Morgan Stanley

Information about Fees and Other Compensation

Please also refer to the Important Account Information (IAI) booklet for additional information on fees and compensation as well as information about our various products and services.

Taxes Generally

In addition to U.S. federal, state and other U.S. taxes, certain non-U.S. jurisdictions may impose stamp duty and other non-U.S. taxes on securities and other investment product transactions at various rates.  Clients should consult with their tax advisors for tax-specific information.

Additional information by investment product

American Depository Record (ADRs)

Middle Markets

The Equity Middle Markets business serves certain qualifying institutional accounts at Morgan Stanley and facilitates trading on the trading platforms of Morgan Stanley & Co. LLC (“MSCO”). Commission is charged by Morgan Stanley and MSCO with respect to such equity trades when Morgan Stanley and MSCO serve as a broker.

ADR Custody Fee(s)

Fee charged by the ADR Agent for holding the ADR, maintaining records and managing dividend payments to the investor. Please refer to the prospectus for additional detail.

ADR Exchange Fee(s)

Fee charged by the ADR Agent to the investor when the investor exchanges ADRs for foreign ordinary shares, or vice versa. Please refer to the prospectus for additional detail.

ADR Termination Fee(s)

Fee charged by the ADR Agent to the investor when the investor terminates ADRs and receives cash. Please refer to the prospectus for additional detail.

Processing Fee

A transaction processing fee charged by Morgan Stanley applies to certain executed orders and applies to all account types (excluding advisory accounts, 529 Plans and Choice Select). The fee is charged only once per security, per day, for trades done on the same side of the market (for multiple buy trades of the same security, on the same day, the charge will only be added to one of the trades; similarly, there is only one charge for all sell trades of the same security on the same day). $6 is charged for E-delivery (of trade confirm) per transaction, $6.50 is charged for paper delivery per transaction.

Supplemental Transaction Fee

Additional fee charged by Morgan Stanley on all ADR trades for the cost of processing trade transactions. This fee is based upon the rate set by the Securities and Exchange Commission pursuant to Section 31 of the Securities Exchange Act of 1934, as amended, rounded up to the next penny.

Trading Commission

Commission charged by Morgan Stanley with respect to trades when Morgan Stanley serves as a broker for its client accounts with respect to such transactions. In addition, if Morgan Stanley or its affiliates trade as principal or riskless principal, a trading spread may be charged by the applicable trading desk and does not constitute compensation for the FA/PWA.

Effective May 1st, 2017, the maximum commission amount charged to clients for trades is a percentage of Principal Value (PV) ranging from 0.50% to 2.50%, depending on the Principal Value of the trade. The commission for a given trade is determined on a marginal basis, meaning clients will be charged progressively lower percentage rates at higher Principal Value amounts. Therefore, the higher the Principal Value of the trade, the lower the effective percentage rate that will be applied. There is no maximum commission charge on ADRs.

Voluntary Reorganization Fee

Fee charged by Morgan Stanley for when a stock splits and results in a delivery of new shares and/or payout. $25 per/transaction.

Auction Rate Securities

Auction Rate Securities ("ARS") are municipal bonds, corporate bonds, interests in trusts or other special purpose vehicles or preferred stocks, in each case with interest rates or dividend yields that are periodically reset through auctions, typically every 7, 14, 28 or 35 days.

Remarketing Fee

For many ARS, Morgan Stanley’s affiliate, Morgan Stanley & Co. LLC (“MSCO”), has been appointed by the issuer of the ARS to serve as a dealer in the auction. Pursuant to agreements with ARS issuers, there is a remarketing fee paid by the issuer to MSCO ranging from 0 basis points to 25 basis points. These amounts are paid to MSCO for its on-going role as a participating broker dealer in the relevant ARS program, a portion of which may be shared with your FA/PWA. More specifically, the fee is paid for MSCO’s role in facilitating any customer auction orders (i.e., passing through the orders for inclusion in an auction) and implementing the results of the auction (e.g., a new reset rate, failed auction rate, or transfer of the ARS). Prior to investment, please contact your FA/PWA for information related to the specific ARS.

Equities and Fixed Income – Primary

The following information relates to new issue syndicated offerings where Morgan Stanley or its affiliates are acting as underwriter, placement agent or distributor.  Additional information for structured investments can be found in the structured investments section of this document.

For new issue syndicated offerings, clients pay the offering price agreed to or set by the issuer of the securities, which is stated in the relevant offering document. Underwriters, placement agents and distributors receive a gross spread that is paid by the issuer out of the proceeds of the offering. Morgan Stanley and its FAs/PWAs receive a selling concession for new issue syndicated offerings from the underwriters, placement agents or distributors who bring the security to market.

Selling concessions may vary based on certain factors, including but not limited to, the issuer, size of deal, sector and product type and are typically a percentage of the new issue price up to 4.5%, with certain exceptions.  To determine the exact selling concession for the product you are purchasing please consult your FA/PWA or the relevant offering materials.When Morgan Stanley facilitates a client purchase of a new issue security where Morgan Stanley or its affiliates are not acting as underwriter, placement agent or distributor, Morgan Stanley may or may not receive a fee from the third party underwriter, placement agent or distributor (which is a portion of the fee paid to the third party as disclosed in the applicable offering document) and/or add sales credit to the purchase price.

For new issue CDs (other than structured CDs), Morgan Stanley or its affiliates will receive a placement fee from the issuer in connection with the purchase of a CD. Such fee is typically 20 basis points (0.20%) per annum of the principal amount of CDs purchased by you in the primary market, but can range from 10 basis points (0.10%) to 25 basis points (0.25%) depending on the maturity and other terms of the CD.

Certain new issue syndicated offerings may be variable price offerings, meaning that they are offered from time to time in one or more negotiated transactions at varying prices to be determined at the time of each sale.

For registered equity block transactions, the underwriters will pay a non-variable sales credit to Morgan Stanley and its FAs/PWAs.

