Morgan Stanley

Morgan Stanley
Type Public (NYSE: MS)
Founded 1935
Headquarters Flag of the United States New York City, New York
Key people John J. Mack, Chairman & CEO
Walid Chammah Co-President
James P. Gorman Co-President
Industry Investment services
Products Financial Services
Investment Banking
Investment management
Revenue ▲ US$ 84.12 billion (2007)[1]
Net income ▲ US$ 3.209 billion (2007)[1]
Employees over 48,000 (October 2008)[2]
Website www.morganstanley.com

Morgan Stanley (NYSE: MS) is a global financial services provider headquartered in New York City, New York, United States. It serves a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 33 countries around the world with 600 offices, with an approximate employee workforce of 45,000.[3] The company reports US$779 billion as assets under its management[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 saw it lose a lot of talent and competence[6] and ultimately saw the firing of its then CEO Philip Purcell in 2005.

On September 21, 2008, it was reported that the Federal Reserve allowed Morgan Stanley to change its status from investment bank to bank holding company. On September 29, 2008, it was announced that Mitsubishi UFJ Financial Group, Japan's largest bank, will take a stake of $9 billion in Morgan Stanley equity.[7] In the midst of the October 2008 stock market crash, concerns over the completion of the Mitsubishi deal caused a dramatic fall in Morgan Stanley's stock price to levels last seen in 1994. The stock grew considerably after Mitsubishi UFJ closed the deal to buy 21% of Morgan Stanley on October 14, 2008.

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.[8]

Morgan Stanley's office on Times Square

History

See also: JPMorgan Chase and J.P. Morgan & Co.

Early years: 1935-1950

Morgan Stanley can trace its roots in the history of J.P. Morgan & Co. Following the Glass-Steagall Act, it became no longer possible for a corporation to have investment banking and retail banking businesses under a single holding entity. J.P. Morgan & Co. chose the retail 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.[9]

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[10].

In 1962, Morgan Stanley credits itself with having created the first viable computer model for financial analysis[11], 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[12]. 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

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." until late 2001. To foster brand recognition and marketing the Dean Witter name was dropped and the firm became "Morgan Stanley". Morgan Stanley acquired AB Asesores of Spain and entered India in a joint venture with JM Financials in 1999.

In 2001, Morgan Stanley lost ten employees in the September 11, 2001 attacks. In 2005 it moved 2,300 of its employees back to lower Manhattan, at that time the largest such move [13].

In 2004, Morgan Stanley co-managed the Google IPO which is 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. 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.[14]

In August 2008, Morgan Stanley was contracted by the United States Treasury to advise the government on potential rescue strategies for Fannie Mae and Freddie Mac [15].

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 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.[16]

On September 22, 2008, the last two investment banks in the US, Morgan Stanley and Goldman Sachs, both announced that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street. [17] The Federal Reserve's approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps 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. [18]

Organization

Morgan Stanley splits its businesses into three core business units. These follow below.

Institutional Securities

Institutional Securities has been the most profitable business segment[19] for Morgan Stanley in recent times. This business segment provides institutions with services such as capital raising and financial advisory services including advice on mergers and acquisitions, restructurings, real estate and project finance, corporate lending etc. The segment also encompasses the Equities and the Fixed Income divisions of the firm.

Global Wealth Management Group

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 mainly high net worth individuals and hedge funds.

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 are principally conducted under the Morgan Stanley and Van Kampen brands. 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. As of 2008 Q1 the segment posted a pre-tax loss of US$161 million[21].

Magazine and Popularity Rankings

Controversies and Lawsuits

In 2003, Morgan Stanley agreed to pay billions of dollars 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 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.

On July 12, 2004, Morgan Stanley settled a sex discrimination suit brought by the Equal Employment Opportunity Commission for $54 million.

On January 12, 2005, The New York Stock Exchange imposed a $19 million fine on Morgan Stanley for alleged regulatory and supervisory lapses.

On May 16, 2005, a Florida jury found that Morgan Stanley did in fact fail 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. On March 21, 2007, the ruling was overturned and Morgan Stanley was no longer required to pay the 1.57 billion dollar verdict. [24].

More recently, a class action lawsuit was filed in California by both current and former Morgan Stanley employees for unfair labor practices that were instituted to those employed through the financial advisor training program. A $40 million settlement was reportedly reached, with expected payout to those employed through the training program between specified dates.

