SEC Division of Corporation Finance no-action letter: Morgan Stanley

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

November 16,2011
Mr. David S. Huntington
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue ofthe Americas
New York, NY 10019
Re: In the Matter ofMorgan Stanley Investment Management, Inc. (FL-3607) Morgan Stanley - Waiver Request ofIneligible Issuer Status under Rule 405 of the· Securities Act Dear Mr. Huntington:
This is in response to your letter dated October 20,2011, written on behalf ofMorgan Stanley (Company) and constituting an application for relief from the Company being considered an "ineligible issuer" under Rule 405(1)(vi) ofthe Securities Act of 1933 (Securities Act). The Company requests relief from being considered an "ineligible issuer" under Rule 405, due to the entry on November 16,2011, ofa Commission Order (Order) pursuant to Sections 203(e) and 203(k) ofthe Investment Advisers Act of 1940 (Advisers Act) and Sections 9(b) and 9(f) ofthe Investment Company Act of 1940 (Investment Company Act) naming Morgan Stanley Investment Management (MSIM), a subsidiary ofthe Company, as a respondent. The Order requires that, among other things, MSIM cease and desist from committing or causing any violations and any future violations of Sections 15(c) and 34(b) ofthe Investment Company Act, and Sections 206(2) and 206(4) ofthe Advisers Act and Rule 206(4)-7 thereunder. Based on the facts and representations in your letter, and assuming the Company and MSIM comply with the Order, the Commission, pursuant to delegated authority has determined that the Company has made a showing of good cause under Rule 405(2) ofthe Securities Act and that the Company will not be considered an ineligible issuer by reason ofthe entry ofthe Order. Accordingly, the relief described above from the Company being an ineligible issuer under Rule 405 ofthe Securities Act is hereby granted. Any different facts from those represented or non-compliance with the Order might require us to reach a different conclusion. Sincerely, '!1~ltj Chief, Office ofEnforcement Liaison Division of Corporation Finance