Equities and Fixed Income Private Placement

When clients participate in a private placement offering through Morgan Stanley where Morgan Stanley is not a distributor but is acting as, or one of our affiliates is acting as, placement agent, Morgan Stanley may receive a placement or referral fee based on the aggregate proceeds received by the issuer that are attributable to investments made by clients of Morgan Stanley.   The placement or the referral fee, which may be paid by the issuer or its affiliates and/or the client may, in whole or in part, go to the FA/PWA.

For more information, please refer to the offering document for a particular security.

Equities and Fixed Income – Secondary

Equities  – Secondary

Equity Middle Markets

The Equity Middle Markets business serves certain qualifying institutional accounts at Morgan Stanley and facilitates trading on the trading platforms of Morgan Stanley & Co. LLC (“MSCO”). Commission is charged by Morgan Stanley and MSCO with respect to such equity trades when Morgan Stanley and MSCO serves as a broker for its client.

Foreign Equity Trade FX Conversion

As part of the currency conversion to facilitate these trades, the executing broker, who may be an affiliate of Morgan Stanley, may receive a trading spread in connection with the buy or sell of the security or corporate actions (including the conversion of any dividends).

Foreign Ordinary Share Fee

Fee charged by Morgan Stanley on equity trades with principal values lower than $15,000. $50 fee for purchases with less than $15,000 principal value, no charge for purchases valued equal to or greater than $15,000 principal value. Fee is only charged on transactions involving foreign equities.

Odd Lot Issuer Fee

Fee charged by third party (stock issuer) that could be assessed whenever there is an odd lot tender offer executed for buy or sell. A tender odd-lot is a type of voluntary equity offering by the issuer for holders that hold 99 or less shares. Odd lot offers have two options: 1) buy shares to round up to a round lot (100 or more) from the issuer 2) sell the odd lot holdings back to the issuer. This fee is not always assessed and varies by issuer.

Odd Lot Processing Fee

Fee charged by Morgan Stanley that could be assessed to process an odd lot tender offer executed for equity buy or sell. $25 per/transaction.

Short Selling  

If a client sells short, a fee, the rate of which is set by Morgan Stanley & Co. LLC, may be charged as follows:

Easy to Borrow Securities

If the security is widely available for borrowing in the market, in normal market conditions, the clients short sell position will receive a credit.  However, in circumstances where interest rates are at, near or below zero, clients may pay a borrow cost for widely available securities.  Securities lending transactions are fully collateralized so when Morgan Stanley borrows the security to fulfill the client delivery, the notional value of the security is paid to the lender in cash. 

·         The lender will pay interest on the cash to Morgan Stanley which is shared with the client. 

·         The credit interest paid to the client is generally tied to the Overnight Bank Funding Rate (OBFR) less a 0.50% fee retained by Morgan Stanley.

·         In general, as interest rates rise, the client will earn a higher rate on their short sale, as interest rates decline, the client will be paid a lower rate.

Hard to Borrow Securities

If the security is hard-to-borrow, Morgan Stanley is required to pay the market rate to obtain the security for delivery to the purchaser, as such the client will be charged the market rate plus a spread of up to 10.025% to Morgan Stanley.   

Processing Fee

A transaction processing fee charged by Morgan Stanley applies to certain executed orders and applies to all account types (excluding advisory accounts, 529 Plans and Choice Select). The fee is charged only once per security, per day, for trades done on the same side of the market (for multiple buy trades of the same security, on the same day, the charge will only be added to one of the trades; similarly, there is only one charge for all sell trades of the same security on the same day). $6 is charged for E-delivery (of trade confirm) per transaction, $6.50 is charged for paper delivery per transaction.

Stock Certificate Collection Fee

Fee charged by Morgan Stanley for the collection of physical certificates. $25 per/transaction.

Supplemental Transaction Fee

Additional fee charged by Morgan Stanley on all exchange traded products for the cost of processing trade transactions. This fee is based upon the rate set by the Securities and Exchange Commission pursuant to Section 31 of the Securities Exchange Act of 1934, as amended, rounded up to the next penny.

Trading Commission

Commission charged by Morgan Stanley with respect to equity trades when Morgan Stanley serves as a broker for its client accounts with respect to such transactions. In addition, if Morgan Stanley or its affiliates trade as principal or riskless principal, a trading spread may be charged by the applicable trading desk and does not constitute compensation for the FA/PWA.

Effective May 1, 2017, the maximum equity commission amount charged to clients for equity trades is a percentage of Principal Value (PV) ranging from 0.50% to 2.50%, depending on the Principal Value of the trade. The commission for a given equity trade is determined on a marginal basis, meaning clients will be charged progressively lower percentage rates at higher Principal Value amounts. Therefore, the higher the Principal Value of the equity trade, the lower the effective percentage rate that will be applied. There is no maximum commission charge on equity trades.

Voluntary Reorganization Fee

Fee charged by Morgan Stanley when a stock goes through a voluntary corporate action (i.e., tender, exchange, etc.) and results in a delivery of new shares and/or payout. $25 per/transaction.

Fixed Income – Secondary

When clients purchase or sell a fixed income security in the secondary market in their brokerage accounts, Morgan Stanley or its affiliates generally act as principal or riskless principal in that transaction and clients pay a markup when purchasing the security or a markdown when selling the security. The markup or markdown includes a sales credit charged by your FA/PWA as well as a trading spread charged by the applicable trading desk.

Trading Spread 

When clients purchase or sell a fixed income security in the secondary market in their brokerage accounts, the securities may be subject to a bid/offer trading spread. This spread is captured by the trading desk and is not compensation for the FA/PWA.

Sales Credit

Your FA/PWA may charge a sales credit on secondary fixed income security trades in your brokerage account.  The maximum sales credit charge ranges from 0.125% to 2.0% depending on the security, maturity, size of the trade and whether the trade is a buy or sell, among other things.   The maximum sales credit charged is calculated using the formula:

Base Price x Sales Credit Rate = Maximum Sales Credit

The sales credit rate is a percentage derived from the sales credit schedule applicable to the product being traded.

