Morgan Stanley


Morgan Stanley
Morgan Stanley
Type Public company
Traded as NYSEMS
Industry Financial services
Founded 1935
Founder(s) Henry S. Morgan
Harold Stanley
Headquarters Morgan Stanley Building,
New York City, U.S
Area served Worldwide
Key people John J. Mack
(Chairman)
James P. Gorman
(President and CEO)
Ruth Porat
(CFO)
Products Investment banking
Commercial banking
Asset Management
Investment management
Retail brokerage
Commodities
Revenue increase US$ 31.622 billion (2010)[1]
Operating income increase US$ 6.202 billion (2010)[1]
Net income increase US$ 4.703 billion (2010)[1]
AUM increase US$ 279 billion (2010)[1]
Total assets increase US$ 807.698 billion (2010)[1]
Total equity increase US$ 57.211 billion (2010)[1]
Employees 62,542 (May, 2010)[1]
Website MorganStanley.com
The Morgan Stanley Building.

Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000.[2] The company reports US$779 billion as assets under its management.[3] It is headquartered in the Morgan Stanley Building, in Midtown Manhattan, New York City.[4]

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

The company found itself in the midst of a management crisis in the late 1990s[5] that resulted in a loss of a number of the firm's staff[6] and ultimately saw the firing of its then CEO Philip Purcell in 2005.

Contents

Overview

Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to customers, including corporations, governments, financial institutions and individuals. The company operates in three business segments: Institutional Securities, Global Wealth Management Group, and Asset Management.[7]

Morgan Stanley's office on Times Square

History

Early years: 1935–1950

Morgan Stanley can trace its roots in the history of J.P. Morgan & Co. Following the Glass–Steagall Act, it was no longer possible for a corporation to have investment banking and commercial banking businesses under a single holding entity. J.P. Morgan & Co. chose the commercial banking business over the investment banking business. As a result, some of the employees of J.P. Morgan & Co., most notably Henry S. Morgan and Harold Stanley, left J.P. Morgan & Co. and joined some others from the Drexel partners to form Morgan Stanley. The firm formally opened the doors for business on September 16, 1935, at Floor 19, 2 Wall Street, New York City. Within its first year, it achieved 24% market share (US$1.1 billion) among public offerings. The firm was involved with the distribution of 1938 US$100 million of debentures for the United States Steel Corporation as the lead underwriter. The firm also obtained the distinction of being the lead syndicate in the 1939 U.S. rail financing. The firm went through a major reorganization in 1941 to allow for more activity in its securities business. As J.P. Morgan rose to fame, he organized a contract to make sure that all of his future family receive a large annual sum of money, directly given to his family. Currently, Steven Parisee, a 4th generation relative, receives an annual 1.5 million dollars, regardless of the company's financial situation.[8]

Middle years: 1950–1990

The firm was led by Perry Hall, the last founder to lead Morgan Stanley, from 1951–1961. During this period, the firm co-managed the famous World Bank's US$50 million triple-A-rated bonds offering of 1952. The firm, in this period, also came up with the General Motor's US$300 million debt issue, US$231 million IBM stock offering, the US$250 million AT&T's debt offering.[8]

In 1962, Morgan Stanley credits itself with having created the first viable computer model for financial analysis,[8] thereby starting a new trend in the field of financial analysis. In 1967 it established the Morgan & Cie, International in Paris in attempt to enter the European securities market. It acquired Brooks, Harvey & Co., Inc. in 1967 and established a presence in the real estate business. By 1971 the firm had established its Mergers & Acquisitions business along with Sales & Trading. The sales and trading business is believed to be the brainchild of Bob Baldwin.[8] In 1970 Morgan Stanley opened a representative office in Tokyo and formally entered the Japanese markets. In 1975 Morgan Stanley established Morgan Stanley International Inc. in London. The private wealth management department was added into the firm's business units by 1977 when Morgan Stanley established Morgan Stanley Realty Inc. In the same year Morgan Stanley merged with Shuman, Agnew & Co. Morgan Stanley lead the Apple common stock IPO on December 12, 1980. The firm entered the Prime Brokerage business in 1984. In 1986, Morgan Stanley Group, Inc., was publicly listed on the New York Stock Exchange. By 1990 Morgan Stanley had its regional offices in Frankfurt, Hong Kong, Luxembourg, Melbourne, Milan, Sydney and Zürich and had regional headquarters in London and Tokyo.

