NOTIFICATIONto theBOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEMbyMORGAN STANLEYfor prior approval to acquire by mergerE*TRADE FINANCIAL CORPORATIONPursuant to Sections 4(j) and 4(k)of the Bank Holding Company Act of 1956, as amended, andRegulation Y promulgated thereunder,andSection 163(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010March 25, 2020

FR Y-4OMB Number 7100-0121Approval expires July 31, 2021Page 1 of 2Board of Governors of the Federal Reserve System:. o·i ·co i : .i.: Notification by a Bank Holding Company to .Acquire a Nonbank Company and/or Engage inNonbanking Activities—FR Y-4Morgan StanleyCorporate Title of Notificant1585 BroadwayStreet AddressNew YorkNY10036CityStateZip CodeHereby provides the Board with a notice pursuant to: (1) Section 4(c)(8) and 4(j) of the Bank Holding Company Act of 1956, as amended (“BHC Act”— 12 U.S.C. § 1843), under the“Expedited action for certain nonbanking proposals by well-run bank holding companies” as described in section 225.23 ofRegulation Y; or(2) Section 4(c)(8) and 4(j) of the BHC Act, under the “Procedures for other nonbanking proposals” as described in section 225.24of Regulation Y; for prior approval to engage directly or indirectly in certain nonbanking activities, de novo, through acquisition of theassets of a going concern, or through direct or indirect ownership, control, or power to vote at least (100%) of the votingshares of:E*TRADE Financial CorporationCorporate Title of Company to be Acquired and/or Description of Nonbanking Activity (refer to section 225.28 of Regulation Y, as applicable)671 North Glebe RoadStreet AddressArlingtonVirginia22203CityStateZip CodeDoes notificant request confidential treatment for any portion ofthis submission? Yes As required by the General Instructions, a letter justifyingthe request for confidential treatment is included.The information for which confidential treatment is beingsought is separately bound and labeled “Confidential.” NoPublic reporting burden for this collection of information is estimated to average 0.5 hours for a post-consummation notification, 5 hours for an expedited notification, and 12 hours for a complete notification,including the time to gather and maintain data in the required form, to review instructions, and to complete the information collection. Send comments regarding this burden estimate or any other aspect of thiscollection of information, including suggestions for reducing this burden to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW, Washington, DC 20551; and to the Office ofManagement and Budget, Paperwork Reduction Project (7100-0121), Washington, DC 20503. The Federal Reserve may not conduct or sponsor, and an organization or a person is not required to respond to a collectionof information unless it displays a currently valid OMB control number.07/2018

FR Y-4Page 2 of 2Name, title, address, telephone number, and facsimile number of person(s) to whom inquiries concerning this notification may be directed:Luigi L. De GhenghiAndrew S. BaerNameNamePartner, Davis Polk & Wardwell LLPManaging Director, Morgan StanleyTitleTitle450 Lexington Avenue1633 Broadway, 30th FloorStreet AddressStreet AddressNew YorkNY10017New YorkNY10019CityStateZip CodeCityStateZip Code212-450-4296212-537-1183Area Code / Phone NumberArea Code / Phone ganstanley.comEmail AddressEmail AddressCertificationI certify that the information contained in this notification has beenexamined carefully by me and is true, correct, and complete, and iscurrent as of the date of this submission to the best of my knowledge andbelief. I acknowledge that any misrepresentation or omission of amaterial fact constitutes fraud in the inducement and may subject me tolegal sanctions provided by 18 U.S.C. §§ 1001 and 1007.I also certify, with respect to any information pertaining to an individualand submitted to the Board in (or in connection with) this notification,that the notificant has the authority, on behalf of the individual, to providesuch information to the Board and to consent or to object to public releaseof such information. I certify that the notificant and the involvedindividual consent to public release of any such information, except tothe extent set forth in a written request by the notificant or the individual,submitted in accordance with the Instructions to this form and the Board'sRules RegardingSigned this25thDayday ofMarchMonthAvailability of Information (12 C.F.R. Part 261), requesting confidentialtreatment for the information.I acknowledge that approval of this notification is in the discretion of theBoard of Governors of the Federal Reserve System (the “FederalReserve”). Actions or communications, whether oral, written, orelectronic, by the Federal Reserve or its employees in connection withthis filing, including approval if granted, do not constitute a contract,either express or implied, or any other obligation binding upon theagency, the United States or any other entity of the United States, or anyofficer or employee of the United States.Such actions orcommunications will not affect the ability of the Federal Reserve toexercise its supervisory, regulatory, or examination powers underapplicable laws and regulations. I further acknowledge that the foregoingmay not be waived or modified by any employee or agency of the FederalReserve or of the United States.2020YearSignature of Chief Executive Officer or DesigneeSebastiano VisentiniManaging DirectorPrint or Type NameTitle07/2018