The base price is the price charged by the trader which includes the trader spread.

Sales Credit Tier 1: Treasuries, Agencies and Commercial Paper

Buy Pricing on a tiered scale between 0.125% and 1.125% as a percentage of base price

Sell Pricing on a tiered scale between 0.125% and 0.50% as a percentage of base price

Sales Credit Tier 2: Investment Grade Corporates, Investment Grade Municipals, Certificates of Deposit, Investment Grade Non-Dollar Denominated Bonds, Investment Grade Convertibles, Investment Grade Step-ups, $1000 Hybrids, Structured Investments, Reverse Convertibles, and Agency-issued Mortgage-Backed Securities (MBS) Pass-Throughs

Buy Pricing on a tiered scale between 0.25% and 2.00% as a percentage of base price

Sell Pricing on a tiered scale between 0.125% and 0.50% as a percentage of base price

Sales Credit Tier 3: Emerging Market Fixed Income, Non-Investment Grade Municipals, Non-Investment Grade Corporates, MBS CMOs (Collateralized Mortgage Obligations), Private Label MBS/ABS, Non-Investment Grade Convertibles, Non-Investment Grade Non-Dollar Denominated Bonds, Non-Investment Grade Step-ups, and Contingent Convertibles

Buy Pricing on a tiered scale between 0.5% and 1.50% as a percentage of base price

Sell Pricing on a tiered scale between 0.125% and 1.00% as a percentage of base price

A discount to the maximum allowable sales credit is applied to trades of $1 million or more in principal value in any of the Sales Credit Tiers. The discount is applied to all buy side transactions, and to sell side transactions of Tier 3 securities. A discount of 37.5% to 90% will be applied to the maximum sales credit allowed, on the incremental principal value of $1 million or more, depending on the size of the trade. The maximum sales credit for all secondary fixed income trades is capped at $100,000.

Processing Fee

A transaction processing fee charged by Morgan Stanley applies to certain executed orders and applies to all account types (excluding advisory accounts, 529 Plans and Choice Select). The fee is charged only once per security, per day, for trades done on the same side of the market (for multiple buy trades of the same security, on the same day, the charge will only be added to one of the trades; similarly, there is only one charge for all sell trades of the same security on the same day). $6 is charged for E-delivery (of trade confirm) per transaction, $6.50 is charged for paper delivery per transaction.

Voluntary Reorganization Fee

Fee charged by Morgan Stanley in the event a company offers a voluntary event. Common types of voluntary events include tender offers or exchange offers (e.g., publicly traded company makes a tender offer to buy back its own outstanding securities). $25 per transaction.

Foreign Currency Denominated Fixed Income Securities

As part of the currency conversion to facilitate these trades, the executing broker, who may be an affiliate of Morgan Stanley, may receive a trading spread in connection with the buy or sell of the security (including the processing of corporate actions).

Foreign Exchange (FX) - Spot and Deliverable Forwards

When you transact in FX in your FX account, Morgan Stanley or its affiliates generally act as principal or riskless principal in such transactions.  These fees are separate and distinct from Global Currency fees, as set forth below in the section entitled “Global Currency”.  

Financial Advisor Markup or Markdown

Advisors can establish a markup or markdown for the trade as long as it meets all the terms of the sales credit grid, which ranges between 0.03% and 1.5% of the notional amount of the trade. Offsetting transactions may be charged markups or markdowns per the terms of the sales credit grid. The sales credit for a given FX transaction is determined on a notional basis, meaning clients will be charged progressively lower percentage rates at a higher notional amount.  Therefore, the higher the notional amount, the lower the effective percentage that will be applied.  There is no maximum sales credit charge on FX transactions.

Affiliate Trading Desk Markup / Markdown

Our affiliates, Morgan Stanley & Co. LLC, or others, may charge a markup or markdown (trading spread and other additional charges, which may include incremental fees based on the notional amount of your trade or fees charged for FX transactions) in addition to the FX sales credit charged by your FA/PWA.

Interest

Morgan Stanley, in its sole discretion, will set the applicable interest rate for your currencies, which may be a positive, zero or negative interest rate. In the event of a negative interest rate on your currency holding, Morgan Stanley may debit your account the amount of negative interest charged. The rate of interest determined by Morgan Stanley may be less than the rate available directly at other banks or at Morgan Stanley in another product or account type.

Fully Paid Lending

Morgan Stanley & Co. LLC (“MSCO”) will receive compensation in connection with its use of a client’s loaned securities, including in connection with facilitating settlement of short sales by MSCO, its affiliates and/or its customers.  The compensation earned by MSCO generally will be measured by the difference (i.e., spread) between the loan rate charged by MSCO and the loan rate charged by Morgan Stanley in connection with each of MSCO and Morgan Stanley relending such client’s loaned securities.  Morgan Stanley earns compensation in connection with the use of clients’ loaned securities and will pass a majority of that compensation on to the client in the form of a loan fee. Compensation is based on a 70/30 split of gross fees received by Morgan Stanley; 70% to the client and 30% to Morgan Stanley. FAs/PWAs will be compensated from Morgan Stanley’s 30% split.

Global Currency

Morgan Stanley charges a markup of up to 200 basis points to purchase a time deposit if there is a currency conversion, prorated based upon a one-year term (e.g., up to 100 basis points for a 6-month time deposit). There is no markup when a time deposit automatically rolls into a savings deposit of the same currency.

For savings deposits, Morgan Stanley charges a markup of up to 150 basis points for each deposit into and withdrawal from the savings deposit if there is currency conversion. There is no markup for deposits into a savings deposit made via wire or check. There is also no markup for withdrawals from a savings deposit made via wire. The amount of the markup will be determined by your FA/PWA and will be charged in addition to your purchase or withdrawal, thereby reducing your net earnings on the deposit.