PAUL. WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
TELEPHONE (212) 373-3000
LLOYD K. GARRISON (1946-' 991)
RANDOLPH E. PAUL (1946-1956)
SIMON H. RIFKIND (1950-1995)
LOUIS S. WEISS (192.7-1950)
JOHN F. WHARTON (1927-1977)
WRITER'S DIRECT DIAL NUMBER
(212) 373-3124
WRITER'S DIRECT FACSIMILE
(212) 492-0124
WRITER'S DIRECT E-MAIL ADDRESS dhuntington@paulweiss.com UNIT 3601, FORTUNE PLAZA OFFICE TOWER A NO 7 DONG SANHUAN ZHONGLU CHAO YANG DISTRICT BEIJING 100020 PEOPLE'S REPUBLIC OF CHINA TELEPHONE (86-' 0) 5828-6300 12TH FLOOR, HONG KONG CLUB BUILDING 3A CHATER ROAD, CENTRAL HONG KONG TELEPHONE (852) 2846-0300 ALDER CASTLE 10 NOBLE STREET LONDON EC2V 7JU, U.K TELEPHONE (44 20\ 7367 1600 FUKOKU SEIMEI BUILDING 2-2 UCHISAIWAICHO 2-CHOME CHIYODA-KU, TOKYO 100-0011, JAPAN TELEPHONE (81-3) 3597-8101 TORONTO-DOMINION CENTRE 77 KING STREET WEST, SUITE 3100 P.O. BOX 226 TORONTO, ONTARIO M5K 1J3 TELEPHONE (416) 504-0520 2001 K STREET, NW WASHINGTON, DC 20006-1047 TELEPHONE (202) 223-7300 500 DELAWARE AVENUE, SUITE 200 POST OFFICE BOX 32 WILMINGTON. DE 19899-0032 TELEPHONE (302) 655-4410 October 20, 2011 MATTHEW W. ABBOTT ALLAN J. ARFFA ROBERT A. ATKINS DAVID J. BALL JOHN F. BAUGHMAN LYNN B. BAYARD DANIEL J. BELLER CRAIG A. BENSON MITCHELL L BERG MARK S. BERGMAN BRUCE BIRENBOIM H. CHRISTOPHER BOEHNING ANGELO BONVINO HENK BRANDS JAMES L. BROCHIN RICHARD J. BRONSTEIN DAVID W. BROWN SUSANNA M. BUERGEL PATRICK S. CAMPBELL"" JEANETTE K. CHAN YVONNE Y. F. CHAN LEWIS R. CLAYTON JAY COHEN KELLEY A. CORNISH CHRISTOPHER J. CUMMINGS CHARLES E. DAVIDOW DOUGLAS R. DAVIS THOMAS V. DE LA BASTIDE III ARIEL J. DECKELBAUM JAMES M. DUBI AUCE BE ATON ANDREW L1CH GREGORY. ING LESLIE GOR FAGEN MARC FALC ANDREW C. CH BRAD J. FINKELSTEIN ROBERTO FINZI PETER E. FISCH ROBERT C. FLEDER MARTIN FLUMENSAUM ANDREW J. FOLEY HARRIS 8. FREIDUS MANUEL S. FREY KENNETH A. GALLO MICHAEL E. GERTZMAN PAUL D. GINSBERG ADAM M. GIVERTZ ROBERT O. GOLDBAUM NEIL GOLDMAN ERIC S. GOLDSTEIN ERIC GOODISON CHARLES H. GOOGE, JR ANDREW G. GORDON UDIGROFMAN NICHOLAS GROOMBRIDGE BRUCE A. GUTENPLAN GAINES GWATHMEY, III ALAN S. HALPERIN CLAUDIA HAMMERMAN GERARD E. HA.RPER BRIAN S. HERMANN ROBERT M. HIRSH MICHELE HIRSHMAN JOYCE S. HUANG DAVID S. HUNTINGTON MEREDITH J. KANE ROBERTA A. KAPLAN BRAD S. KARP JOHN C. KENNEDY "'NOT ADMITTED TO THE NEW YORK BAR ALAN W. KORNBERG DANIEL J. KRAMER DAVID K. LAKHDHIR STEPHEN P. LAMB' JOHN E. LANGE OANIEL J. LEFFELL KIAOYU GREG LIU JEFFREY O. MAR ELL MARCO V. MASOTTI EDWIN S. MAYNARD DAVID W. MAYO ELIZABETH R. McCOLM MARK F. MENDELSOHN TOBY S. MVERSON JOHN E. NATHAN CATHERINE NYARADY JOHN J. O'NEIL ALEX YOUNG K. OH BRAD R. OKUN KELLEY D. PARKER ROBERT P. PARKER"" MARC E. PERLMUTTER MARK F. POMERANTZ VALERIE E. RAOWANER CARL L. REISNER WALTER G. RICCIARDI WALTER RIEMAN RICHARD A. ROSEN ANDREW N. ROSENBERG PETERJ. ROTHENBERG JACQUELINE P. RUBIN RAPHAEL M RUSSO JEFFREY O. SAFERSTEIN JEFFREY B. SAMUELS DALE M. SARRO TERRY E. SCHIMEK KENNETH M. SCHNEIDER ROBERT B. SCHUMER JAMES H. SCHWAB JOHN M. SCOTT STEPHEN J. SHIMSHAK DAVID R. SICULAR MOSES SILVERMAN STEVEN SIMkiN JOSEPH J. SIMONS MARILYN SOBEL AUDRA J. SOLOWAY TARUN M. STEWART ERIC ALAN STONE AIDAN SYNNOTT ROBYN F. TARNOFSKY MONICA K. THURMOND DANIEL J. TOAL MARK A. UNDERBERG LlZA M. VELAZQUEZ MARIA T. VULLO LAWRENCE G. WEE
THEODORE V. WELLS, JR. BETH A. WILKINSON STEVEN J. WILLIAMS LAWRENCE I. WITDORCHIC MARK B. WLAZL.O JULIA T.M. WOOD JORDAN E. YARETT KAYE N. YOSHINO TONG YU TRACEY A. ZACCONE T. ROBERT ZOCHOWSKI, JR. Via First Class Mail and Email Mary J. Kosterlitz, Esq. Chief, Office ofEnforcement Liaison Division ofCorporation Finance, Stop 3628 Securities and Exchange Commission 100 F Street, N .E. Washington, DC 20549 Re: In the Matter ofMorgan Stanley Investment Management, Inc. (File No. FL-3607) Dear Ms. Kosterlitz:
We submit this letter on behalf ofMorgan Stanley Investment Management Inc. (the "Settling Finn") and Morgan Stanley, in connection with a contemplated settlement between the Settling Finn and the Securities and Exchange Commission (the "Commission") in the above-referenced administrative proceeding.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Mary J. Kosterlitz, Esq. Page 2
The Settling Finn is a subsidiary of Morgan Stanley. Though its subsidiaries, Morgan Stanley offers banking, brokerage, advisory and other financial services to institutional and individual customers worldwide. Morgan Stanley hereby requests, pursuant to Rule 405 ("Rule 405") promulgated under the Securities Act of 1933, as amended (the "Securities Act"), that the Division of Corporation Finance (the "Division"), acting pursuant to delegated authority, grant a waiver to Morgan Stanley with respect to any "ineligible issuer" status (as defined in Rule 405) that may arise as a result ofthe entry ofthe Order (as defined below). We request that this waiver be made effective upon entry ofthe Order. It is the Settling Firm's understanding that the Division of Enforcement does not object to the grant ofthe requested waiver. BACKGROUND The Settling Firm has engaged in settlement discussions with the staff of the Division of Enforcement in connection with the administrative proceeding referenced above, which will be brought pursuant to Sections 203(e) and 203(k) ofthe Investment Advisers Act of 1940, as amended (the "Advisers Act"), and Sections 9(b) and 9(t) ofthe Investment Company Act of 1940, as amended (the "Investment Company Act"). As a result of these discussions, the Settling Firm has submitted an offer of settlement, pursuant to which it has consented to entry of an Order ofthe Commission (the "Order"). Under the terms ofthe offer of settlement, the Settling Finn will neither admit nor deny any ofthe findings in the Order, except as to jurisdiction. The Order relates to alleged violations ofthe federal securities laws by the Settling Finn, which served as the primary investment adviser to the Malaysia Fund, Inc. (the "Fund"), in connection with investment advisory fees charged to the Fund by the Fund's Malaysian sub-adviser and representations made to investors and the Fund's board of directors (the "Board") regarding the nature ofservices provided by the sub￾adviser. The Settling Finn did not receive any economic benefit from the conduct in question, and there has been no allegation of any scienter-based offenses. Under the terms of the Order, the Commission will:

