Research Conflict Management Policies

Morgan Stanley Investment Research has adopted certain conflict management policies in connection with the preparation and publication of research.

Introduction

Note on Applicable Regulation

Identification and Disclosure of Possible Conflicts

Supervision and Compensation of Research Analysts

Activities of Analysts

Inducements and Inappropriate Influences

Review and Comment on Research

Timing and Content of Research

Important Notes

Introduction
This policy applies to investment research published by the Research Department of Morgan Stanley and its affiliated companies ("the Firm" or "Morgan Stanley").

This policy is available from Morgan Stanley on request and is made available on the public website at www.morganstanley.com/institutional/research/ and for Firm investor clients, on the research pages of the ClientLink website.  Morgan Stanley reserves the right to amend or supplement this policy at any time.  For the current policy, please check the website.

For purposes of this policy, "equity research" means an analysis of equity securities of individual companies or industries that provides information reasonably sufficient upon which to base an investment decision; "fixed income research" means an analysis of debt securities that provides information reasonably sufficient upon which to base an investment decision; and "derivatives research" means an analysis of the price and market for any derivative that provides information reasonably sufficient upon which to base a decision to enter into a derivatives transaction (collectively "research" or "research reports").  Equity, fixed income, and derivatives analysts (collectively "research analysts" or "analysts") refer to research analysts who publish equity, fixed income, and derivatives research reports, respectively.  The term "Research Management" is used to describe the senior management teams of the Research Department.

For the Research Department of Morgan Stanley & Co. International Plc in the United Kingdom that publishes research from the London office, this policy represents the conflict management policy required by the Principles for Businesses issued by its regulator, the Financial Services Authority, and its Conduct of Business Sourcebook Rule 12.2.3, with respect to the management of conflicts of interest in connection with the publication of impartial investment research.  Morgan Stanley & Co. International Plc does not itself distribute research that has not been published from the London office.


Note on Applicable Regulation
This policy complies with laws and regulations applicable to research and may go beyond what is required by those laws and regulations.

Morgan Stanley & Co. LLC ("MSCO") is party to the equity research settlement with U.S. federal and state regulators of April 2003 (the "Research Settlement"), and Morgan Stanley policies are designed to comply with the Research Settlement.  The Research Settlement applies to equity research analysts based in North America and to equity research analysts who publish on individual companies incorporated or headquartered in the United States or whose principal equity trading market is in the United States.  These companies are referred to as "U.S. Companies."

With respect to Fixed Income Research, Morgan Stanley policies are designed to comply with the Guiding Principles to Promote the Integrity of Fixed Income Research published by The Bond Market Association.The Firm’s policies are also designed to comply with the Commodities Futures Trading Commission’s Research Conflict of Interest Rules that apply to derivatives research.


1. Identification and Disclosure of Possible Conflicts
Morgan Stanley policies and internal procedures are designed to assist the Firm in identifying possible conflicts of interest, or the appearance of conflicts of interest, that might affect or raise questions about the impartiality of research.

Morgan Stanley provides training for research analysts and other Firm personnel with whom analysts interact on the identification of potential conflicts.  Research Management and the Legal and Compliance Division ("LCD") provide assistance and guidance to Firm personnel as issues arise.  Individual Firm personnel are responsible for raising identified conflicts or potential conflicts with their supervisors to ensure that all conflict questions are referred to and considered at the appropriate level within the Firm.

LCD monitors the application of the Firm's policy regarding the publication of research in the period before, during and after investment banking transactions, as described further in "Timing and Content of Research."  Morgan Stanley also has automated systems that facilitate the required disclosures in research reports of interests and activities of the Firm which may appear to represent a conflict of interest (see "Disclosure of interests").

The primary analyst(s) responsible for a research report is required to ensure that the views expressed in each research report accurately reflect his or her personal views, as applicable (see "Certification on each research report").

The Firm's usual disciplinary procedures apply in case of breaches of the policies referred to herein. Failure of Firm personnel to adhere to the requirements of Morgan Stanley policies may result in a range of sanctions, up to and including termination of employment.


2. Supervision and Compensation of Research Analysts
Research analysts are not directly supervised by personnel from other areas of the Firm (in particular investment banking or sales and trading personnel) whose interests or functions may conflict with those of the research analysts.  The evaluation and appraisal of research analysts for purposes of career advancement, compensation and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management.  Research analysts do not report to, and are not supervised by, any investment banking or any sales and trading personnel.  Senior Research Management personnel report either directly to Firm Management or to the most senior management level in the related sales and trading business.