Affiliate Trading Desk Markup / Markdown

Our affiliates, Morgan Stanley & Co. LLC, or others, may act as principal or riskless principal and may charge a markup or markdown (trading spread and other additional charges, which may include incremental fees based on the notional amount of your trade or fees charged for your Global Currency transactions) in addition to the Global Currency markups described above.

Options

Option Commission Rates

For all Option trades, the commission is calculated as a percentage rate applied to the Principal Value (PV) of the Option trade ranging from 3.5% to a maximum of 5%.  The commission for a given option trade is determined by the Principal Value amount, with a lower percentage rate applied to higher Principal Value amounts. The minimum commission is $50.00.  There is no maximum commission charge on Options.  In addition, if Morgan Stanley or its affiliates trade as principal or riskless principal, a trading spread may be charged by the applicable trading desk and does not constitute compensation for the FA/PWA.

Supplemental Transaction Fee

Additional fee charged by Morgan Stanley on all option trades for the cost of processing trade transactions. This fee is based upon the rate set by the Securities and Exchange Commission pursuant to Section 31 of the Securities Exchange Act of 1934, as amended, rounded up to the next penny.

OTC Derivatives

Morgan Stanley refers customers that are interested in transacting in OTC derivatives (e.g., swaps, non-deliverable FX Forwards, etc.) to an affiliate, and clients are charged a fee by that affiliate, a portion of which is shared with your FA/PWA.  

Precious Metals

When clients purchase or sell a precious metals position in their brokerage accounts, Morgan Stanley or its affiliates generally act as principal or riskless principal in that transaction and clients pay a markup when purchasing the security or a markdown when selling the security. The markup or markdown includes a sales credit charged by your Financial Advisor as well as a trading spread charged by the applicable trading desk.

Trading Spread 

When clients purchase or sell a precious metals position in their brokerage accounts, the securities may be subject to a bid/offer trading spread. This spread is captured by the trading desk and is not compensation for the Financial Advisor.

Sales Credit

Your Financial Advisor may charge a sales credit on precious metals trades in your brokerage account.  The maximum sales credit charge is 2.00%, depending on the type of metal, size of trade and whether the trade is a buy or sell, among other things.

The maximum sales credit charged is calculated using the formula:

Base Price x Sales Credit Rate = Maximum Sales Credit

The sales credit rate is a percentage derived from the sales credit schedule applicable to the product being traded.

The base price is the price charged by the trader which includes the trading spread. For Precious Metals, the Sales Credit Rate is:

·         Buy Pricing on a tiered scale up to 2.00% as a percentage of base price

·         Sell Pricing on a tiered scale up to 2.00% as a percentage of base price

Trading of Precious Metals

Morgan Stanley or its Affiliates may buy and sell for its own account the physical precious metals that back “unallocated” holdings and may profit by such use in addition to the bid/offer spread and sales credit it charges on purchases and sales.

Service Fee

Customers buying precious metals through Morgan Stanley or delivering precious metals into their Morgan Stanley accounts for storage or otherwise will be charged a service fee. Service fees are subject to change without notice.

Delivery Charge

For insured mail delivery of small orders (less than $100,000 in total value) to the residence on file see table below.

Type

Precious Metal

Size(s)/Increments

Minimum Purchase

Delivery Charge

Notes

Bar

Gold

1 and 10 oz.

$5,000

$100 per 20oz.,
$3.50 per oz.
thereafter

N/A

1 kilo (32.15 oz.)

$100 per bar

N/A

100/400 oz.

$300 per bar

N/A

Silver

1 and 10 oz.

$50 per 100 oz.,
$0.25 per oz.
thereafter

N/A

100 oz.

$75 for the first 2, $15
each thereafter

N/A

1,000 oz.

$150 per bar

N/A

Platinum

All

$100 per 20 oz.,
$3.50 per oz.
thereafter

N/A

Palladium

1 and 100 oz.

$100 per 20 oz.,
$3.50 per oz.
thereafter

N/A

100 oz.

$300 per bar

N/A

Coin

Gold

All

First 20 oz* $100
$3.50 per oz.
thereafter

Available Coins

American Gold Eagle;
American Gold Buffalo

Canadian Gold Maple Leaf

South African Gold Krugerrand (1oz. only)


Silver

All

$125 for first 300 coins,
$0.25 per coin thereafter

Available Coins

American Silver Eagle

Canadian Silver Maple Leaf

Silver Bags

All

$125 per bag

Available Bags



40% Silver Coin bags (295oz.)

Platinum

All

First 20 oz* $100
$3.50 per oz.
thereafter

Available Coins

American Eagle

Canadian Maple Leaf


Palladium

All

First 20 oz* $100
$3.50 per oz.
thereafter

Available Coins

Canadian Maple Leaf

If you take physical possession of precious metals, you will be charged applicable sales tax.

For large orders, you are advised to use a provider with specialized experience transporting precious metals and have delivery made to a secure storage facility.

Fees for delivery of large orders, or to locations other than the residence on file, will vary according to quantity, value, metal type and destination. Contact your FA/PWA for more information.

Storage Charge

Client Holdings

Storage Charge Rate

Minimum ($ Million)

Maximum ($ Million)
(non-inclusive)

Specifically Identified or Allocated (Basis Points)
(Bars & Coins)

Un-allocated (Basis Points)
(Bullion and Loco London)

-

1

60

36

1

5

45

20

5

-

30

20

Preferreds

Commission and Other Compensation

The commission charged by Morgan Stanley with respect to trades when Morgan Stanley serves as a broker for its client accounts with respect to such transactions.

The maximum commission charged is calculated using the formula:

Base Price x Commission Rate = Maximum Commission

The commission rate is a percentage derived from the commission schedule applicable to the product being traded.

