UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1933

Release No. 85998 / May 31, 2019 

ADMINISTRATIVE PROCEEDING

File No. 3-15982

In the Matter of 

MORGAN STANLEY AND CO. LLC;

MORGAN STANLEY ABS CAPITAL I 

INC; and MORGAN STANLEY 

MORTGAGE CAPITAL HOLDINGS 

LLC,

Respondents.

NOTICE OF PROPOSED PLAN OF 

DISTRIBUTION AND 

OPPORTUNITY FOR COMMENT

Notice is hereby given, pursuant to Rule 1103 of the United States Securities and

Exchange Commission’s (“Commission”) Rules on Fair Fund and Disgorgement Plans

(“Rules”), 17 C.F.R. § 201.1103, that the Division of Enforcement has submitted to the

Commission a proposed plan of distribution (“Distribution Plan”) for the distribution of monies 

paid by Morgan Stanley and Co. LLC (f/k/a Morgan Stanley and Co. Incorporated) (“MS & 

Co.”), Morgan Stanley ABS Capital I Inc., (“MSAC”), and Morgan Stanley Mortgage Capital 

Holdings LLC, (“MSMCH”) (collectively, the “Respondents”) in the above-captioned matter.

On July 24, 2014, the Commission issued an Order Instituting Cease and Desist 

Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and 

Imposing a Cease-and-Desist Order (“Order”)1against the Respondents. The Commission 

determined that Respondents issued misleading public disclosures regarding the number of 

delinquent loans in two subprime residential mortgage-backed securities transactions offered in 

2007 – Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 (“NC4”) and Morgan Stanley ABS 

Capital I Inc. Trust 2007-H7 (“HE7”) (collectively the “transactions”). 

As a result of this misconduct, the Order found the Respondents violated Sections 

17(a)(2) and (3) of the Securities Act of 1933. The Order held Respondents jointly and severally 

liable for disgorgement of $160,627,852, prejudgment interest of $17,995,437, and a civil 

penalty of $96,376,711, for a total of $275,000,000. The Order created a Fair Fund pursuant to 

Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty, along with the disgorgement 

 

1

Securities Act Rel. No. 9617 (July 24, 2014).
2

and interest, could be distributed to harmed investors. Pursuant to the Order, the Respondents 

paid the sums ordered by the Commission (the “Fair Fund”). The Fair Fund is subject to the 

continuing jurisdiction and control of the Commission and is currently on deposit with the 

United States Department of Treasury’s Bureau of Financial Service (“BFS”). The Respondents 

are responsible for all reasonable costs and expenses of administering the Fair Fund. 

OPPORTUNITY FOR COMMENT

Pursuant to this Notice, all interested persons are advised that they may obtain a copy of 

the Distribution Plan from the Commission’s public website at 

http://www.sec.gov/litigation/fairfundlist.htm. Interested persons may also obtain a written copy 

of the Distribution Plan by submitting a written request to Adriene Mixon, Esq., Assistant Chief 

Litigation Counsel, United States Securities and Exchange Commission, 444 South Flower 

Street, Suite 900, Los Angeles, CA 90071. All persons who desire to comment on the 

Distribution Plan may submit their comments, in writing, no later than thirty (30) days from the 

date of this Notice:

1. to the Office of the Secretary, United States Securities and Exchange 

Commission, 100 F Street, NE, Washington, DC 20549-1090;

2. by using the Commission’s Internet comment form 

(http://www.sec.gov/litigation/admin.shtml); or 

3. by sending an e-mail to rule-comments@sec.gov.

Comments submitted should include “Administrative Proceeding File No. 3-15982” in the 

subject line. Comments received will be publicly available. Persons should submit only 

information that they wish to make publicly available.

THE DISTRIBUTION PLAN

The Net Available Fair Fund is comprised of the $275,000,000 in disgorgement, 

prejudgment interest, and civil penalties paid by the Respondents, plus any accumulated interest, 

less any BFS fees and any federal, state, and local taxes. The Distribution Plan provides for 

distribution of the Net Available Fair Fund to harmed investors in the two previously discussed 

transactions in accordance with the methodology described in the Distribution Plan. 

By the Commission.

Vanessa A. Countryman

Acting Secretary