Recent years: 1991–present

Historical logo used by Morgan Stanley in the early 2000s

In 1996, Morgan Stanley acquired Van Kampen American Capital. On February 5, 1997, the company merged with Dean Witter Reynolds, and Discover & Co. the spun off financial services business of Sears Roebuck. The merged company was briefly known as "Morgan Stanley Dean Witter Discover & Co." until 1998 when it was known as "Morgan Stanley Dean Witter & Co.". In late 2001, the "Dean Witter" name was dropped and the firm became "Morgan Stanley".

Morgan Stanley had offices located on twenty-four floors, running from the 59th floor to the 74th floor, of buildings 2 and 5 of the World Trade Center in New York City. These offices had been inherited from Dean Witter which had occupied the space since the mid-1980s. During the events of September 11, both WTC towers collapsed after Al Qaeda hijacked two airplanes and flew them into the towers. Ten employees died; one on American Airlines Flight 11, and nine others in the towers, including Security Director Rick Rescorla. 2,687 were successfully evacuated. After the disaster, the surviving employees moved to temporary headquarters in the vicinity. In 2005, it moved 2,300 of its employees back to lower Manhattan, at that time the largest such move.[9]

Morgan Stanley led the 2004 Google IPO, the largest Internet IPO in U.S. history. In the same year Morgan Stanley acquired the Canary Wharf Group. On December 19, 2006, after reporting 4th quarter earnings, Morgan Stanley announced the spin-off of its Discover Card unit. The bank completed the spinoff of Discover Financial on June 30, 2007.[10]

In order to cope up with the write-downs during the subprime mortgage crisis, Morgan Stanley announced on December 19, 2007 that it would receive a US$5 billion capital infusion from the China Investment Corporation in exchange for securities that would be convertible to 9.9% of its shares in 2010.[11]

The bank's Process Driven Trading unit was amongst several on Wall Street caught in a short squeeze, reportedly losing nearly $300 million in one day. One of the stocks involved in this squeeze, Beazer Homes USA, was a component of the then-bulging real estate bubble. The bubble's subsequent collapse was considered to be a central feature of the financial crisis of 2007–2010.[12]

The bank was contracted by the United States Treasury in August 2008 to advise the government on potential rescue strategies for Fannie Mae and Freddie Mac.[13]

On September 17, 2008, the British evening-news analysis program Newsnight reported that Morgan Stanley was facing difficulties after a 42% slide in its share price. CEO John J. Mack wrote in a memo to staff "we're in the midst of a market controlled by fear and rumours and short-sellers are driving our stock down." The company was said to explore merger possibilities with CITIC, Wachovia, HSBC, Banco Santander and Nomura.[14] At one point, Hank Paulson offered Morgan Stanley to JPMorgan Chase at no cost, but Jamie Dimon refused the offer.[15]

Morgan Stanley and Goldman Sachs, the last two major investment banks in the US, both announced on September 22, 2008 that they would become traditional bank holding companies regulated by the Federal Reserve.[16] The Federal Reserve's approval of their bid to become banks ended the ascendancy of securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.[17]

Mitsubishi UFJ Financial Group, Japan's largest bank, invested $9 billion in Morgan Stanley on September 29, 2008.[18] Concerns over the completion of the Mitsubishi deal during the October 2008 stock market volatility caused a dramatic fall in Morgan Stanley's stock price to levels last seen in 1994. It recovered once Mitsubishi UFJ's 21% stake in Morgan Stanley was completed on October 14, 2008.

Morgan Stanley borrowed $107.3 billion from the Fed during the 2008 crises, the most of any bank, according to data compiled by Bloomberg News Service and published 8/22/2011.

In 2009, Morgan Stanley purchased Smith Barney from Citigroup and the new company is operating under the name Morgan Stanley Smith Barney.

In non-financial matters, the firm celebrated its 75th anniversary in 2010 and has continued to demonstrate dedication to its Global Citizen Program into the new decade.[19]

Organization

Morgan Stanley splits its businesses into three core business units. As listed below:

Institutional Securities

Institutional Securities has been the most profitable business segment[20] for Morgan Stanley in recent times. This business segment provides institutions with services such as capital raising and financial advisory services including mergers and acquisitions advisory, restructurings, real estate and project finance, and corporate lending. The segment also encompasses the Equities and the Fixed Income divisions of the firm; trading is anticipated to maintain its position as the "engine room" of the company.[21]

Global Wealth Management Group

The Global Wealth Management Group provides brokerage and investment advisory services. As of 2008 Q1 this segment has reported an annual increase of 12 percent in the pre-tax income.[20] This segment provides financial and wealth planning services to its clients who are primarily high net worth individuals.