Morgan Stanley will act as agent on trades where commissions are charged and its affiliate may act as principal or riskless principal.  In addition, if Morgan Stanley or its affiliates trade as principal or riskless principal, a trading spread may be charged by the applicable trading desk and does not constitute compensation for the FA/PWA.

$25 Par Debt Preferred (Baby Bonds)

·         Buy pricing on a tiered scale up to 2.00% as a percentage of base price

·         Sell pricing on a tiered scale up to 1.00% as a percentage of base price

The commission schedule includes the maximum commission rate based on a product's risk, credit rating, and duration.

Foreign Denominated Stock Preferreds

·         Buy pricing 2.25% as a percentage of base price

·         Sell pricing 1.75% as a percentage of base price

As part of the currency conversion to facilitate these trades our affiliate may receive a trading spread in connection with the buy, sell, or payment of dividends.

Convertible Preferreds

·         Buy pricing 2.25% as a percentage of base price

·         Sell pricing 1.75% as a percentage of base price

Stock/Trust/Hybrid Preferreds

·         Buy pricing 2.25% as a percentage of base price

·         Sell pricing 1.75% as a percentage of base price

$1,000 Par Preferreds

Please refer to “Fixed Income” for fee and sales credit information.

Preferreds Large Trade Discounting

A discount is applied for larger trades. The discount is applied to all buy side transactions and certain sell side transactions. The discount varies by the principal value of the trade and the type of preferred security.

The maximum sales credit for all trades is capped at $100,000.

Supplemental Transaction Fee

Additional fee charged by Morgan Stanley on all exchange traded preferred trades for the cost of processing trade transactions. This fee is based upon the rate set by the Securities and Exchange Commission pursuant to Section 31 of the Securities Exchange Act of 1934, as amended, rounded up to the next penny.

Structured Investments


Structured Investments - Primary

For new issue structured investments (including structured notes and structured CDs), the offering price includes costs and fees associated with issuing, selling, structuring and hedging the security or instrument, including a fee to Morgan Stanley and its FAs/PWAs for distributing the new issue investment (typically called a selling concession). 

The selling concession is a percentage of the underwriters’ commissions and fees and includes a fixed sales commission as well as a structuring fee, which are described further below. 

The offering price and a description of the costs and fees associated with a particular structured investment can be found in the offering documents. 

Issuing and Hedging Cost

The offering price of a new issue structured investment includes the costs of issuance and the costs of carrying out hedging activities related to the structured investments by Morgan Stanley and one or more of its affiliates and/or third-party issuers and underwriters. See the offering documents for more information.

Licensing and Index Fees

For structured investments linked to the performance of an index, fees generally include licensing fees for use of the index, which may be paid to third parties or Morgan Stanley or its affiliates for indexes owned or sponsored by them (proprietary indexes). See the offering documents for more information.

Additionally, certain structured investments are linked to proprietary indexes that may contain embedded servicing and rebalancing costs paid to Morgan Stanley or its affiliates. See the offering documents for more information.

Sales Commission

Morgan Stanley receives a sales commission when it distributes new issue structured investments. Sales commissions are subject to a maximum selling concession of 3.0% based upon the structured investment’s tenor, structure, underlying asset and other factors.

Structuring Fees

Morgan Stanley receives a structuring fee for its role in the structuring of the structured investment.

The structuring fee is up to 0.5% of the transaction amount.

Note: While the amounts of the sales commission and structuring fee are typically separately disclosed on the cover of the offering documents, this is not the case for Interest Rate Linked structured investments, where only the total combined sales commission/structuring fee is disclosed.

Variable Price Offerings

Certain new issue structured investments offerings may be variable price offerings, meaning that they are offered from time to time in one or more negotiated transactions at varying prices to be determined at the time of each sale. For structured investments variable price offerings, the underwriters will pay varying discounts and commissions to Morgan Stanley and its financial advisors depending upon the transaction, and the maximum discount or commission that can be paid will be stated in the offering document.

Structured Investments – Secondary

When clients purchase or sell a structured investment in the secondary market in their brokerage accounts, Morgan Stanley or its affiliates generally act as principal or riskless principal in that transaction and clients pay a markup when purchasing the structured investment or a markdown when selling the structured investment. The markup or markdown includes a sales credit charged by your FA/PWA as well as a trading spread charged by the applicable trading desk.  

Trading Spread 

When clients purchase or sell a structured investment in the secondary market in their brokerage accounts, the structured investment is subject to a bid/offer trading spread. This spread is captured by the trading desk and is not compensation for the FA/PWA.

Sales Credit

Your FA/PWA may charge a sales credit on secondary structured investment trades in your brokerage account. The sales credit rate is a percentage derived from the sales credit schedule applicable to the product being traded.  Please see the “Fixed Income – Secondary –Sales Credit” section, which includes Structured Investments (Tier 2).

Processing Fee


A transaction processing fee charged by Morgan Stanley applies to certain executed orders and applies to all account types (excluding advisory accounts, 529 Plans and Choice Select). The fee is charged only once per security, per day, for trades done on the same side of the market (for multiple buy trades of the same security, on the same day, the charge will only be added to one of the trades; similarly, there is only one charge for all sell trades of the same security on the same day). $6 is charged for E-delivery (of trade confirm) per transaction, $6.50 is charged for paper delivery per transaction.

Transactional Futures

Commission

Fee charged at the FA’s/PWA’s discretion. A maximum of $45 per lot per side (buy/sell) may be charged.

Execution Fee

Execution Costs vary by point of execution:

RJ O’Brien - $0.75 per contract

Trading Technologies - $0.30 per contract

Bloomberg Tradebook - $0.30 per contract

WebICE – no charge

Execution fees for trades done with floor brokers are negotiated between Morgan Stanley & Co. LLC, the client and the executing broker, and are reflected on the final, electronic give-up agreement which is stored with the Futures Industry Association on their EGUS platform.   

This charge is debited to the account at the time of execution.