Request for Confidential TreatmentMorgan Stanley respectfully requests confidential treatment under the federal Freedom ofInformation Act, 5 U.S.C. § 552 (“FOIA”), and the implementing regulations of the FederalReserve, 12 C.F.R. Part 261, for the information contained in the Confidential Exhibits Volumeto this Application, as well as any other information marked “confidential” (collectively, the“Confidential Materials”). The Confidential Materials include, for example, nonpublic proforma financial and regulatory capital information and information regarding the businessstrategies and plans of (i) Morgan Stanley and its subsidiary banks, Morgan Stanley Bank, N.A.and Morgan Stanley Private Bank, National Association (together the “Morgan StanleyBanks”), and (ii) E*TRADE and its subsidiary banks, E*TRADE Bank and E*TRADE SavingsBank (together the “E*TRADE Banks”), and other information regarding additional matters ofa similar nature, which is commercial or financial information that is both customarily andactually treated as confidential by Morgan Stanley and E*TRADE and provided to thegovernment under an assurance of confidentiality. Certain information in the ConfidentialMaterials also includes confidential supervisory information. None of the information in theConfidential Materials is the type of information that would otherwise be made available to thepublic under any circumstances. All such information, if made public, could result in substantialand irreparable harm to Morgan Stanley, the Morgan Stanley Banks, E*TRADE, and theE*TRADE Banks. In addition, potential investors could be influenced or misled by suchinformation, which is not reported in any documents filed or to be filed in accordance with thedisclosure requirements of applicable securities laws, as a result of which Morgan Stanley orE*TRADE could be exposed to potential inadvertent violations of law or exposure to legalclaims. Accordingly, confidential treatment is respectfully requested with respect to theConfidential Materials under FOIA, specifically 5 U.S.C. § 552(b)(4) and (b)(8), and the FederalReserve’s implementing regulations, specifically 12 CFR 261.14(a)(4) and (a)(8). TheConfidential Materials may also be exempt from disclosure under other provisions of law.We also request that, if the Federal Reserve should make a preliminary determination notto comply with the request for confidential treatment, Morgan Stanley be given notice thereof inample time to permit it to make an appropriate submission as to why such information should bepreserved in confidence. If the Confidential Materials, or any memoranda, notes or writingsmade by employees, agents or other persons under the control of the Federal Reserve or anyFederal Reserve Bank that incorporate, include or relate to any of the matters referred to in theConfidential Materials, are the subject of a FOIA request or a request or demand for disclosureby any governmental agency, Congressional office or committee, or court or grand jury, werequest, pursuant to the Federal Reserve’s regulations, that you notify Morgan Stanley and theundersigned prior to making such disclosure.We further ask that Morgan Stanley and the undersigned be furnished with a copy of allwritten materials pertaining to such request (including, but not limited to, the request itself andany determination with respect to such request) and that Morgan Stanley and the undersigned begiven sufficient advance notice of any intended release so that Morgan Stanley may, if deemednecessary or appropriate, pursue any available remedies.If you have any questions regarding this confidential treatment request, please contactLuigi L. De Ghenghi at (212) 450-4296 or [email protected], or Ryan Johansen at(212) 450-3408 or [email protected]

Table of ContentsPRELIMINARY STATEMENT . 1I.INTRODUCTION . 1II.EXECUTIVE SUMMARY . 2III. PARTIES TO THE PROPOSED TRANSACTION . 5A. Morgan Stanley and Its Subsidiaries. 5B. E*TRADE and Its Subsidiaries . 7IV. THE PROPOSED TRANSACTION . 10A. Transaction Structure . 10B. Summary of the Merger Agreement . 12V.STANDARDS FOR REVIEW . 14A. Effects on Competition . 14B. Convenience and Needs of the Community and Public Benefits . 17C. Community Reinvestment Act Compliance . 19D. Financial and Managerial Resources . 36E. Deposits and Liabilities Concentration Limit Analyses . 47F. Financial Stability Considerations . 48VI. PUBLIC NOTICE . 58VII. CONCLUSION. 58APPENDIX A: INFORMATION REQUIRED BY SECTION 225.24 OF REGULATION Y . 59APPENDIX B: INFORMATION REQUESTED BY FORM FR Y-3 . 62

PUBLIC EXHIBITSDocument TitleExhibitMerger Agreement .1Form 8-K Report Filed by Morgan Stanley with the SEC Announcing the ProposedTransaction .2Subsidiaries of E*TRADE .3Pro Forma Organizational Chart of E*TRADE.4Resolutions of the Board of Directors of Morgan Stanley.5MSBNA CRA Performance Evaluation .6MSPBNA CRA Performance Evaluation .7ETB CRA Performance Evaluation .8ETSB CRA Performance Evaluation .9Pro Forma Balance Sheet and Regulatory Capital (Redacted) .10Overview of Morgan Stanley’s Enterprise Risk Management Framework .11Overview of Morgan Stanley’s Compliance Risk Management Program .12Overview of Morgan Stanley’s Fair Lending Compliance Program .13Overview of Morgan Stanley’s Financial Crimes Compliance Program.14Deposits and Liabilities Concentration Limit Analyses .15Additional Information Regarding Financial Stability (Redacted) .16Form of Newspaper Notice .17E*TRADE Financial Statements .18Morgan Stanley Financial Statements .19Information Regarding Litigation Matters .20

