Policies on Client-Oriented Business Conduct

Morgan Stanley MUFG Securities Co., Ltd. (hereinafter referred to as “Morgan Stanley”) has established policies for client-oriented business conduct as set out below.

We will provide periodic disclosures regarding the status of our compliance with such policies. Also, we will review the policies on a periodic basis and make a constant effort to provide our services in a client-oriented manner.

1. Our Policy on Putting the Clients First

At Morgan Stanley, we are committed to fostering and maintaining a culture based on our four core values: Putting Clients First, Leading with Exceptional Ideas, Doing the Right Thing and Giving Back. Living these values means, above all, conducting ourselves and our business activities in accordance with the letter and spirit of applicable laws and regulations and our policies, and acting with integrity to deliver first-class business in a first-class way. As directors, officers and employees, we have a shared responsibility to maintain the highest standards of ethical behavior in our dealings with our clients and communities.

  1. Doing the Right Thing
    • Act with integrity
    • Think like an owner to create long-term shareholder value
    • Value and reward honesty, character and diversity
    • Foster a collegial work environment where all employees feel a sense of belonging
  2. Putting Clients First
    • Keep the client’s interests first
    • Work with colleagues to deliver the best of the Firm to every client
    • Listen to what the client is saying and needs
  3. Leading with Exceptional Ideas
    • Win by breaking new ground
    • Leverage different perspectives to gain new insight
    • Drive innovation
    • Be vigilant about what we can do better
  4. Giving Back
    • Serve our communities generously with our expertise, time and money
    • Build a better Firm for the future through mentoring others

Please refer to our Code of Conduct available on Morgan Stanley website for greater detail.

2. Our Policy on Proper Management of Conflict of Interest

Our core value of Putting Clients First requires us to place our clients’ interests first and manage conflicts appropriately between their interests and ours. Therefore, as set forth in our global policy, officers and employees must be sensitive to whether the actions they take could create an actual or potential conflict of interest, or even the appearance of a conflict of interest.

Conflicts of interest can arise in a number of circumstances, including between Morgan Stanley and one or more clients or between two or more clients. If we become aware of an actual or potential conflict of interest, we must act in accordance with regulatory requirements and our policies and procedures. Under our policies and procedures, we are required to identify, and where appropriate, address, disclose and/or restrict, business conduct and practices that may pose an actual or potential conflict involving the interests of Morgan Stanley, its clients and/or its officers and employees.

Please refer to our Code of Conduct available on Morgan Stanley website for greater detail.

3. Our Policy on Clarification of Pricing and Applicable Fees for the Financial Products and Services

We will seek to determine the terms and conditions of the financial products or services we offer to our clients in a fair manner in compliance with the applicable laws and regulations and our internal policy on pricing for the financial products and services. Pursuant to such policy, the pricing and fees for financial products or services should be reasonable and fair taking into consideration various factors including, but not limited to, the nature, volume and maturity of the relevant transaction, type of transaction execution, market conditions (including market events and volatility), cost of capital and certain client characteristics.

We will provide an appropriate explanation with respect to the fees for the financial products or services when we deliver information regarding such products or services in compliance with the applicable laws and regulations and our policies and procedures. Also, we will seek to ensure transparency of pricing for the financial products or services so that our clients can make appropriate investment decisions based on sufficient information.

4. Our Policy on Providing Important Information in an Understandable Manner

When we provide important information regarding financial products or services to our clients, we will endeavor to provide such information regarding each financial products or services in a manner easily understandable by our clients.

When we initiate a transaction with our client, we will inquire about the asset status, investment experience and objectives as well as the level of risk tolerance of our client, confirm the intention and needs of our client and offer a transaction suitable for such conditions in accordance with the applicable laws and regulations and our policies and procedures. Also, we will provide the information necessary for our clients to make an informed investment decision, such as the terms and conditions of the financial product or services, risk embedded in such products or services, relevant market conditions and actual and potential conflicts of interest between Morgan Stanley and our clients, if any, in accordance with the applicable laws and regulations and our policies and procedures.