Clearing Fee

The Futures Clearing Fee for trades with Morgan Stanley through Morgan Stanley & Co. LLC is $0.20 per contract.

Storage Fee

After Morgan Stanley executes a Futures trade relating to precious metals, storage may be necessary for these commodities. Futures Storage Fees are fixed dollar amounts issued by the depository for exchange traded products. The Futures Storage Fees are charged monthly by the Exchange and are passed on to the client.

Refer to the fee schedule below for the rates associated with the specific precious metals and possible corresponding depositories.

Depository

Gold

Silver

Platinum

Palladium

HSBC

$15.00

$8.50 (per bar)

$20.00

$20.00

Scott Moncotta

$15.00

$8.50 (per bar)

$20.00

$20.00

Brinks

$15.00

$8.50 (per bar)

$20.00

$20.00

Delaware

$15.00

$8.50 (per bar)

$20.00

$20.00

Manfra, Tordella, & Brookes, Inc

$15.00

$8.50 (per bar)

$15.00

$15.00

JP Morgan Chase Bank NA

$15.00

$8.50 (per bar)

$20.00

$20.00

 

National Futures Association Clearing Fee

The National Futures Association (NFA), a self-regulatory agency for the futures industry, fee is a fixed dollar amount of .02 cents charged by the NFA on Future trades per contract that supports the NFA's regulatory efforts. 

Insurance

Permanent and Term Life Insurance -- Commissions

Each time a life insurance policy is purchased in coordination with a Morgan Stanley Financial Advisor/Private Wealth Advisor, the insurance carrier pays Morgan Stanley compensation, based upon a schedule for each insurance carrier, in the form of commissions.  Factors that may influence the amount of commissions paid include, but are not limited to: product design (the issuing insurance carrier, the product selected and the premium payment period selected), transaction type (i.e. term conversion, internal replacement) and the on-going service model of the third-party insurance partner involved in the design and implementation process.

The table below provides information on the commissions generally paid to Morgan Stanley for the life insurance products we sell. In the first policy year, Morgan Stanley may receive a percentage of the premium paid up to the target premium amount and a percentage of the premium paid above the target premium amount for whole life, universal life, indexed universal life and variable universal life insurance. For those life insurance products that pay commissions on renewal premiums, Morgan Stanley may receive a percentage of the renewal premiums paid beginning in policy year two and every year thereafter when renewal premiums are paid. For variable universal life insurance only, Morgan Stanley may receive trail commissions (a percentage of the accumulated cash value) beginning in policy year five and every year thereafter as long as the policy is in force in lieu of renewal commissions. For term life insurance, Morgan Stanley may receive a percentage of the first year premium paid less policy fee. For those term life products that pay commissions on renewal premiums, Morgan Stanley may receive a percentage of the renewal premiums paid beginning in policy year two and every year thereafter when renewal premiums are paid. The commission payable for hybrid life/long-term care insurance is a percentage of the first-year paid premium. For those hybrid life/long-term care products that pay commissions on renewal premiums Morgan Stanley may receive a percentage of the renewal premiums paid beginning in policy year two and every year thereafter when renewal premiums are paid.

The commissions payable to Morgan Stanley are not dependent upon the volume of business Morgan Stanley submits to the insurance carrier or the profitability of the policy to the insurance carrier. Further, no insurance carrier or the parent or affiliated company of the insurance carrier has any material interest in Morgan Stanley or its insurance licensed subsidiaries, Morgan Stanley Insurance Services, Inc. and SBHU Life Agency, Inc.

Commission Rates As of May 2020

Product Type

Firm Gross on Target First Year

Firm Gross on Above Target First Year

Firm Rate on Renewals Yrs 2+

Firm Rate on Trails Yrs 5+

Universal Life

Up to 110%   (Up to 80%   in NY)

Up to 5% (Up to 4%  in NY)

Up to 5% (Up to 20% in NY)

N/A

Indexed Universal Life

Up to 85% (Up to 80%  in NY)

Up to 5% (Up to 10% in NY)

Up to 5% (Up to 10% in NY)

N/A

Whole Life

Up to 100% (Up to 80%  in NY)

Up to 5% (N/A in NY)

Up to 15% (N/A in NY)

N/A

Variable Universal Life

Up to 85% (Up to 80%  in NY)

Up to 5% (Up to 4% in NY)

Up to 5% (Up to 15% in NY)

Up to 0.5% (Up to 0.5% in NY)

Term Life

Up to 100% (Up to 90%  in NY)              of first year premium paid less policy fee

N/A

Up to 7% (Up to 30% in NY)

N/A

Hybrid Life/LTC

Up to 75% (Up to 75%  in NY)

Up to 5% (N/A in NY)

Up to 10% (N/A in NY)

N/A

Morgan Stanley, in turn, pays a portion of the commissions to the Financial Advisor/Private Wealth Advisor. Financial Advisor/Private Wealth Advisor commissions from the sale of a whole life, universal life, indexed universal life, variable universal life, term life and/or hybrid life/long-term care insurance policy generally range from 56% to 64% of the premium paid up to the target premium and generally range from 2.5% to 5.5% of the premium paid above the target premium amount. Financial Advisor/Private Wealth Advisor commissions in each policy renewal year thereafter generally range from 2% to 17% of the renewal premium when renewal premiums are paid.  Not all life insurance policies pay commissions on premium paid above target in the first year or on renewal premiums paid in policy year two and every year thereafter. Financial Advisors/Private Wealth Advisors may receive trail commissions on variable universal life policies generally up to 0.5% of the accumulated cash value beginning in policy year five and every year thereafter as long as the policy is in force in lieu of renewal commissions.