Asset Management

Asset Management provides global asset management products and services in equity, fixed income, alternative investments and private equity to institutional and retail clients through third-party retail distribution channels, intermediaries and Morgan Stanley's institutional distribution channel. Morgan Stanley's asset management activities were principally conducted under the Morgan Stanley and Van Kampen brands until 2009. On October 19, 2009, Morgan Stanley announced that it would sell Van Kampen to Invesco for $1.5 billion, but would retain the Morgan Stanley brand.[22] It provides asset management products and services to institutional investors worldwide, including pension plans, corporations, private funds, non-profit organizations, foundations, endowments, governmental agencies, insurance companies and banks.

Magazine and popularity rankings

  • Morgan Stanley was named one of the 100 Best Companies for Working Mothers in 2004 by Working Mothers magazine.
  • Family Digest magazine named Morgan Stanley one of the "Best Companies for African Americans" in June 2004
  • Essence magazine named Morgan Stanley as one of the "30 Great Places to Work" in May 2004
  • Asian Enterprise magazine named Morgan Stanley as one of the "Top Companies for Asian Americans" in April 2004
  • Hispanic magazine selected Morgan Stanley as one of the "100 Companies Providing the Most Opportunities to Hispanics" in February 2004
  • Morgan Stanley is listed in The Times Top 100 Graduate Employers, only recently dropping out of the top 40
  • The Times listed Morgan Stanley 5th in its 20 Best Big Companies to Work For 2006 list[23]
  • Great Place to Work Institute Japan in 2007 ranked Morgan Stanley as the second best corporation to work in Japan, based on the opinions of the employees and the corporate culture[24]

Controversies and lawsuits

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

Morgan Stanley settled a sex discrimination suit brought by the Equal Employment Opportunity Commission for $54 million on July 12, 2004.[citation needed]

The New York Stock Exchange imposed a $19 million fine on January 12, 2005 for alleged regulatory and supervisory lapses.[citation needed]

On May 16, 2005, a Florida jury found that Morgan Stanley failed to give adequate information to Ronald Perelman about Sunbeam thereby defrauding him and causing damages to him of $604 million. In addition, punitive damages were added for total damages of $1.450 billion. This verdict was directed by the judge as a sanction against Morgan Stanley after the firm's attorneys infuriated the court by failing and refusing to produce documents, and falsely telling the court that certain documents did not exist.[citation needed] The ruling was overturned on March 21, 2007 and Morgan Stanley was no longer required to pay the $1.57 billion verdict.[25]

Morgan Stanley settled a class action lawsuit on March 2, 2006. It had been filed in California by both current and former Morgan Stanley employees for unfair labor practices instituted to those in the financial advisor training program. Employees of the program had claimed the firm expected trainees to clock overtime hours without additional pay and handle various administrative expenses as a result of their expected duties. A $42.5 million settlement was reached and Morgan Stanley admitted no fault.[26]

On September 25, 2009, Citigroup Inc. filed a federal lawsuit against Morgan Stanley, claiming its rival failed to pay $245 million due under a credit default swap agreement. The breach-of-contract lawsuit was filed in Manhattan federal court and seeks unspecified damages.[27]

FINRA fine

The Financial Industry Regulatory Authority (FINRA) announced a $12.5 million settlement with Morgan Stanley on September 27, 2007. This resolved charges that the firm's former affiliate, Morgan Stanley DW, Inc. (MSDW), failed on numerous occasions to provide emails to claimants in arbitration proceedings as well as to regulators. The company had claimed that the destruction of the firm's email servers in the September 11, 2001 terrorist attacks on New York's World Trade Center resulted in the loss of all email before that date. In fact, the firm had millions of earlier emails that had been retrieved from backup copies stored in another location that was not destroyed in the attacks.[28] Customers who had lost their arbitration cases against Morgan Stanley DW Inc. because of their inability to obtain these emails to demonstrate Morgan Stanley's misconduct received a token amount of money as a result of the settlement.

