		101		—		1,130
Net income applicable to noncontrolling interests				61		74		27		—		162
Net income applicable to Morgan Stanley			$	711	$	183	$	74	$	—	$	968

(1)In certain management fee arrangements, the Company is entitled to receive performance-based fees (also referred to as incentive fees) when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fee revenue is accrued (or reversed) quarterly based on measuring account fund performance to date versus the performance benchmark stated in the investment management agreement. The amount of performance-based fee revenue at risk of reversing if fund performance falls below stated investment management agreement benchmarks was approximately $175 million at March 31, 2012 and approximately $179million at December 31, 2011(see Note 2 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K).

(2)       See Notes 1 and 20 for discussion of discontinued operations.

Net Interest			Institutional Securities		Global Wealth Management Group		Asset Management		Intersegment Eliminations		Total
			(dollars in millions)
Three Months Ended March 31 2012
Interest income		$	1,145	$	490	$	3	$	(96)	$	1,542
Interest expense			1,606		80		11		(96)		1,601
	Net interest	$	(461)	$	410	$	(8)	$	—	$	(59)
Three Months Ended March 31 2011
Interest income		$	1,486	$	453	$	4	$	(84)	$	1,859
Interest expense			1,813		112		12		(84)		1,853
	Net interest	$	(327)	$	341	$	(8)	$	—	$	6

Total Assets(1)		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
At March 31, 2012	$	670,662	$	103,235	$	7,133	$	781,030
At December 31, 2011	$	641,456	$	101,427	$	7,015	$	749,898

(1)       Corporate assets have been fully allocated to the Company's business segments.

Geographic Information.

The Company operates in both U.S. and non-U.S. markets. The Company's non-U.S. business activities are principally conducted through European and Asian locations. The net revenuesdisclosed in the following table reflect the regional view of the Company's consolidated net revenues on a managed basis, based on the following methodology:

•       Institutional Securities: advisory and equity underwriting—client location, debt underwriting—revenue recording location, sales and trading—trading desk location.

•       Global Wealth Management Group: global representative coverage location.

•       Asset Management: client location, except for Merchant Banking and Real Estate Investing businesses, which are based on asset location.

			Three Months Ended
			March 31,
Net Revenues			2012		2011
			(dollars in millions)
Americas		$	4,790	$	5,466
Europe, Middle East, and Africa			1,154		1,667
Asia			991		441
	Net revenues	$	6,935	$	7,574

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Goodwill and Net Intangible Assets (Changes in Carrying Amount of Goodwill) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Dec. 31, 2011
Beginning Balance	$ 6,686	[1]
Foreign currency translation adjustments and other	14
Ending Balance	6,700	[1]
Goodwill, accumulated impairments	700
Goodwill before accumulated impairments	7,400		7,386
Institutional Securities
Beginning Balance	330	[1]
Foreign currency translation adjustments and other	14
Ending Balance	344	[1]
Goodwill, accumulated impairments	673
Global Wealth Management Group
Beginning Balance	5,616	[1]
Foreign currency translation adjustments and other	0
Ending Balance	5,616	[1]
Asset Management
Beginning Balance	740	[1]
Foreign currency translation adjustments and other	0
Ending Balance	740	[1]
Goodwill, accumulated impairments	$ 27

[1] The amount of the Company’s goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27 million related to the Asset Management business segment, was $7,400 million and $7,386 million at March 31, 2012 and December 31, 2011, respectively

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Borrowings and Other Secured Financings (Tables)

3 Months Ended

Mar. 31, 2012

Borrowings and Other Secured Financings

Components of Long-term Borrowings

		At March 31,		At December 31,
		2012		2011
	(dollars in millions)
Senior debt	$	167,986	$	175,471
Subordinated debt		3,899		3,910
Junior subordinated debentures		4,838		4,853
Total	$	176,723	$	184,234

Other Secured Financings

			At		At
			March 31,		December 31,
			2012		2011
			(dollars in millions)
Secured financings with original maturities greater than one year		$	19,883	$	18,696
Secured financings with original maturities one year or less			305		275
Failed sales(1)			1,247		1,748
	Total(2)	$	21,435	$	20,719

Schedule of Maturities of Secured Financing

___________

• For more information on failed sales, see Note 6.
• Amounts include $13,081million and $14,594 million at fair value at March 31, 2012 and December 31, 2011, respectively.

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Commitments, Guarantees and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments, Guarantees and Contingencies [Abstract]

Commitments, Guarantees And Contingencies

11.    Commitments, Guarantees and Contingencies.

Commitments.