We will, when we provide information regarding financial products or services to our clients, communicate in a plain and clear manner designed to facilitate a sufficient understanding by our clients taking into consideration various factors such as the level of complexity and risk of the transaction, market condition and whether the client has entered into a similar transaction in the past.

Also, we will follow up with our clients, as necessary, if there is a significant change in the market conditions which affects a transaction entered into with the client so that we can provide our services to protect the interest of our clients.

5. Our Policy on Providing Suitable Service for Clients

We will strive to offer financial products and services suitable to our clients in an appropriate manner as described below.

Upon initiating transactions with our clients, we will conduct sufficient due diligence on our clients including but not limited to their asset status, investment experience and objectives. We will then scrutinize whether a transaction is suitable or appropriate for a particular client under the particular circumstances and, if there are any issues or concerns, strive to address them properly by discussing them with the client.

When we introduce a new or complex product, we will conduct sufficient analysis on the potential risk our clients may take in accordance with our internal policies and offer the product to clients who are deemed suitable for such product.

When we originate retail structured products to be sold by distributors to their retail investors, we will assess the suitability of such distributors in accordance with the retail structured products business policies and procedures in a manner designed to ensure that proper solicitation and marketing is conducted by such distributors.

Please refer to our Solicitation Policy available on Morgan Stanley website for greater detail.

6. Our Policy on Proper Training and Incentives for Employees

We strive to adhere to the highest standards of ethical conduct. Our commitment to ethical conduct means that we abide by the letter and the spirit of applicable laws and regulations. These principles are hallmarks of Morgan Stanley’s culture and reflect our pledge to Do the Right Thing and Put Clients First.

In order to promote the compliance with our policies and procedures, we deliver mandatory training to all the employees on a regular basis to raise their awareness and remind them to act in the best interest of the clients.

A breach of Morgan Stanley’s four core values and above mentioned policies including the Code of Conduct may result in disciplinary action. Also, we regularly review our incentive compensation programs. We have implemented an employee performance evaluation and compensation determination processes designed to ensure that each employee’s compliance with the four core values and the policies will be reviewed and considered during those processes.

 

(Below information is updated in August, 2019)

Our Action Plan

Morgan Stanley MUFG Securities Co., Ltd. ("MSMS") has established its Action Plan for based on "Policies on Client-Oriented Business Conduct" as set forth below. Our Actions Plan is reviewed and discussed regularly.

In regards to notes and funds structuring businesses where Morgan Stanley arranges and sells notes or funds to potentially be sold to retail investors through other securities firms, we will further enhance our governance framework and continue our efforts to keep our products suitable and appropriate for retail investors and serve their best interests.

KPI for our Action Plan

MSMS plans to evaluate the status of improvement of client services and announce KPIs based on the above Action Plan pursuant to its "Policies on Client-Oriented Business Conduct". Our KPIs are reviewed and discussed regularly. Our current KPI are as follows.

Action Items KPIs Status
Further improve governance through continued meetings of a Governance Committee on a monthly basis for the business specified in the Action Plan. To maintain robust local governance, the Governance Committee is chaired by MSMS personnel, rather than being led by overseas affiliates. In place since our FD Policy announcement in June 2017.
When there are any regulatory sanctions on Japanese securities firms, Compliance will share the relevant information with the Governance Committee to consider required actions to be taken in response, if any. In place since our FD Policy announcement in June 2017.
In the Governance Committee, feedback from distributors and sales’ forecast are to be shared and discussed. In place since our FD Policy announcement in June 2017.
Product review enforcement in regards to business specified in the Action Plan. Regularly (at least annually) review our products’ structure and potential risk, and set up internal standard for each product. In place since our FD Policy announcement in June 2017.
For public funds where we help structure and / or launch, the Governance Committee will review the fund structure and roles and responsibilities associated with the fund before the fund launch. In place since completion of our New Product Approval for our public fund platform in March 2019. Launched our 1st public fund on April 5th, 2019.
Further enhancement of internal training for business specified in the Action Plan. Uphold an effective internal training regime and hold regular training (at least annually) for the business specified in the Action Plan. In place since our FD Policy announcement in June 2017.