NASD fine for e-mails

On September 27, 2007, FINRA announced a $12.5 million settlement with Morgan Stanley to resolve charges that the firm's former affiliate, Morgan Stanley DW, Inc. (MSDW), failed on numerous occasions to provide e-mails to claimants in arbitration proceedings as well as to regulators - while representing 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 pre-9/11 e-mail. In fact, the firm had millions of pre-9/11 e-mails that had been restored to the firm's active e-mail system using back-up tapes that had been stored in another location.[25] Customers who had lost their arbitration cases against Morgan Stanley DW Inc. because of their inability to obtain the emails to demonstrate Morgan Stanley's misconduct will each receive a token amount of money as a result of the settlement.

Awards

2007

Information found at Euromoney

Notable current and former employees

Business

Politics and public service

Other

Works about Morgan Stanley

See also

References

  1. ↑ 1.0 1.1 "Financial Statements for Morgan Stanley". Google Finance. Retrieved on 2008-09-18.
  2. ↑ "Company Profile for Morgan Stanley (MS)". Retrieved on 2008-10-01.
  3. ↑ "Morgan Stanley in United States". Morgan Stanley Website. Retrieved on 2008-03-22.
  4. ↑ "Company Information". Morgan Stanley Website. Retrieved on 2008-03-22.
  5. ↑ "Lame Duck Purcell". Forbes Website. Retrieved on 2008-03-22.
  6. ↑ "Morgan Stanley Exodus Continues as 8 Traders Leave". New York Times Online Edition of April 21, 2005. Retrieved on 2008-03-22.
  7. ↑ "Mitsubishi UFJ Financial Group to Invest $9 Billion in Morgan Stanley". Retrieved on 2008-10-02.
  8. ↑ "Google Finance - Morgan Stanley Summary". Google Finance. Retrieved on 2007-12-19.
  9. ↑ "Company History". Morgan Stanley Website. Retrieved on 2008-03-22.
  10. ↑ "Company History". Morgan Stanley Website. Retrieved on 2008-03-22.
  11. ↑ "Company History". Morgan Stanley Website. Retrieved on 2008-06-24.
  12. ↑ "Company History". Morgan Stanley Website. Retrieved on 2008-03-22.
  13. ↑ "Morgan Stanley to Move 2,300 Employees Downtown". Retrieved on 2008-08-11.
  14. ↑ "Morgan Stanley posts loss on writedown". Joe Bel Bruno, AP Business Writer. Retrieved on 2007-12-19.
  15. ↑ "Morgan Stanley to Advise U.S. on Fannie and Freddie". Louise Story, The New York Times. Retrieved on 2008-08-11.
  16. ↑ Morgan Stanley perplexes Wall Street as bank loses $20bn, The Times, September 19, 2008
  17. ↑ Wall Street in crisis: Last banks standing give up investment bank status, The Guardian, September 22, 2008
  18. ↑ Goldman, Morgan Stanley Bring Down Curtain on an Era, bloomberg, September 22, 2008
  19. ↑ "Morgan Stanley Reports First Quarter Results". Morgan Stanley Press Release. Retrieved on 2008-03-22.
  20. ↑ "Morgan Stanley Reports First Quarter Results". Morgan Stanley Press Release. Retrieved on 2008-03-22.
  21. ↑ "Morgan Stanley Reports First Quarter Results". Morgan Stanley Press Release. Retrieved on 2008-03-22.
  22. ↑ "Times 20 Best Big Companies to Work For 2006 list". Times Online (2004-08-23). Retrieved on 2007-02-08.
  23. ↑ Great Place to Work® Institute
  24. ↑ Morgan Stanley has billionaire Perelman's $1.58 billion award reversed in Sunbeam lawsuit - International Herald Tribune
  25. ↑ FINRA News Release
  • Chernow, Ron (Copyright 1990) The House of Morgan
  • Hibbard, J. (17 January 2005). Morgan Stanley: No stars—and lots of top tech IPOs. In BusinessWeek, 56 – 58.
  • John Mack Elected Chairman and CEO of Morgan Stanley
  • Partnoy, Frank: F.I.A.S.C.O. - NY: Penguin Books, 1997.

External links

Major investment banks

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