MSMorgan Stanley

Please tell us and revise, in future filings, to provide a specific and thorough discussion of the severance expenses, which were primarily related to the May 2023 “employee action.” Your disclosures should take into consideration and address the steps taken by the Company, as well as the impact on the operating performance of the impacted segments, geographic areas and on the consolidated level.

For the year ended December 31, 2023 (“prior year”) the Company recognized severance costs primarily associated with specific reductions in workforce (“RIFs”) of $353 million, of which $308 million were related to a May 2023 RIF recorded in the second quarter of 2023 (i.e. “employee action” in the 2023 Form 10-K), and an additional $45 million which were recorded in the second half of the year, all included within Compensation and benefits expenses as disclosed on pages 30 and 35 of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2023 Form 10-K.

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The specific RIFs occurred across the Company’s business segments and geographic regions and impacted approximately 4% of the Company’s global workforce at that time. The specific RIFs resulted from the Company’s review of its global workforce, operating expenses and the business environment following the acquisitions of E*TRADE Financial Corporation (“E*TRADE”) and Eaton Vance Corp. (“Eaton Vance”), rather than a change in strategy or exit of businesses. The impact of severance costs to any individual segment or geographic region was not deemed to be material for the prior year.

The Company had previously disclosed severance costs in the Financial Data Supplement of the Company (“Earnings Supplement”) for the quarter and year ended December 31, 2023 that was filed as Exhibit 99.2 to the Company’s Form 8-K dated January 16, 2024, of $220 million in the Institutional Securities business segment, $105 million in the Wealth Management business segment, and $28 million in the Investment Management business segment for the prior year. These severance costs reduced diluted EPS by $0.17 and pre-tax margin by approximately 65 basis points for the Company, 95 basis points for Institutional Securities, 40 basis points for Wealth management and 52 basis points for Investment management business segments for the prior year.

In future filings, to the extent the Company incurs material charges and such charges have a significant impact on any individual business segment or geographic region, or represent a material portion of the changes in an expense category within Management’s Discussion and Analysis, the Company will discuss and quantify the amount of these expenses by business segment and geography along with the impact to operating performance.

In future filings, in response to the Staff’s comment, beginning with the Form 10-Q for the quarter ended September 30, 2024, the Company will provide the following expanded qualitative and quantitative disclosure of prior period severance costs.

During the nine months ended September 30, 2023, Compensation and benefits expenses included severance costs of $308 million, associated with a reduction in workforce during the second quarter of 2023. This specific reduction in workforce occurred across the Company’s business segments and geographic regions, impacted approximately 4% of the Company’s global workforce, and resulted from the Company’s review of its global workforce, operating expenses and the business environment following the acquisitions of E*TRADE and Eaton Vance, rather than a change in strategy or exit of businesses. We recorded severance costs of $207 million in the Institutional Securities business segment, $78 million in the Wealth Management business segment, and $23 million in the Investment Management business segment for the prior year period. These costs were primarily incurred in the Americas and EMEA, with the majority in the Americas.

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Please tell us and revise, in future filings, to provide a specific and thorough discussion of the integration-related expenses recognized during the period. Your disclosures should discuss each of the types of integration activities that includes those relating to E*TRADE, the costs recognized, the segments impacted and on the consolidated level.

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You should also address additional costs required to complete any planned integrationrelated activities. Notes to Consolidated Financial Statements 2. Significant Accounting Policies, page 45

The Company recognized integration-related expenses of $293 million for the prior year, primarily related to the integrations of its acquired businesses, E*TRADE within the Wealth Management business segment and Eaton Vance within the Investment Management business segment. These integration-related expenses were significantly lower than the integration-related expenses incurred in the years ended December 31, 2022 of $470 million, and December 31, 2021 of $456 million, both from a consolidated and segment perspective, given integration activities were substantially completed by December 31,

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2023. Additionally, segment attribution of these expenses during the prior year remained largely consistent with the attribution disclosed in 2022 and 2021.

In the Earnings Supplement for the quarter and year ended December 31, 2023, the Company disclosed integration-related expenses for the quarter and year ended December 31, 2023, of $30 million and $201 million respectively in the Wealth Management business segment, and $19 million and $92 million, respectively, in the Investment Management business segment. Similar tabular disclosures of integration-related expenses were also made in Form 10-K and 10-Q filings and Earnings Supplements from the year ended December 31, 2020 through the year ended December 31, 2022 when integration-related expenses were more significant.