CONFIDENTIAL EXHIBITSDocument TitleExhibitAdditional Information Regarding E*TRADE’s Acquisition of Gradifi .ADescription of the Due Diligence Process .BResolutions of the Board of Directors of E*TRADE .CPro Forma Balance Sheet and Regulatory Capital.DE*TRADE’s Enterprise Compliance Policy and BSA/AML/OFAC Policy.EAdditional Information Regarding Financial Stability .FAdditional Information Regarding Regulatory Applications.GAdditional Financial Information .HInformation Regarding Litigation Matters.I

PRELIMINARY STATEMENTI.INTRODUCTIONMorgan Stanley, New York, New York (“Morgan Stanley”) hereby submits thisnotification (the “Application”) to the Board of Governors of the Federal Reserve System (the“Federal Reserve”) for prior approval of a transaction (the “Proposed Transaction”) in whichMorgan Stanley would acquire E*TRADE Financial Corporation, Arlington, Virginia(“E*TRADE”). Morgan Stanley is a bank holding company (“BHC”) that has successfullyelected to become a financial holding company (“FHC”) pursuant to Section 4(k) of the BankHolding Company Act of 1956 (the “BHC Act”). Morgan Stanley owns two national banks,Morgan Stanley Bank, N.A. (“MSBNA”) and Morgan Stanley Private Bank, NationalAssociation (“MSPBNA” and, together with MSBNA, the “Morgan Stanley Banks”), as wellas certain other subsidiaries engaged in activities that are either closely related to banking withinthe meaning of Section 225.28 of Regulation Y or financial in nature and permissible underSection 4(k) of the BHC Act. E*TRADE is a savings and loan holding company (“SLHC”) thatowns two federal savings associations, E*TRADE Bank, Arlington, Virginia (“ETB”) andE*TRADE Savings Bank, Arlington, Virginia (“ETSB” and, together with ETB, the“E*TRADE Banks”), as well as certain other subsidiaries engaged in activities that are eitherclosely related to banking within the meaning of Section 225.28 of Regulation Y or that arefinancial in nature and permissible under Section 4(k) of the BHC Act.As discussed more fully below, the Proposed Transaction will be effected pursuant to anAgreement and Plan of Merger, dated as of February 20, 2020, by and among Morgan Stanley,Moon-Eagle Merger Sub (“Merger Sub”) and E*TRADE (the “Merger Agreement”), a copyof which is included as Public Exhibit 1 to this Application. The Form 8-K report filed byMorgan Stanley with the SEC announcing the Proposed Transaction is also included as PublicExhibit 2 to this Application.Morgan Stanley respectfully requests the prior approval of the Federal Reserve of theProposed Transaction pursuant to Sections 4(j) and 4(k)(6)(B)(ii) of the BHC Act and theprocedures set forth in Section 225.24 of the Federal Reserve’s Regulation Y, as well as Section163(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the“Dodd-Frank Act”).Morgan Stanley acknowledges the extraordinary and difficult circumstances affecting theentire country, and is fully aware of the extraordinary efforts and dedication of resources by theFederal Reserve to stabilize the broader economy through a variety of measures announcedrecently to promote the continued availability of credit and liquidity to sectors of the economyaffected by the COVID-19 pandemic. Morgan Stanley and E*TRADE are each committed tocontributing to the continued provision of credit, liquidity, and financial products and services totheir respective clients, the financial sector and the broader economy in this difficult and tryingperiod, and the financial strength of both firms has enabled them to continue to proactively servethe needs of their respective clients throughout the market turbulence. Both Morgan Stanley andE*TRADE continue to operate with their respective staff working mostly on a remote basis, andneither firm has experienced any material disruptions to their services or operations. Both firmsare also committed to working towards the success of the Proposed Transaction notwithstanding-1-

the challenges posed by the current situation. In connection with this Application, MorganStanley has consulted with Federal Reserve staff and is committed to working with FederalReserve staff to do what it can to make the public notice and comment and review process aseasy as is practicable for all interested parties concerned under the circumstances.II.EXECUTIVE SUMMARYMorgan Stanley strongly believes that the Proposed Transaction would create a combinedfirm that, by integrating the complementary products and services of Morgan Stanley andE*TRADE, expands the breadth and depth of its client offerings, allows it to serve the needs of abroader and emerging client base, and produces a financially stronger and more diversified firm.Morgan Stanley has continuously evolved to help clients finance economic growth, jobcreation, retirement security, college savings, and other needs against the backdrop of a changingU.S. and global economic landscape. Since becoming a BHC in 2008, Morgan Stanley hasdiversified its businesses, including expanding the scale of its wealth management business, tostrengthen resilience against changes in the wider market environment. By buildingcomplementary franchises in Institutional Securities, Wealth Management and InvestmentManagement segments, Morgan Stanley has reoriented its activities over the last decade to derivea greater share of revenues from relatively stable businesses.The Proposed Transaction represents the next step in this decade-long strategicrebalancing. Following the integration of E*TRADE, Morgan Stanley’s Wealth and InvestmentManagement businesses are expected to comprise approximately 57% of the