Evaluation and compensation: The compensation of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients and employees in other parts of the Firm with whom analysts interact.  Analysts' compensation may not be directly linked to specific transactions or the profitability of particular trading desks or investment banking groups but will in part reflect the overall profitability of the Firm as a whole, including the profitability of the Institutional Securities Group, which includes investment banking and sales and trading businesses.  Morgan Stanley does not permit investment banking personnel to participate in the Firm's evaluation of research analysts and limits the participation of sales and trading personnel in the Firm’s evaluation of analysts in compliance with CFTC rules.


3. Activities of Analysts
Morgan Stanley restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for investment banking mandates or to prepare or review materials for those pitches.  Pitch materials may not contain the promise of research coverage.

No promotion of issuers' transactions: Research analysts may not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer.

For this reason, equity research analysts are not permitted to attend road show presentations by issuers that are corporate clients of the Firm relating to offerings of securities or any other investment banking transaction.  Equity research analysts may, however, observe road shows without asking questions by video link or telephone in order to help ensure that they have access to the same information as their investor clients.  Fixed income or derivatives research analysts, with Research Management's prior approval, may attend road shows passively (i.e., as a member of the audience, neither asking nor responding to questions).

Analysts, including equity research analysts, are permitted to attend ordinary course investor presentations (also known as non-deal related road shows) by issuers, including those that are corporate clients of the Firm, that do not relate to offerings of securities or other investment banking transactions.  Equity research analysts may not attend, however, if investment banking personnel are present.

Three-way meetings: Equity research analysts are not permitted to attend meetings with corporate clients of the Firm jointly with investment banking personnel ("three-way meetings"), except in widely-attended conferences and events and in specific circumstances as detailed in "Other permitted activities" below.  Economists and fixed income or derivatives analysts who do not analyze specific issuers may be permitted to attend three-way meetings, so long as they are not soliciting business on behalf of investment banking personnel or promoting or marketing the activities of an issuer as described above.

Widely-attended conferences or other events: Analysts, including equity research analysts, are permitted to attend and speak at widely-attended conferences or other events at which investment banking colleagues and clients, among others, may also be present.  These widely-attended conferences and events may include some investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by investment banking and sales and trading personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations.  

Before investment banking receives a mandate for a transaction, equity research analysts may also carry out preliminary due diligence and vetting of issuers who may be prospective subjects of research or prospective investment banking clients, or both, and may meet issuers at that time for this purpose (or otherwise upon the issuer's request) provided investment bankers are not present.

Equity research analysts and investment banking personnel may carry out joint due diligence with an issuer and other third parties (including, e.g., suppliers, customers, accountants, vendors, and regulatory authorities) after investment banking receives a transaction mandate or where the time frame is too short to provide for separate due diligence sessions (e.g., an overnight block trade), provided that such communications are chaperoned either by: 1) a member of LCD; or 2) outside counsel on the transaction who are knowledgeable regarding research and investment banking conflicts.

Research analysts may not be provided with material or confidential non-public information regarding an issuer or investment, unless the analyst is brought "over the wall" (variously known as the "information barrier" or "ethical wall") in accordance with Morgan Stanley procedures.  This requires the prior consent of Research Management and a record to be made by the LCD, specifically the Control Group, and potentially results in restrictions on the analyst's activities until the relevant non-public information has become public or stale.

In connection with a securities offering or other transaction and during the course of such an offering or transaction, Morgan Stanley policies permit analysts to meet and speak with potential investors, at meetings and in conversations not involving the issuer or investment banking colleagues, for purposes of investor education and information.

Analysts' personal dealings:  Analysts1 are generally prohibited from trading in securities or related derivatives of any issuer on which they issue research.  More specifically, equity and fixed income research analysts who cover industries are prohibited from trading in the analyst’s global coverage sector, which is the MSCI/GICS industries.  The prohibition on personal account trading therefore applies not only to the issuers covered by the research analyst but also to similar issuers.  Fixed income and derivatives analysts are prohibited from transacting in any derivatives of a type, class or category they follow, prepare, or otherwise cover.  Exceptions may be made with the prior approval of Research Management and LCD in special circumstances such as for disposal of (i) positions already held under a previous policy, when joining the Firm, or when initiating coverage; and (ii) positions obtained as a result of a merger, fund distribution or other involuntary acquisition.  Where such special circumstances apply, analysts are required to disclose their interests in research reports and are permitted to trade only during prescribed window periods away from the time of publication of a research report.  Any trades that analysts make must be in line with their recommendation(s), if any.  Analysts are also required to disclose all other material personal conflicts relevant to the issuers or investments that are the subject of their research.