The Company's commitments associated with outstanding letters of credit and other financial guarantees obtained to satisfy collateral requirements, investment activities, corporate lending and financing arrangements, mortgage lending and margin lending at March31, 2012 are summarized below by period of expiration. Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

			Years to Maturity
			Less								Total at
			than 1		1-3		3-5		Over 5		March 31, 2012
			(dollars in millions)
Letters of credit and other financial guarantees
	obtained to satisfy collateral requirements	$	2,068	$	12	$	6	$	—	$	2,086
Investment activities			1,160		238		44		274		1,716
Primary lending commitments—investment grade(1)(2)			10,181		9,854		31,778		1,997		53,810
Primary lending commitments—non-investment grade(2)			2,182		2,789		9,981		897		15,849
Secondary lending commitments(3)			56		203		20		112		391
Commitments for secured lending transactions			1,299		251		198		—		1,748
Forward starting reverse repurchase agreements and
	securities borrowing agreements(4)		74,317		—		—		—		74,317
Commercial and residential mortgage-related commitments			1,378		26		201		450		2,055
Other commitments			1,262		248		5		1		1,516
	Total	$	93,903	$	13,621	$	42,233	$	3,731	$	153,488

(1)       This amount includes commitments to asset-backed commercial paper conduits of $275 million at March 31, 2012, of which $138 million have maturities of less than one year and $137 million of which have maturities of one to three years.

(2) This amount includes $12.2billion of investment grade and $3.5billion of non-investment grade unfunded commitments accounted for as held for investment and $68million of investment grade and $191million of non-investment grade unfunded commitments accounted for as held for sale at March 31, 2012. The remainder of these lending commitments are carried at fairvalue.

(3)       These commitments are recorded at fair value within Financial instruments owned and Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition (see Note 3).

(4)       The Company enters into forward starting reverse repurchase and securities borrowing agreements (agreements that have a trade date at or prior to March 31, 2012 and settle subsequent to period-end) that are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations. These agreements primarily settle within three business days and of the amount atMarch 31, 2012,$70.7billion settled within three business days.

For further description of these commitments, refer to Note 13 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

The Company sponsors several non-consolidated investment funds for third-party investors where the Company typically acts as general partner of, and investment advisor to, these funds and typically commits to invest a minority of the capital of such funds, with subscribing third-party investors contributing the majority. The Company's employees, including its senior officers, as well as the Company's directors, may participate on the same terms and conditions as other investors in certain of these funds that the Company forms primarily for client investment, except that the Company may waive or lower applicable fees and charges for its employees. The Company has contractual capital commitments, guarantees, lending facilities and counterparty arrangements with respect to these investment funds.

Guarantees.

The table below summarizes certain information regarding the Company's obligations under guarantee arrangements at March 31, 2012:

			Maximum Potential Payout/Notional										Carrying Amount (Asset)/ Liability		Collateral/ Recourse
			Years to Maturity
Type of Guarantee			Less than 1		1-3		3-5		Over 5		Total
			(dollars in millions)
Credit derivative contracts(1)		$	503,713	$	761,897	$	718,038	$	368,277	$	2,351,925	$	42,350	$	—
Other credit contracts			186		1,125		527		2,721		4,559		(1,787)		—
Non-credit derivative contracts(1)			1,084,120		889,974		375,232		424,365		2,773,691		85,784		—
Standby letters of credit and other
	financial guarantees issued(2)(3)		1,247		1,704		1,253		5,604		9,808		(141)		6,788
Market value guarantees			—		51		188		553		792		13		89
Liquidity facilities			4,827		305		37		67		5,236		(7)		6,552
Whole loan sales representations and
	warranties		—		—		—		24,366		24,366		79		—
Securitization representations and
	warranties		—		—		—		78,029		78,029		35		—
General partner guarantees			83		18		25		156		282		77		—

_____________

(1)Carrying amounts of derivative contracts are shown on a gross basis prior to cash collateral or counterparty netting. For further information on derivative contracts, see Note 10.

(2)       Approximately $2.6 billion of standby letters of credit are also reflected in the “Commitments” table in primary and secondary lending commitments. Standby letters of credit are recorded at fair value within Financial instruments owned or Financial instruments sold, not yet purchased in the condensed consolidated statements of financial condition.

(3)       Amounts include guarantees issued by consolidated real estate funds sponsored by the Company of approximately $225 million. These guarantees relate to obligations of the fund's investee entities, including guarantees related to capital expenditures and principal and interest debt payments. Accrued losses under these guarantees of approximately $7 million are reflected as a reduction of the carrying value of the related fund investments, which are reflected in Financial instruments owned—Investments on the condensed consolidated statement of financial condition.

For further description of these guarantees, refer to Note 13 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

The Company has obligations under certain guarantee arrangements, including contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying measure (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or non-occurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Also included as guarantees are contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement, as well as indirect guarantees of the indebtedness of others. The Company's use of guarantees is described below by type of guarantee:

Other Guarantees and Indemnities.