Long Term Care and Disability Income Insurance – Commissions

Each time a long term care or disability income insurance policy is purchased in coordination with a Morgan Stanley Financial Advisor/Private Wealth Advisor, the insurance carrier pays Morgan Stanley compensation, based upon a schedule for each insurance carrier, in the form of commissions. For long term care insurance and disability income products, Morgan Stanley may receive up to 80% of the premium paid in the first policy year. For those long term care insurance and disability income products that pay commissions on renewal premiums beginning in policy year two and every year thereafter when renewal premiums are paid, Morgan Stanley may receive up to 6% of the renewal premium paid.

The commissions payable to Morgan Stanley are not dependent upon the volume of business Morgan Stanley submits to the insurance carrier or the profitability of the policy to the insurance carrier. Further, no insurance carrier or the parent or affiliated company of the insurance carrier has any material interest in Morgan Stanley or its insurance licensed subsidiaries, Morgan Stanley Insurance Services, Inc. and SBHU Life Agency, Inc.

Morgan Stanley, in turn, pays a portion of the commissions to the Financial Advisor/Private Wealth Advisor. Financial Advisor/Private Wealth Advisor commissions from the sale of a long-term care insurance policy or a disability income insurance policy generally range from 30% to 64% of the premium paid. Financial Advisor/Private Wealth Advisor commissions in each policy renewal year thereafter generally range from 1% to 4% of the renewal premium when renewal premiums are paid.

Property & Casualty Insurance – Commissions

Morgan Stanley offers certain property and casualty insurance products and services through certain service providers. Morgan Stanley will receive commissions if you purchase a property and casualty insurance product or service from the service provider. The service provider will be compensated by the issuing insurance company.  The service provider, in turn, will pay Morgan Stanley up to a maximum of 25% of the first year insurance commissions received and up to a maximum of 15% of the annual renewal commissions received beginning in policy year two.  Morgan Stanley may pay a portion of the commissions it receives from the service provider to your Morgan Stanley Financial Advisor / Private Wealth Advisor.  The commission payable to Morgan Stanley has no effect on the cost of any property and casualty insurance product purchased through the service provider.  The profitability of the policy to the issuing insurance company will not affect the commissions payable to Morgan Stanley either.  Further, neither the service provider nor the issuing insurance company has any material interest in Morgan Stanley or its insurance-licensed subsidiaries, Morgan Stanley Insurance Services, Inc. and SBHU Life Agency, Inc. 

Expense Reimbursements and Data Analytics Fees

Morgan Stanley seeks prepayment from approved insurance carriers of up to $26,000 to help cover the costs associated with platform administration, regulatory compliance and other distribution responsibilities. In addition, Morgan Stanley seeks reimbursement from approved insurance carriers, their parent or affiliated companies, or other service providers for the expenses incurred for various national, regional, and local training and education events and conferences held in the normal course of business. Approved insurance carriers, their parent or affiliated companies, or other service providers independently decide if and what they will spend on these activities. Morgan Stanley will also provide insurance carriers and other service providers with the opportunity to purchase supplemental insurance sales data analytics. The amount of the fees depends on the level of data provided. The current range is $10,000 per annum. Should an insurance carrier offer other financial products, insurance carriers may purchase sales data analytics from Morgan Stanley on those products as well.

Fees

Permanent Life Insurance

Contingent Deferred Sales Charge (CDSC) or Surrender Charge

Fees charged for early termination or a partial withdrawal (in excess of a specified permitted amount) during the surrender period of the life insurance policy. Calculation methodology is insurance company and product specific. CDSC typically ranges up to 10% and subsequently declines to zero over the typical range of 10-20 years.

Cost of Insurance

The cost of insurance is the premium rate per $1,000 associated with the net amount of insurance benefit payable. Factors in the calculation of the premium rate include mortality, interest earnings, and insurance company expenses. Calculation methodology is insurance company and product specific.

Loan Interest

Interest on loans will be billed annually. If the amount due is not paid, it will be added to the amount of the loan and the following year's interest will be based on this new loan amount.

Rider Fee

Fee charged by the insurance company for the election of certain optional benefits.  The fee varies depending on rider type and insurance company.

State Premium Tax

Premium tax is levied by the client’s resident state, and may be processed/collected through the insurance company.

Term Life Insurance

        Cost of Insurance

Cost of insurance is the premium rate associated with the net amount of insurance benefit payable. Factors in the calculation of the premium rate include, but are not limited to, mortality, interest earnings, and insurance company expenses. Calculation methodology is insurance company and product specific.

        Rider Fee

Fee charged by the insurance company for the election of certain optional benefits.  The fee varies depending on rider type and insurance company.

Long Term Care and Disability Income Insurance

        Cost of Insurance

Cost of insurance is the premium rate associated with the net amount of insurance benefit payable. Factors in the calculation of the premium rate include, but are not limited to, morbidity, interest earnings, and insurance company expenses. Calculation methodology is insurance company and product specific.

        Rider Fee

Fee charged by the insurance company for the election of certain optional benefits.  The fee varies depending on rider type and insurance company.

Property and Casualty Insurance

        Cost of Insurance

Cost of insurance is the premium rate for the net amount at risk associated to the formal valuation of the underlying property insured or general liability. Additionally, calculation methodology may be specific to geographical location and history of claims in geographical location.  

        Rider Fee

Fee charged by the insurance company for the election of certain optional benefits.  The fee varies depending on rider type and insurance company.    

Annuities

Compensation

Brokerage Annuities -- Commissions

Each time an annuity is purchased in a brokerage account through a Morgan Stanley Financial Advisor/Private Wealth Advisor, the insurance company pays Morgan Stanley compensation—based upon a standard schedule for all insurance companies—in the form of a commission (or “upfront commission”). The commission amount is based upon the product type selected, the product selected, the product term selected, the commission option elected, and the amount invested in the annuity. The commissions payable to Morgan Stanley are consistent for all insurance companies regardless of the volume of business Morgan Stanley submits to the insurance company or the profitability of the annuity product to the insurance company. However, Morgan Stanley may receive differing levels of compensation depending upon the client’s age. Please note that no insurance company—or the parent or affiliated company of the insurance company—has any material interest in Morgan Stanley or its licensed insurance agency subsidiaries, Morgan Stanley Insurance Services, Inc. and SBHU Life Agency, Inc.