An analyst is prohibited from covering an issuer if the analyst serves as an officer, director or board member of the issuer.  If an analyst's household member serves in such a capacity, the analyst is also required to disclose that fact in any relevant research report, and Research Management will consider whether, based on the facts and circumstances, the analyst should cease covering the issuer.

Where personal account trading is permitted within the rules described above, analysts are required to comply with the Firm's rules and procedures on personal account dealing, which include requirements for dealings to be conducted through an account with the Firm (or, in limited circumstances, in other permitted accounts held outside the Firm) and to be pre-cleared with the Trading Supervisor.  Pre-clearance is not required for certain transactions, including transactions in the most liquid sovereign and government-related fixed income securities, Morgan Stanley stock (during permitted window periods) or for permitted trading in a discretionary account where the analyst has ceded all investment discretion to an investment manager or financial adviser.

1 Also includes household members.


4. Inducements and Inappropriate Influences
Morgan Stanley prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within the Firm that might be perceived to result in inappropriate influence on analysts' views.

Inducements: Morgan Stanley policies and procedures prohibit research analysts from directly or indirectly offering favorable research to an issuer as consideration or inducement for the receipt of business or compensation.  These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm's general policies on gifts, entertainment, and corporate hospitality.

Inappropriate influences: Morgan Stanley has implemented policies and procedures, where appropriate, to regulate communications between Morgan Stanley research analysts and non-research personnel.

Analysts are physically separated from investment banking personnel.  There are security restrictions to equity research floors by investment banking personnel.  In addition:
  • Investment banking, sales and trading personnel, and other non-research personnel are prohibited from attempting to influence the timing or content of an analyst's research report, and research analysts are prohibited from disclosing to any other business area of the Firm (other than the LCD) the timing or content of a research report prior to its publication (see "Timing and Content of Research").
  • Non-research personnel may not direct an analyst to publish a research report or to publish specific views and opinions in a research report. 
  • Investment banking personnel are prohibited from providing analysts with material or confidential non-public information regarding an issuer or investment, unless the analyst is brought "over the wall" in accordance with Morgan Stanley procedures (see "Other permitted activities").
  • Investment bankers are also prohibited from asking an analyst to initiate coverage of a US Company (see "Coverage decisions") and from using research analysts to identify or strategize about potential investment banking business.

Morgan Stanley provides Legal and Compliance notices and training to the relevant personnel on these policies.  To reinforce this, Morgan Stanley requires certain conversations to be logged in advance with and/or chaperoned by LCD.  For example, business-related conversations between investment bankers and equity research analysts about U.S. Companies must be chaperoned.

Coverage decisions: Decisions to initiate, resume, suspend or discontinue research coverage of an issuer or investment are made by Research Management in conjunction with the research analyst concerned.  Research Management is permitted to take into account input with respect to research coverage from other business areas, including investment banking and sales and trading.  Input from investment banking with respect to equity research coverage involving U.S. Companies is limited to a discussion of the merits of coverage of particular sectors or other general categories and may not be issuer-specific.

Certification on each research report: The primary analyst responsible for a research report on a specific issuer or issuers of securities is required to certify, at the time of publication, that the views expressed in the report accurately reflect his or her personal views about the subject securities or issuers, and that no part of his or her compensation was, is or will be directly or indirectly related to the specific views or recommendations contained therein.  This certification can be found in the disclosures section of each such research report.


5. Review and Comment on Research
Morgan Stanley policies and procedures are designed to ensure that parties with interests that may potentially conflict with those of recipients of research are not able to review or comment on research in a manner that might affect the impartiality of the research.

Review of research: Prior to publication, all research reports are reviewed by a supervisory analyst.  The purpose of these reviews is to confirm compliance with the Firm's editorial guidelines and regulatory requirements, including the requirement that research be clear, fair and not misleading.  Thereafter, all such research reports that contain any discussion of a company or other entity in relation to which Morgan Stanley has an investment banking mandate (which would not necessarily be limited to the issuer the Firm represents in that mandate) are reviewed by LCD to monitor compliance with any legal or policy restrictions on timing or content as described in "Timing and content of research."