In the normal course of business, the Company provides guarantees and indemnifications in a variety of commercial transactions. These provisions generally are standard contractual terms. Certain of these guarantees and indemnifications are described below.

•        Trust Preferred Securities.    The Company has established Morgan Stanley Capital Trusts for the limited purpose of issuing trust preferred securities to third parties and lending the proceeds to the Company in exchange for junior subordinated debentures. The Company has directly guaranteed the repayment of the trust preferred securities to the holders thereof to the extent that the Company has made payments to a Morgan Stanley Capital Trust on the junior subordinated debentures. In the event that the Company does not make payments to a Morgan Stanley Capital Trust, holders of such series of trust preferred securities would not be able to rely upon the guarantee for payment of those amounts. The Company has not recorded any liability in the condensed consolidated financial statements for these guarantees and believes that the occurrence of any events (i.e., non-performance on the part of the paying agent) that would trigger payments under these contracts is remote. See Note 15 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K for details on the Company's junior subordinated debentures.

• Indemnities.    The Company provides standard indemnities to counterparties for certain contingent exposures and taxes, including U.S. and foreign withholding taxes, on interest and other payments made on derivatives, securities and stock lending transactions, certain annuity products and other financial arrangements. These indemnity payments could be required based on a change in the tax laws or change in interpretation of applicable tax rulings or a change in factual circumstances. Certain contracts contain provisions that enable the Company to terminate the agreement upon the occurrence of such events. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated.

•       Exchange/Clearinghouse Member Guarantees.    The Company is a member of various U.S. and non-U.S. exchanges and clearinghouses that trade and clear securities and/or derivative contracts. Associated with its membership, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange or the clearinghouse. While the rules governing different exchange or clearinghouse memberships vary, in general the Company's guarantee obligations would arise only if the exchange or clearinghouse had previously exhausted its resources. The maximum potential payout under these membership agreements cannot be estimated. The Company has not recorded any contingent liability in the condensed consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote.

•       Merger and Acquisition Guarantees.    The Company may, from time to time, in its role as investment banking advisor be required to provide guarantees in connection with certain European merger and acquisition transactions. If required by the regulating authorities, the Company provides a guarantee that the acquirer in the merger and acquisition transaction has or will have sufficient funds to complete the transaction and would then be required to make the acquisition payments in the event the acquirer's funds are insufficient at the completion date of the transaction. These arrangements generally cover the time frame from the transaction offer date to its closing date and, therefore, are generally short term in nature. The maximum potential amount of future payments that the Company could be required to make cannot be estimated. The Company believes the likelihood of any payment by the Company under these arrangements is remote given the level of the Company's due diligence associated with its role as investment banking advisor.

•       Guarantees on Morgan Stanley Stable Value Program.    On September 30, 2009, the Company entered into an agreement with the investment manager for the Stable Value Program (“SVP”), a fund within the Company's 401(k) plan, and certain other third parties. Under the agreement, the Company contributed $20 million to the SVP on October 15, 2009 and recorded the contribution in Compensation and benefits expense. Additionally, the Company may have a future obligation to make a payment of $40 million to the SVP following the third anniversary of the agreement, after which the SVP would be wound down over a period of time. The future obligation is contingent upon whether the market-to-book value ratio of the portion of the SVP that is subject to certain book-value stabilizing contracts has fallen below a specific threshold and the Company and the other parties to the agreement all decline to make payments to restore the SVP to such threshold as of the third anniversary of the agreement. The Company has not recorded a liability for this guarantee in the condensed consolidated financial statements.

In the ordinary course of business, the Company guarantees the debt and/or certain trading obligations (including obligations associated with derivatives, foreign exchange contracts and the settlement of physical commodities) of certain subsidiaries. These guarantees generally are entity or product specific and are required by investors or trading counterparties. The activities of the subsidiaries covered by these guarantees (including any related debt or trading obligations) are included in the Company's condensed consolidated financial statements.

Contingencies.

Legal.  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 are in financial distress. These actions have included, but are not limited to, residential mortgage and credit crisis related matters. Over the last several years, the level of litigation and investigatory activity focused on residential mortgage and credit crisis related matters 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 regarding residential mortgages and related securities in the future and, while the Company has identified below any individual proceedings where the Company believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that have not yet been notified to the Company or are not yet determined to be probable or possible and reasonably estimable losses.

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, including, among other matters, 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 condensed 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. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss.

For certain legal proceedings, the Company cannot reasonably estimate such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. 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, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding.

For certain other legal proceedings, the Company can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued, but does not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the Company's condensed consolidated financial statements as a whole, other than the matters referred to in thefollowing paragraphs.