List of officers and directors

Operating Committee:

  • James P. Gorman: President and Chief Executive Officer
  • Frank Barron: Chief Legal Officer
  • Walid Chammah: Chairman and CEO, Morgan Stanley International
  • Kenneth M. deRegt: Global Head of Fixed Income Sales and Trading
  • Greg Fleming: President of Investment Management, President of Morgan Stanley Smith Barney
  • Ruth Porat: Chief Financial Officer and Executive Vice President
  • Jim Rosenthal: Chief Operating Officer
  • Colm Kelleher: Co-President, Institutional Securities
  • Paul J. Taubman: Co-President, Institutional Securities

Board of Directors:

  • John J. Mack
  • James P. Gorman
  • Roy J. Bostock
  • Erskine B. Bowles
  • Sir Howard J. Davies
  • James H. Hance, Jr.
  • Nobuyuki Hirano
  • C. Robert Kidder
  • Donald T. Nicolaisen
  • Hutham S. Olayan
  • O. Griffith Sexton
  • Dr. Laura D. Tyson

Global headquarters

Morgan Stanley World Headquarters located in New York, European headquarters are based in London and Asia Pacific Headquarters are based in Hong Kong [29][30]

Notable alumni

  • Daniel Ammann, General Motors, Chief Financial Officer
  • Barton Biggs, Author and Hedge Fund Manager
  • Erskine Bowles, Clinton White House Chief of Staff
  • Bob Diamond, Chief Executive Officer, Barclays
  • Richard A. Debs, Chairman of Carnegie Hall; Middle East power-broker
  • Thomas J. DeLong, Stomberg Professor of Management, Harvard University
  • Amy Falls, Chief Investment Officer, Rockefeller University
  • Amelia Fawcett, D.B.E. chairman, Guardian Media Group PLC
  • Richard B. Fisher, Chairman of the Board, Rockefeller University; member, Trilateral Commission
  • S. Parker Gilbert, Jr., Chairman of the Morgan Library; philanthropist
  • Steve Girsky, Vice Chairman of General Motors
  • Eric Gleacher, founder of Gleacher & Co.
  • Robert F. Greenhill, founder of Greenhill & Co.
  • Peter Karches, Chairman of the New York Racing Authority
  • Mary Meeker, Author and Venture Capitalist
  • Thomas Nides, Deputy Secretary, U.S. Department of State
  • Stephen A. Oxman, Assistant Secretary of State; Chair, Princeton University Board of Trustees
  • Vikram Pandit, Chief Executive Officer, Citigroup
  • Joseph R. Perella, philanthropist; founder of Perella Weinberg Partners
  • Charles E. Phillips, former President of Oracle, Inc.; C.E.O. of Infor
  • Frank Quattrone, founder, Qatalyst Group
  • Steven Rattner, Private Equity Manager and Commentator
  • Ben Rosen, Technology Investor; founder, Compaq
  • David E. Shaw, Hedge Fund Manager
  • Kevin Warsh, G.W. Bush deputy economic advisor; Member, Federal Reserve Board of Governors
  • Byron Wien, Chief Strategist, Blackstone Group