Ø  Index Annuities - A portion of the commission paid to Morgan Stanley is, in turn, paid to the Financial Advisor/Private Wealth Advisor. Financial Advisor/Private Wealth Advisor commissions generally range from 0% to 5% of monies invested in an index annuity contract. Insurance companies also pay Morgan Stanley trails for ongoing index annuity contract servicing and administration ranging from 0% to 1% of the index annuity assets. Morgan Stanley passes all or a portion of these trails to the Financial Advisor/Private Wealth Advisor. Insurance companies may also pay Morgan Stanley an additional percentage of the amount invested in an index annuity generally not exceeding 2.00%. Upfront and trail commission payments are paid out of the insurance company’s general revenues and do not represent an additional charge to you.

Ø  Fixed Annuities - A portion of the commission paid to Morgan Stanley is, in turn, paid to the Financial Advisor/Private Wealth Advisor. Financial Advisor/Private Wealth Advisor commissions generally range from 0% to 5% of monies invested in a fixed annuity contract. Insurance companies also pay Morgan Stanley trails for ongoing fixed annuity contract servicing and administration generally .25% of fixed annuity assets. Financial Advisors/Private Wealth Advisors may be paid an additional commission if you decide to renew your fixed annuity at the end of a guarantee period. Renewal commission rates generally range from 0% to 3% of fixed annuity assets. Not all fixed annuities pay a renewal commission. Morgan Stanley passes all or a portion of these renewal payments on to the Financial Advisor/Private Wealth Advisor. Insurance companies may also pay Morgan Stanley an additional percentage of contributions generally not exceeding 0.5%. Upfront, trail and renewal commission payments are paid out of the insurance company’s general revenues and do not represent an additional charge to you.

Ø  Income Annuities - A portion of the commission paid to Morgan Stanley is, in turn, paid to the Financial Advisor/Private Wealth Advisor. Financial Advisor/Private Wealth Advisor commissions generally range from 0% to 5% monies invested in an income annuity contract. Insurance companies may also pay Morgan Stanley an additional percentage of contributions generally not exceeding 1%. Upfront commission payments are paid out of the insurance company’s general revenues and do not represent an additional charge to you.

Brokerage Annuities -- Other Compensation

Index Annuity Revenue Sharing

For the index annuity products that are offered, Morgan Stanley seeks to collect a revenue sharing payment from insurance companies. Insurance companies currently pay fees on assets of up to 0.11% per year ($11 per $10,000), calculated quarterly,  based upon the aggregate value of index annuity assets—including assets invested in fixed rate subaccounts within index annuities—invested in contracts for which Morgan Stanley is designated as the broker-dealer or agent of record. Additionally, beginning in 2017, certain index annuity providers pay an annual support fee of $500,000 to Morgan Stanley.  Revenue sharing payments and product support fees are paid out of the insurance company’s revenues or profits and not from a client’s contract value or the assets invested in the subaccounts. It is important to note that our Financial Advisors/Private Wealth Advisors receive no additional compensation as a result of these revenue sharing payments.

Expense Payments & Data Analytics Fees

Morgan Stanley seeks prepayment from approved insurance companies of up to $26,000 to help cover the costs associated with platform administration, regulatory compliance and other distribution responsibilities. In addition, Morgan Stanley seeks reimbursement from approved insurance companies, their parent or affiliated companies, or other service providers for the expenses incurred for various national, regional, and local training and education events and conferences held in the normal course of business. Approved insurance companies, their parent or affiliated companies, or other service providers independently decide if and what they will spend on these activities.  Morgan Stanley also provides insurance companies with the opportunity to purchase supplemental annuity sales data analytics. The amount of the fees depends on the level of data provided.  The current fee is up to $40,000 per annum. Should an insurance company offer other financial products, insurance companies may purchase sales data analytics from Morgan Stanley on those products as well.

Fees

Contingent Deferred Sales Charge (CDSC) or Surrender Charge

Fees charged for early termination or a partial withdrawal (in excess of a specified permitted amount) during the surrender period of the annuity contract. Calculation methodology is insurance company and product specific. CDSC typically ranges from 0% to 9% and subsequently declines to zero over the typical range of 0-10 years.

Market Value Adjustment

A market value adjustment may be assessed for early termination or a partial withdrawal (in excess of a specified permitted amount) during the surrender period of the annuity. The amount of the adjustment is based on market conditions at the time an early termination or partial withdrawal is requested. If current interest rates move higher than the annuity contract guaranteed rate, you may receive less than the amount you invested. Conversely, if current interest rates move lower than the annuity contract guaranteed rate, then you may receive more than the amount invested.

Rider Fee

Fee charged by the insurance company for the election of certain living and/or death benefits.  The fee varies depending on rider type and insurance company. The current cost for optional death benefits typically ranges from 0.20% to 1.50% annually. The cost for optional living benefits typically ranges from 0.30% to 2.50% annually.

State Premium Tax

Premium tax is levied by the client’s resident state, and may be processed/collected through the insurance company.

Choice Select (Brokerage)

Sliding scale commission is charged monthly in arrears, based on the PV (value of the position traded in the month). The more PV trades throughout the Choice Select year, the lower the commission rate charged for transactions.

Morgan Stanley Choice SelectSM Annual Commission Schedule

Principal Volume Tier

Marginal Rate

$0-$249,999.99

2.50%

$250,000.00-$499,999.99

2.00%

$500,000.00-$999,999.99

1.50%

$1,000,000.00-$2,499,999.99

1.00%

$2,500,000.00-$9,999,999.99

0.75%

$10,000,000.00 +

0.50%

 

*If no Morgan Stanley Choice SelectSM eligible equity or option trades are placed during the month, then no Morgan Stanley Choice SelectSM commissions are charged for that month.