Moving forward together

Morgan Stanley will be assuming responsibility for the custody and clearing services provided by E*TRADE Securities. Here's what you need to know.

As you may know, E*TRADE and Morgan Stanley joined forces in late 2020. We’re now entering a new phase of our journey together and are excited to share with you what’s next.

Morgan Stanley Smith Barney LLC (Morgan Stanley) will soon be assuming responsibility for the custody and clearing services currently provided by E*TRADE Securities LLC (E*TRADE). As a result, your E*TRADE account(s) will be transferred to Morgan Stanley over the coming months. We’ll notify you as your transfer date approaches—and will keep you informed every step of the way.

No action is required on your part for this transfer to take effect. You will continue to enjoy the online experience you’ve come to expect from us, including the E*TRADE website, mobile apps, trading platforms, and customized product features.

Please note: Account transfers will occur on a rolling basis. To find the transfer date for your account(s), see the Notice of Changes that was sent to your email or home address. If you haven’t yet received this communication, your transfer date is not immediately upcoming.

About 1 week before transfer weekend On the Tuesday before transfer weekend On the Friday of transfer weekend

All outgoing account transfer requests will be rejected and will need to be resubmitted (using your new account number) after transfer weekend.

You will no longer be able to change your sweep option until after the transfer has been completed.

Processing of all incoming account transfer requests will be paused until after transfer weekend. Starting after the close of extended hours trading, all open orders except futures will be canceled, and online account access will be disabled through Sunday afternoon. This could also impact your access to any banking accounts you hold with us, as well as the availability of certain banking and cash management features. Debit and ATM cards, however, will remain fully functional. Learn more about what to expect before the transfer weekend.
 

While your online experience and the way you access your account(s) will remain the same, there are a number of post-transfer changes to keep in mind, including the assignment of new account numbers. You can explore these changes by expanding the sections shown below.

For additional details, see the Notice of Changes you received from us.

 

General Changes

The following general changes will take effect on your transfer date:

Account number

You’ll be assigned a new brokerage account number with nine digits, which you’ll be able to view online. For reference, your old account number will also be visible on etrade.com and E*TRADE mobile applications.

Fractional quantity decimal places

  • For certain products, the share quantity for your portfolio and watch list positions will be rounded and adjusted to three decimal places (from five decimal places previously). Your historical data on E*TRADE platforms, however, will continue to display to five decimal places.
  • For certain products, if you hold a long position with a quantity that extends to more than three decimal places, the quantity will be rounded up to the next highest number at the third decimal place (e.g., 100.32816 will be rounded to 100.329). If you’re short these same products, positions with a quantity of more than three decimal places will be rounded down at the third decimal place (e.g., -98.34795 will be rounded down to -98.347).

Dividend and interest payments

If you’ve elected to have your dividend and interest income distributed on a monthly basis, you’ll experience a change in the way your monthly distribution amount is calculated. After the transfer, your dividend and interest income will be added to your available cash balance. If the cash available in your account on the distribution date is less than your accumulated income balance (due to trades, withdrawals, and so on), the amount that’s distributed to you will equal your available cash balance. This may result in a different distribution amount than you received prior to the transfer.

Banking and cash management features of brokerage accounts

When you’re assigned a new brokerage account number upon transfer, you’ll also be issued a new checking account number to be used when establishing new direct deposits and automatic payments tied to your E*TRADE brokerage account. You can view this number by logging on to etrade.com, locating the account on the Complete View page, and selecting “Routing and account number” from the “Quick links” menu. This number will also appear at the bottom of any brokerage account checks you order after the transfer is completed.

Your existing checks, debit card, Bill Pay, and automatic payments and instructions tied to your E*TRADE brokerage account will continue to operate without change.

Wires

After the transfer, for any new wire requests tied to your E*TRADE brokerage account, select E*TRADE as the financial institution (ABA number 056073573) and use your new account number.

Check writing

After the transfer, you can continue to use your current checks with your old account number. However, when you reorder checks tied to your E*TRADE brokerage account, you’ll notice your new account number on them. You’ll continue to be able to view 24 months of cleared check images through etrade.com. Check images can also be viewed on the E*TRADE mobile app via Menu > Check Deposits > Activity.

Direct deposit

After the transfer, any direct deposits you’ve set up with your old account number will continue. For any new direct deposits tied to your E*TRADE brokerage account, use your existing routing number (ABA number 056073573) and new account number. We also encourage you to update your existing instructions with any depositors to reflect your new account number.

Automatic payments

After the transfer, any automatic payments you’ve initiated directly with a payee using your old E*TRADE brokerage account number will continue. For any new automatic payments tied to your E*TRADE brokerage account, use your existing routing number (ABA number 056073573) and new account number. We also encourage you to update your existing instructions with any payees to reflect your new account number.

Debit cards

Your debit card number associated with your E*TRADE brokerage account as well as the card’s features and benefits will not change. Plus, any recurring payments associated with your debit card that you established prior to the transfer will continue without change.

ATM fee reversals

You will continue to receive ATM fee reversals as stipulated by the E*TRADE ATM refund policy.