See also

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Notes

  1. ^ a b c d e f g "2010 Form 10-K, Morgan Stanley". United States Securities and Exchange Commission. http://www.sec.gov/Archives/edgar/data/895421/000119312511050049/d10k.htm. 
  2. ^ "Morgan Stanley article in The Gateway". The Gateway Online. http://www.thegatewayonline.com/article/317. Retrieved November 25, 2009. 
  3. ^ "Company Information". Morgan Stanley Website. Archived from the original on March 21, 2008. http://web.archive.org/web/20080321044634/http://www.morganstanley.com/about/company/index.html. Retrieved March 22, 2008. 
  4. ^ "Contact Us". Morgan Stanley. Retrieved on August 28, 2009.
  5. ^ "Lame Duck Purcell". Forbes Website. June 13, 2005. http://www.forbes.com/2005/06/13/morgan-stanley-purcell-quit-cx_lm_0613quit.html?boxes=custom. Retrieved March 22, 2008. 
  6. ^ THOMAS Jr, LANDON (April 21, 2005). "Morgan Stanley Exodus Continues as 8 Traders Leave". New York Times Online Edition of April 21, 2005. http://www.nytimes.com/2005/04/21/business/21wall.html. Retrieved March 22, 2008. 
  7. ^ "Google Finance – Morgan Stanley Summary". Google Finance. http://finance.google.com/finance?q=ms. Retrieved December 19, 2007. 
  8. ^ a b c d "Company History". Morgan Stanley Website. http://www.morganstanley.com/about/company/history.html. Retrieved March 22, 2008. 
  9. ^ "Surviving 9/11 gave former NHLer Rob Cimetta a new outlook on life". http://www.lowermanhattan.info/news/morgan_stanley_to_move_52052.aspx. Retrieved September 11, 2009. 
  10. ^ "Press Release". Morgan Stanley. June 1, 2007. http://www.morganstanley.com/about/press/articles/4984.html. Retrieved July 9, 2011. 
  11. ^ "Morgan Stanley posts loss on writedown". Joe Bel Bruno, AP Business Writer. Archived from the original on December 21, 2007. http://web.archive.org/web/20071221002410/http://biz.yahoo.com/ap/071219/earns_morgan_stanley.html. Retrieved December 19, 2007. 
  12. ^ Patterson, Scott D., The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Crown Business, 352 pages, 2010. ISBN 0307453375 ISBN 978-0307453372 Amazon page for book. Specifically in an excerpt from "Chapter 10: The August Factor", in the January 23, 2010 Wall Street Journal.
  13. ^ "Morgan Stanley to Advise U.S. on Fannie and Freddie". Louise Story, The New York Times. August 6, 2008. http://www.nytimes.com/2008/08/06/business/06morgan.html?ref=business. Retrieved August 11, 2008. 
  14. ^ Morgan Stanley perplexes Wall Street as bank loses $20bn, The Times, September 19, 2008
  15. ^ [Duff McDonald, Last Man Standing (2009)]
  16. ^ Wall Street in crisis: Last banks standing give up investment bank status, The Guardian, September 22, 2008
  17. ^ Goldman, Morgan Stanley Bring Down Curtain on an Era, bloomberg, September 22, 2008
  18. ^ "Mitsubishi UFJ Financial Group to Invest $9 billion in Morgan Stanley". http://www.morganstanley.com/about/press/articles/6962.html. Retrieved October 2, 2008. 
  19. ^ http://www.insidebuzz.co.uk/banking/morgan-stanley/graduate-career Inside Buzz Morgan Stanley Profile
  20. ^ a b "Morgan Stanley Reports First Quarter Results". Morgan Stanley Press Release. http://www.morganstanley.com/about/ir/shareholder/1q2008.html. Retrieved March 22, 2008. 
  21. ^ FINS.com. "Morgan Stanley Overview". http://www.fins.com/Finance/Companies/141/Morgan-Stanley. Retrieved July 19, 2010. 
  22. ^ "Invesco to Buy Morgan Stanley Unit for $1.5 Billion". Deal Book (The New York Times). 2009-10-19. http://dealbook.blogs.nytimes.com/2009/10/19/invesco-to-buy-morgan-stanley-unit-for-15-billion/. Retrieved 2009-10-20. 
  23. ^ Elliott, Francis; Haynes, Deborah (August 23, 2004). "Times 20 Best Big Companies to Work For 2006 list". The Times (UK). http://business.timesonline.co.uk/section/0,,20089,00.html. Retrieved February 8, 2007. 
  24. ^ "Great Place to Work Institute". Greatplacetowork-europe.com. February 18, 2010. http://www.greatplacetowork-europe.com/best/list-jp.htm. Retrieved July 9, 2011. 
  25. ^ "Morgan Stanley has billionaire Perelman's $1.58 billion award reversed in Sunbeam lawsuit". International Herald Tribune. March 29, 2009. http://www.iht.com/articles/ap/2007/03/21/america/NA-FIN-US-Morgan-Stanley-Perelman.php. Retrieved July 9, 2011. 
  26. ^ "Morgan Settles Suit on Overtime". Los Angeles Times. March 3, 2006. http://articles.latimes.com/2006/mar/03/business/fi-wrap3. Retrieved July 9, 2011. 
  27. ^ Glovin, David (September 25, 2009). "Citigroup Sues Morgan Stanley Over $250 million CDO". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601087&sid=aJJBnys.k1dM. Retrieved July 9, 2011. 
  28. ^ "FINRA News Release". Finra.org. http://www.finra.org/PressRoom/NewsReleases/2007NewsReleases/P037071. Retrieved July 9, 2011. 
  29. ^ "Morgan Stanley in the United Kingdom". Morganstanley.com. http://www.morganstanley.com/about/offices/uk.html. Retrieved July 9, 2011. 
  30. ^ "Morgan Stanley in Hong Kong". Morganstanley.com. http://www.morganstanley.com/about/offices/hk.html. Retrieved July 9, 2011. 

References

Further reading

  • Patricia Beard (2008). Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley.

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