On September 25, 2009, the Company was named as a defendant in a lawsuit styled Citibank, N.A. v. Morgan Stanley & Co. International, PLC, which was pending in the United States District Court for the Southern District of New York (“SDNY”). The lawsuit relates to a credit default swap referencing the Capmark VI CDO (“Capmark”), which was structured by Citibank, N.A. (“Citi N.A.”). At issue is whether, as part of the swap agreement, Citi N.A. was obligated to obtain the Company's prior written consent before it exercised its rights to liquidate Capmark upon the occurrence of certain contractually-defined credit events. Citi N.A. is seeking approximately $245 million in compensatory damages plus interest and costs. On October 8, 2010, the court issued an order denying Citi N.A.'s motion for judgment on the pleadings as to the Company's counterclaim for reformation and granting Citi N.A.'s motion for judgment on the pleadings as to the Company's counterclaim for estoppel. On May 25, 2011, the court issued an order denying the Company's motion for summary judgment and granting Citi N.A.'s cross motion for summary judgment. On June 27, 2011, the court entered a judgment in favor of Citi N.A. for $269 million plus post-judgment interest and costs, and the Company filed a notice of appeal with the United States Court of Appeals for the Second Circuit, which appeal is now pending. Based on currently available information, the Company believes it could incur a loss of up to approximately $269 million plus post-judgment interest.

On August 25, 2008, the Company and two ratings agencies were named as defendants in a purported class action related to securities issued by a structured investment vehicle called Cheyne Finance (the “Cheyne SIV”). The case is styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. and is pending in the SDNY. The complaint alleges, among other things, that the ratings assigned to the securities issued by the Cheyne SIV were false and misleading because the ratings did not accurately reflect the risks associated with the subprime residential mortgage backed securities held by the Cheyne SIV. On September 2, 2009, the court dismissed all of the claims against the Company except for plaintiffs' claims for common law fraud. On June 15, 2010, the court denied plaintiffs' motion for class certification. On July 20, 2010, the court granted plaintiffs leave to replead their aiding and abetting common law fraud claims against the Company, and those claims were added in an amended complaint filed on August 5, 2010. On December 27, 2011, the court permitted plaintiffs to reinstate their causes of action for negligent misrepresentation and breach of fiduciary duty against the Company. The Company moved to dismiss these claims on January 10, 2012. On January 5, 2012, the court permitted plaintiffs to amend their Complaint and assert a negligence claim against the Company. The amended complaint was filed on January 9, 2012 and the Company moved to dismiss the negligence claim on January 17, 2012. On January 23, 2012, the Company moved for summary judgment with respect to the fraud and aiding and abetting fraud claims. There are 15 plaintiffs in this action asserting claims related to approximately $983 million of securities issued by the Cheyne SIV. Plaintiffs have not alleged the amount of their alleged investments and are seeking, among other things, unspecified compensatory and punitive damages. Based on currently available information, the Company believes that the defendants could incur a loss up to the amount of plaintiffs' claimed compensatory damages, once specified, related to their alleged purchase of approximately $983 million of securities issued by the Cheyne SIV plus pre- and post-judgment interest, fees and costs.

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, which is styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al. and is pending in the Supreme Court of the State of New York, New York County. The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB's obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court presiding over this action denied the Company's motion to dismiss the complaint. On March 21, 2011, the Company appealed the order denying its motion to dismiss the complaint.  On July 7, 2011, the appellate court affirmed the lower court's decision denying the motion to dismiss. Based on currently available information, the Company believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against the Company and other defendants in the Superior Court of the State of California. These actions are styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints were filed on June 10, 2010. The complaints allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass through certificates backed by securitization trusts containing residential mortgage loans. The original amount of the certificates allegedly sold to plaintiff by the Company in these cases was approximately $980 million collectively. The complaints raise claims under both the federal securities laws and California law and seek, among other things, to rescind the plaintiff's purchase of such certificates. On July 29, 2011 and September 8, 2011, the court presiding over these cases dismissed the federal securities law claims against the Company, but denied the Company's motion to dismiss with respect to other claims. AtMarch 31, 2012, the current unpaid balance of the mortgage pass through certificates at issue in these cases was approximately $398 million and the certificates had not yet incurred losses. Based on currently available information, the Company believes it could incur a loss up to the difference between the $398 million unpaid balance of these certificates and their fair market value at the time of a judgment against the Company, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and would be entitled to an offset for interest received by the plaintiff prior to a judgment.

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Income Taxes (Reconciliation of the Provision for (Benefit from) Income Taxes and the U.S. Federal Statutory Income Tax Rate) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2011	Dec. 31, 2010 Revel
Discrete tax benefit from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance	$ 447
Pre-tax gain (loss) from disposal of discontinued operations		$ 1,200