An analyst may check the accuracy of factual statements with the relevant issuer that is the subject of a research report.  This may be achieved by providing the issuer with a summary of facts for checking or a redacted version of the draft research report that contains no valuation, investment conclusion, recommendation or price target. 

For reports prepared by non-North American based analysts to be published prior to an initial public offering of a non-U.S. company’s shares, investment banking personnel may review such reports solely for fact checking purposes.

Morgan Stanley policies further require analysts to record the reasons for any subsequent material change made to a research report after factual matters have been reviewed by issuers or non-research personnel when permitted.  This record must be submitted to and approved by both Research Management and LCD prior to publication of the report.

Role of review committees: The Research Department has a Stock Selection Committee ("SSC") for Equity Research.  SSC is made up of senior members of the relevant regional research departments and may include members of other departments, excluding investment banking.  SSC aims to improve the quality of research content and delivery and reinforce the prevention of undue influence on research analysts from other employees, issuers and investors.  SSC approval is required for all initiations, resumptions, suspensions and discontinuations of coverage, changes to ratings (including industry views) and certain changes to price targets and model portfolios, and certain other matters. In addition, a Research Review Process ("RRP") exists for Fixed Income Research.  Research reports containing a trading or investment idea relating to bonds, credit or other instruments of a single corporate issuer in the Financials sector must be submitted to Fixed Income Research Management prior to publication.

Complaints: Any complaints concerning the content of research reports should be referred to, and are dealt with by Research Management, where appropriate in conjunction with LCD in compliance with the Firm's complaint handling procedures and not by investment banking personnel.

Retaliation policy: The Firm and non-research personnel may not retaliate or threaten to retaliate against any research analyst for adversely negative or otherwise unfavorable research that may adversely affect the Firm's present or potential investment banking relationships and present or prospective trading or clearing activities.

6. Timing and Content of Research
Morgan Stanley policies and procedures are designed to ensure that decisions on the timing and content of research are not made or inappropriately influenced by persons with interests potentially conflicting with those of recipients of research and that new, material views are not selectively disclosed before broad dissemination.

The timing of publication of a research report is determined primarily by the analyst on the basis of events affecting the issuer or investment concerned, perceived investment opportunities for research clients and developments in the analyst's opinion.  Investment banking and sales and trading personnel have no control over, or input into, decisions on timing of publication of individual research reports.

The Firm’s policies may restrict the publication of research or the inclusion of opinions and/or recommendations in research, relating to the issuer or its related parties, at certain times when the Firm is involved in investment banking transactions.  In the case of a merger or acquisition, the restriction may be applied both to bidder and target, regardless of which the Firm is advising.  The nature, timing and length of the restriction will depend on the nature of the transaction.

For example, Morgan Stanley generally restricts the publication of research on an issuer for a short period after the announcement of a material merger, acquisition or restructuring in which the Firm is involved, and during the pendency of the deal Morgan Stanley may limit an analyst’s ability to publish opinions or recommendations.

In relation to offerings of securities, Morgan Stanley follows the customary practice, and in some jurisdictions Morgan Stanley is required by law to impose a "quiet period" or "blackout period" before and/or after the offering.  A longer period may be required following initial public offerings of shares than for offerings involving listed issuers or offerings of investment grade debt securities (there may be no quiet period).

Once advised of a role in a transaction by investment banking, LCD is responsible for monitoring compliance with the appropriate quiet periods and other restrictions.

Dissemination of research and updated views: Research reports are made available to clients through a number of established distribution channels, including via e-mail and web-based portals.  Any material update of a research analyst's view is made available to clients through similar channels.  Morgan Stanley policies do not allow research reports to be made available to non-research personnel of the Firm before they are made available to all Morgan Stanley clients.

Disclosure of interests: The Firm discloses in its research reports, in accordance with applicable law and regulation, conflicts of interest including those of the Firm and the analyst, that are or may be material in the context of the relevant report. 

Important Notes
This policy is not intended to create third party rights or duties that would not already exist if the policy had not been made available, or to constitute or form part of any contract between the Firm and any client or customer of the Firm (or any other person).

This policy is supplemented by more detailed policies and procedures adopted by the Firm.  Variations and exceptions to this policy may be approved by Research Management and LCD in individual cases, with a view to promoting the objectives of this policy in the particular circumstances.

References to investment banking include capital markets and corporate broking personnel.

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