Mobile wallet

Any account information you’ve saved in a mobile wallet on a smartphone or other mobile device will continue to operate without change.

Check deposits

After the transfer, you can continue to deposit checks via mobile deposit. Plus, co-located E*TRADE and Morgan Stanley branches can accept check deposits into your E*TRADE brokerage account(s).

Statements and reporting

Due to the transfer, the following statements and reporting changes will apply:

Account statements

For the month in which your current E*TRADE accounts are transferred to your new E*TRADE accounts, you’ll receive two account statements: one from E*TRADE detailing any account activity that took place prior to the transfer, as well as the movement of all securities, funds, and balances from your E*TRADE account(s) to Morgan Stanley; and another from Morgan Stanley detailing any account activity that took place after the transfer, as well as the receipt of all securities, funds, and balances by Morgan Stanley from your E*TRADE account(s). After the transfer, you’ll continue to receive your account statements no less frequently than quarterly as long as you have a security position, account balance, or account activity.

Should residual acitivity (i.e. income payments) take place in your original E*TRADE account after the transfer, you may still receive a statement from E*TRADE as these assets are received and further transferred to your new E*TRADE account.

New statement format

In general, your new E*TRADE from Morgan Stanley statement will contain all the information you’ve been receiving, but in a new format and with some additional data we hope you’ll find useful. As expected, this new format may present information in different sections and/or with different labels.

If your account has Fixed Income securities (i.e. bonds or CDs), your new statement will include the value of accrued interest on the receipt of these positions. Accrued interest represents the interest that has accrued since the last coupon payable date.

Trade confirmations, prospectuses uses and general correspondence

  • Your E*TRADE from Morgan Stanley trade confirmations will have a new design, while offering all the required information. There may be additional information and disclosures as well.
  • Your trade confirmations and prospectuses will be available in the Documents section on etrade.com. Your current eDelivery notification preference selection, available on etrade.com, will be combined to apply to both trade confirmations and prospectuses deliveries.
  • General Correspondence will be introduced as a new preference type and eDelivery will be automatically enabled for General Correspondence if it is elected for any preference in the account.

Product descriptions

Some product descriptions for the holdings in your account on etrade.com and the E*TRADE mobile applications may be different than those displayed on your account statements and trade confirmations.

Product pricing and valuation methodology

As a result of the transfer, the pricing methodology used to calculate prices for certain securities may change on a going-forward basis.

Tax reporting & withholding

Due to the transfer, the following tax-related changes will apply:

2023 tax reporting

For tax year 2023, you will receive separate IRS tax forms (e.g., Form 1099 and Form 1042-S), as well as any applicable state income tax forms, reflecting reportable activity in your E*TRADE account(s) during 2023 prior to the transfer and in your new E*TRADE account(s) during 2023 after the transfer. You may be required to account for information from all tax statements when completing tax returns. If you have questions about tax statements, please consult your tax advisor.

Presumption rules

For undocumented accounts (no valid Form W-8 or W-9 on file), key enhancements to the determination of domestic vs. foreign presumption rules will be implemented at the time of transfer that could impact the tax withholding treatment for your account(s).

Tax lot rounding

Tax lot quantities will be rounded up or down to the nearest third decimal place (e.g., 24.92621 will be rounded down to 24.926; 24.92491 will be rounded up to 24.925).

Tax classification of securities

Due to differences in security reference data and the transfer of your account(s) to Morgan Stanley, you may experience a change in tax withholding, year-end reporting, and/or cost basis calculations related to the securities you held or continue to hold in your transferred account(s).

Margin and lending

Due to the transfer, the following margin-related changes will apply:

Margin billing period

  • Upon the transfer of your E*TRADE brokerage account(s), your margin interest accrual period will change. Your current billing period for margin interest is the 26th of the month to the 25th of the following month. The new billing period will be the first day of the month to the last day of the month.
  • Interest accrued from the 26th of the prior month through your transfer date will be reflected on your E*TRADE Securities brokerage statement following the close of the billing period on the 25th of the month.
  • Interest accrued from your Transfer Date to the end of the month will be reflected on your Morgan Stanley brokerage statement on the last day of the month.

Margin interest calculation

  • Upon transfer of your E*TRADE brokerage account(s), the method of margin interest calculation will change. Your interest will no longer be calculated based on the average daily balance determining the weighted average rate. Your interest will instead be calculated using your actual daily debit balance and associated rate.
  • For an explanation of how your interest will be calculated, see the Margin Supplement in your E*TRADE from Morgan Stanley Client Agreement for Self-Directed Accounts.

Multiple margin and pattern day trading account aggregation logic

  • After the transfer, if you hold multiple margin accounts registered in the name(s) of the same beneficial owner(s) at or between E*TRADE and/or Morgan Stanley, your start-of-day Special Margin Memorandum Account (SMA) excess, buying power, and pattern day trading (PDT) activity and equity requirements, if any, will be aggregated across your multiple margin accounts. PDT round trips, status, buying power, margin calls, equity requirements, and other account requirements and restrictions imposed in one margin account will apply equally to your like-titled multiple margin accounts.