1. Require the Settling Firm to cease and desist from committing or causing
   any violations and any future violations of Sections 15( c) and 34(b) ofthe Investment Company Act, and Sections 206(2) and 206(4) ofthe Advisers Act and Rule 206(4)-7 thereunder.
2. Censure the Settling Firm.
3. Require the Settling Firm to pay a civil money penalty in the amount of
   $1,500,000 to the United States Treasury.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Mary J. Kosterlitz, Esq. Page 3
4. Require the Settling Firm to comply with certain undertakings set forth in
the Order, including making a payment to the Fund in the amount of $1,845,000 to reimburse the Fund for the amount of advisory fees the Fund paid to the sub-adviser during the relevant time period, less a credit of$543,000 for the portion the Settling Firm has already reimbursed to the Fund, and implementing and maintaining certain policies and procedures specifically governing the 15( c) process and its oversight of advisers and sub-advisers, principal underwriters, administrators, and transfer agents. These policies are described in detail in the Order. DISCUSSION In 2005, the Commission adopted rules that significantly modified the registration, communications, and offering processes under the Securities Act. See Securities Act Release No. 33-8591 (the "Offering Reform Release"). The changes eliminated certain restrictions on offerings and provide more timely investment information to investors without mandating delays in the offering process that were considered by the Commission to be inconsistent with the needs ofissuers for timely access to capital. Among the changes were the creation of a new category ofissuer, defined in Rule 405 as a "well-known seasoned issuer," and a new category of offering communication, defined in Rule 405 as a "free writing prospectus." The changes to Rule 405 also added a definition of another category of issuer, defined as an "ineligible issuer," which is excluded from the category of well-known seasoned issuer and which is not eligible to make communications by way of a free writing prospectus, except in limited circumstances. See Rules 164(e) and 433(b)(2) under the Securities Act. An issuer is an ineligible issuer for the purposes of Rule 405 if, among other things, "[w]ithin the past three years ... the issuer or any entity that at the time was a subsidiary ofthe issuer was made the subject of any judicial or administrative decree or order arising out of a governmental action that ... [r]equires that the person cease and desist from violating the anti-fraud provisions of the federal securities laws." Ineligible issuer status may be waived if "the Commission determines, upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer." The Commission has delegated to the Division of Corporation Finance the authority to grant or deny applications requesting that an issuer not be considered an ineligible issuer as defined in Rule 405. Accordingly, we hereby request that a waiver be granted to Morgan Stanley with respect to any "ineligible issuer" status that may arise under Rule 405 as a result of the entry ofthe Order, and that the waiver be effective upon entry ofthe Order. We do not believe that the protection of investors or the public interest would be served by denying Morgan Stanley the benefits afforded by the Securities Act to issuers that are not classified as ineligible issuers because the Settling Firm's conduct addressed in the Order
does not relate to activities undertaken by Morgan Stanley or any ofits subsidiaries

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Mary J. Kosterlitz, Esq. Page 4 with respect to their own disclosures as issuers of securities or in any of their own disclosures in filings with the Commission. In light of the foregoing, we respectfully submit that it is not necessary under the circumstances that Morgan Stanley be considered an ineligible issuer as a result ofthe entry ofthe Order, and that it has shown good cause that relief should be granted. Please do not hesitate to contact the undersigned at (212) 373-3124 regarding this request. Sincerely, ?JC(l<'f/ d J/.- ISi--- David S. Huntington cc: Dina Romani, Esq.

Morgan Stanley

1221 Avenue ofthe Americas

35th Floor

New York, NY 10020