Integration expenses in the prior year primarily included non-compensation expenses such as information technology expense related to the consolidation of platforms, and professional fees related to changes in legal entity structures and the integration of clients, within both the Wealth Management and Investment Management business segments. The Company has a process to track integration-related expenses by segment which is administered by the businesses with oversight from our Financial Control group.

The integrations for both E*TRADE and Eaton Vance were substantially completed as of December 31, 2023. In future filings, to the extent that a material portion of the changes in compensation and/or non-compensation expenses results from a movement of integration-related expenses, the Company will discuss and quantify the amount of these expenses by business segment.

In future filings, beginning with the Form 10-Q for the quarterly period ending September 30, 2024, the Company will provide the following expanded qualitative and quantitative disclosure of integration-related expenses in response to the Staff’s comment.

Integration-related Expenses

In the nine months ended September 30, 2023, integration expenses were $244 million, of which $171 million related to the integration of E*TRADE within the Wealth Management business segment and $73 million related to the integration of Eaton Vance within the Investment Management business segment. Integration-related expenses primarily included non-compensation expenses such as information technology expense related to the consolidation of platforms, and professional fees related to changes in legal entity structures and the integration of clients, within both Wealth Management and Investment Management business segments. All integration-related activities were substantially completed as of December 31, 2023.

Notes to Consolidated Financial Statements

2. Significant Accounting Policies, page 45

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We note you implemented certain presentation changes in the first quarter of 2024 that affected interest income and interest expense but had no effect on net interest income. Please tell us what prior period amounts and line items have been reclassified in these historical financial statements and revise your disclosures, in future filings, to provide further clarity on any reclassification changes, such as the

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nature, magnitude and the specific impact on affected line items in the financial statements. Refer to ASC 20510-50-1. In addition, address the basis for your conclusion that the changes did not represent a change in accounting principle.

In the Form 10-Q for the quarterly period ended June 30, 2024, we disclosed the prior period amounts and line items that were reclassified in historical financial statements, as well as the impacted business segment – Institutional Securities – in Notes 17. Interest Income and Interest Expense (on page 75) and 19. Segment, Geographic and Revenue Information to the Consolidated Financial Statements (on page 76) which stated:

Certain prior period amounts have been adjusted to conform with the current period presentation.

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This adjustment resulted in a decrease to both interest income and interest expense of $1,135 million and $2,025 million for the three months and six months ended, June 30, 2023, respectively. There was no change to net interest income for the Institutional Securities segment. See Note 2 for additional information.

There was no impact to net interest amounts presented in the Equity and Fixed Income Net Revenues table within the Institutional Securities business segment discussion in Management's Discussion and Analysis on page 12 of our Form 10-Q for the quarterly period ending June 30, 2024.

In future filings, beginning with the Form 10-Q filing for the quarter ended September 30, 2024, the Company will aggregate the qualitative and quantitative disclosure relating to this adjustment in Note 2. Significant Accounting Policies to the Consolidated Financial Statements as follows and in addition we will continue to present the existing disclosures in Notes 17 and 19 to the Consolidated Financial Statements for greater prominence in response to the Staff’s comment:

In the first quarter of 2024, the Firm implemented certain presentation changes which resulted in a decrease to both interest income and interest expense of $1,179 million and $3,204 million for the three months and nine months ended, September 30, 2023, respectively and no effect on net interest income, with the entire impact to the Firm recorded within the Institutional Securities segment. These changes further aligned the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage-related customer receivables and payables that are currently accounted for as a single unit of account on the balance sheet. The current and previous presentation of these interest income and interest expense amounts are acceptable and the change does not represent a change in accounting principle. These changes were applied retrospectively to the consolidated income statement for 2023 and accordingly, prior period amounts were adjusted to conform with the current presentation.

Basis for conclusion

In response to the Staff’s request to address the Company’s basis for conclusion that the changes did not represent a change in accounting principle:

Background

The Company offers various services to prime brokerage clients in the U.S. and internationally, which include extension of margin to facilitate client’s securities purchase transactions and sourcing securities or executing other financing arrangements to cover client short positions. These transactions are typically accounted for as a single unit of account on the balance sheet, and the presentation change further aligned the presentation of prime brokerage activities within the income statement with the presentation of such activities on the balances sheet.

Accounting Analysis

A change in accounting principle is defined under ASC 250, Accounting Changes and Error Corrections as:

A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle.

The Company notes that these transactions are not in scope of ASC 606, Revenue from Contracts with Customers as they represent financial instruments and that there is no prescriptive U.S. GAAP guidance addressing the presentation of interest income and expense in these situations.

Furthermore, the Company referenced the nonauthoritative guidance in Deloitte & Touche’s Q&A on Accounting for Changes in Presentation 250-10-45 which states:

A Change When Guidance Is Not Prescriptive

In certain instances in which guidance is not prescriptive, we do not believe that a change in historical presentation would represent a change in accounting principle as defined under ASC 250 if the entity is able to conclude that both the previous presentation and the new presentation are acceptable. Instead, the change should be viewed as a change from one acceptable presentation to another. For example, ASC 830 is silent on the presentation of foreign currency transaction gains and losses; therefore, a change in presentation would not need to be evaluated as a change in accounting principle or an error. Although this would not be an accounting policy change, the change should be applied retrospectively, and the entity should conform the presentation of all periods presented.

Conclusion

Given U.S. GAAP is not prescriptive as to the presentation of these transactions, the Company concluded that both new and previous presentations are acceptable and the change accordingly, did not represent a change in accounting principle.

These changes were applied retrospectively to the income statement for 2023 and accordingly, prior period amounts were adjusted to conform with the current presentation. While the change in presentation did not impact any key financial performance measures within the Consolidated Financial Statements, the Company provided disclosure about the change in the Notes to the Consolidated Financial Statements referred to above, and in future filings plans to consolidate disclosures in Note 2. Significant Accounting Policies, as discussed above, for greater prominence.

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Significant Accounting Policies, page 45 We note your response to comment 3. Please respond to the following additional items: • Please describe for us specifically the details and circumstances considered and the facts supporting your conclusion to change the unit of account for the services that included extension of margin to facilitate client’s securities purchase transactions and sourcing securities or

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executing other financing arrangements to cover certain client short positions. Include your detailed policies before and after the change in unit of accounts. • Please provide us the basis for your response that these transactions are typically accounted for as a single unit of account on the balance sheet and a summary of the circumstances for why your accounting did not do so previously. Please explain in more detail how the referred change in unit of account further aligns • 1. the accounting treatment between the balance sheet and the related interest income or expense.

There has not been any change in the Company’s accounting practice to present prime brokerage activity that is governed by a Customer Prime Broker Account Agreement (“prime brokerage arrangement”) as a single position based on the legal terms of the agreements on the Company’s consolidated balance sheet.

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Rather, the change disclosed in connection with the Company’s filings on Forms 10-Q for the periods ended March 31, 2024 and June 30, 2024 was a change in consolidated income statement presentation of interest income and interest expense from prime brokerage arrangements, such that the net interest income from prime brokerage arrangements is recorded either as interest income or interest expense on a daily basis depending on whether the client’s prime brokerage arrangement is presented as a net receivable or a net payable on the Company’s consolidated balance sheet at the end of such day. The Company believes that this change to the Company’s income statement presentation achieves greater consistency with the Company’s consolidated balance sheet presentation of prime brokerage arrangements as well as improved alignment with certain peer U.S. G-SIB financial institutions. As further discussed within this response, this change is not a change in accounting principle under FASB ASC 250 but a change in the basis of presentation of these arrangements in the income statement. Please find below the details and circumstances specifically considered in support of the presentation for prime brokerage arrangements.

Overview of Prime Brokerage arrangements

The Company offers prime brokerage arrangements to clients in the United States and internationally, facilitating the clearance and settlement of securities trades for clients. Each prime brokerage arrangement is typically governed by a single legal agreement and includes a client account or a collection of sub-accounts. Clients may hold in their prime brokerage accounts a mix of cash and securities to facilitate their trading and investment activities. The prime brokerage arrangement provides for the extension of margin to facilitate clients’ securities purchase transactions, or long positions, and facilitates clients’ sales of securities short (i.e., sales of securities which the client does not hold in its account). The Company charges interest to clients for margin loan debit balances associated with prime brokerage arrangements. Likewise, the Company pays interest to clients on credit balances associated with prime brokerage arrangements, including cash on deposit.

When a client purchases a security through its prime brokerage arrangement, the purchase will be settled with either cash on deposit in the account, or through the extension of a margin loan to the client. When a client sells a security, the cash proceeds from the sale will be deposited in the client’s account. If the client sells a security short, the client must either deposit the security into its account prior to settlement, or the Company as prime broker will source the security to settle the client’s short sale. The net balance of margin lending, which generates debits in the account, and cash deposit and short sale settlement activities provided by the Company as prime broker, which generate credits in the account, is driven by the client’s trading activities. The assets held in the account serve as collateral for the client’s obligations under the prime brokerage arrangement including those arising from margin lending and short sale activities provided by the Company as prime broker. The client must maintain a minimum level of net equity in the account (i.e., the amount by which the client’s assets associated with the prime brokerage arrangement exceed the client’s liabilities associated with the prime brokerage arrangement) required for both regulatory and the Company’s own margin requirements, and the Company has the contractual right to call for additional collateral when required based on the client’s net equity in its account. Furthermore, in the event of client default, the Company has the right to foreclose upon all collateral credited to the account and the cash obligations between the Company as prime broker and the client would be offset against each other.

Balance Sheet Presentation

As discussed above, the prime brokerage arrangement is typically governed by a single legal agreement, restricted as to the net equity requirements at the level of the prime brokerage arrangement, margined on a net basis, and the client assets in the related client account would be foreclosed to satisfy a client’s net obligation to the Company in the event of the client’s default. We understand that it is industry practice for financial institutions to present similar prime brokerage activities as a single balance based on the end-of-day net position at the level of each prime brokerage arrangement on their respective balance sheets, i.e. as “net” receivables and payables. Given these factors, the Company records either a net receivable or net payable at the level of the prime brokerage arrangement, in either “Customer and other receivables” or “Customer and other payables” on the Company’s consolidated balance sheet.

There was no change to the Company’s presentation of prime brokerage arrangements on its consolidated balance sheet in the first quarter of 2024.

Income Statement Presentation

The changes implemented by the Company in the first quarter of 2024 related exclusively to the income statement presentation of prime brokerage arrangements. These changes to the consolidated income statement presentation did not result in changes to the Company’s recognition or measurement of net interest income or net income.

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There is no prescriptive accounting guidance addressing the presentation of interest income or interest expense from prime brokerage arrangements in these circumstances. Prime brokerage arrangements are not in the scope of FASB ASC 606 because the underlying client positions are financial instruments which are expressly excluded from the scope of this standard per ASC 606-10-15-2. Each prime brokerage arrangement consists of a group of financial instrument transactions in debit and credit positions, which distinguishes prime brokerage arrangements from typical financing transactions which are either assets or liabilities. As such, there is no guidance in the FASB Accounting Standards Codification that provides a suitable analogy for determining the income statement presentation of such prime brokerage arrangements.

While the Company’s presentation of interest income and interest expense from prime brokerage arrangements before January 1, 2024 was acceptable under U.S. GAAP given the absence of prescriptive accounting guidance on this topic, the Company nonetheless initiated an internal feasibility assessment on changing its presentation of prime brokerage arrangements on its consolidated income statement by changing the focus to the net position at a client account level at the end of a given day in order to align with the Company’s consolidated balance sheet presentation of these arrangements. The Company considered peer practice when evaluating whether to change its consolidated income statement presentation of prime brokerage arrangements, noting that a peer U.S. G-SIB financial institution disclosed in its filing on Form 10-Q for the quarter ended June 30, 2019 that it implemented certain presentation changes to align the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage related customer receivables and payables that are presented as a single prime brokerage arrangement on the balance sheet.

Upon completion of the feasibility assessment and the execution of changes to operational processes, the Company changed its consolidated income statement presentation, effective January 1, 2024, to record interest income for prime brokerage arrangements in a net receivable position at the end of each day, and to record interest expense for prime brokerage arrangements in a net payable position at the end of each day. The Company does not believe that this change represents a change in accounting principle because there is no prescriptive accounting guidance on this topic. As discussed above, the Company considers this change a change in presentation that should be shown retrospectively and therefore it recast its 2023 consolidated income statement to conform the prior year presentation for interest income and interest expense presentation relating to prime brokerage arrangements to the current year presentation. The entire presentation change to the 2023 consolidated income statement was attributable to the Company’s Institutional Securities business segment. This change to the Company’s consolidated income statement in the first quarter of 2024 changed only the attribution of net interest income between interest income and interest expense with no impact on net interest income, net income or other financial statements including the Company’s consolidated balance sheet. The Company believes that this consolidated income statement presentation is more consistent with the premise that each prime brokerage arrangement is presented as either a net receivable or net payable based on the end of day position at the level of the prime brokerage arrangement on the balance sheet and that the change has resulted in improved financial statement presentation whereby interest-earning assets generate interest income and interest-bearing liabilities generate interest expense on the consolidated income statement.

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