Release rate changes

  • Upon transfer, the lending value release rates will change for select asset types. The asset types that are benefiting from increased release rates include Unit Investment Trusts (UITs) and many fixed income security types (e.g., convertible bonds, non-convertible bonds, municipal bonds, and US government agency debt). Conversely, US equities priced under $2 and warrants and leveraged ETFs priced under $4 will no longer receive lending value.
  • Depending on the asset mix in your accounts, these changes in release value may or may not have a material impact on your borrowing power. If you hold a large number of these asset types and/or have a large loan balance, please carefully check your statement and/or call 800-998-8079 to confirm that your account will not be negatively impacted. In some cases, these changes could result in a margin call.

Brokerage account statement

  • The brokerage account(s) pledged to your Line of Credit, if any, will be noted in your account statement.
  • Your account statement will also include a new Margin Loan Interest Schedule section, providing a detailed breakdown of your interest amount.

Margin base rate and spread changes

Corporate actions

Here are a few things to know about voluntary corporate actions after the transfer, including a new way to view and participate in them at etrade.com.

Voluntary corporate actions

  • Voluntary corporate action elections can be made on etrade.com. You’ll also begin to see a list of your pending voluntary corporate action events on etrade.com.
  • To view voluntary corporate actions available in each of your accounts, go to the new Shareholder Actions tab under Accounts > Portfolios. A link will be available for each corporate action with offer details and the election due date.
  • Based on your delivery preferences, you’ll continue to get electronic or paper notifications of corporate actions.
  • Control numbers will no longer be required.

Voluntary election adjustments

The frequency of voluntary election adjustments will be changed from weekly to daily.

Pricing and fees

$0 commissions for online US-listed stock, ETF, mutual fund and options trades will remain. A number of fees, however, are being eliminated or reduced. For the full fee schedule, see etrade.com/fees.

Fees no longer being charged:

  • Fees for duplicate account statements, confirmations, and tax forms
  • Fee for early withdrawal from a retirement account before age 59½
  • Excess contribution removal fee for retirement accounts
  • Recharacterization fees for retirement accounts
  • Worthless security processing fee
  • Cashless exercise fee
  • Secure ID (RSA) token fee
  • Reg T call extension fee

Fees being reduced:

  • ADR conversion request fee: $25 (previously $30)
  • Physical stock certificate fee: $60 (previously $500)
  • Hard-to-borrow: Now 1% * market value of short * # days (this calculation was previously variable)

For current clients of both E*TRADE and Morgan Stanley

If you have accounts at both E*TRADE and Morgan Stanley, the following changes will take effect on your transfer date:

Profile information

Any updates you make to your employment information, legal address, phone number, or income and net worth will be automatically applied to all your accounts across E*TRADE and Morgan Stanley.

Client profile harmonization

  • Your personal information will be consolidated and synchronized across your account records, if applicable. This process could result in a material update to the information we have on file for you, including your name, legal address, date of birth, phone number, and so on. In the event that we have conflicting information across your accounts, we will use your most recently updated records.
  • To ensure accuracy, please visit etrade.com/myprofile and the Settings tab at morganstanleyonline.com > Profile Tab > Settings to confirm and update your personal information.

Internal transfers

Once your accounts are linked, you’ll be able to transfer cash or securities between E*TRADE brokerage accounts and Morgan Stanley accounts on either etrade.com or Morgan Stanley Online. For more information, visit the E*TRADE Service Center or contact the Morgan Stanley team servicing your account.

Uninvested cash sweeps

Today, your uninvested cash balances automatically move (or sweep) into cash sweep programs, which can be found in your account statement under “Cash & Cash Equivalents.”

As a result of the transfer, all eligible sweep option balances will be transferred to a Morgan Stanley bank sweep program called the Bank Deposit Program (BDP) on or about the transfer date except in certain cases where you’re ineligible to participate or you’re a pattern day trader. Through BDP, available free credit balances are automatically deposited, or swept, by Morgan Stanley into interest-bearing deposit accounts established for you by, and in the name of, Morgan Stanley Smith Barney LLC as agent and custodian, at Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, each a national bank, Federal Deposit Insurance Corporation (FDIC) member, and affiliate of Morgan Stanley, subject to a deposit maximum of $20,000,000. If your account is eligible, additional amounts above the deposit maximum are swept to the Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio (MGPXX), a prospectus for which can be found at morganstanley.com/funds/MGPXX.

Please note:

  • To understand how these changes may impact your account over the weekend of your transfer date, see Changes to your sweep option.
  • Accounts that are designated pattern day trading accounts will continue to maintain cash balances in the Cash Balance Program and will not be transferred to BDP.

For information regarding BDP, including the terms and conditions, see the BDP Disclosure Statement. Except for pattern day trading accounts, BDP will be your default sweep investment unless you’re ineligible to participate in it (e.g., for certain persons residing outside the US), in which case any free credit balances in all of your accounts will automatically sweep into one of the following based upon eligibility:

  • Institutional Liquidity Funds Government Securities Portfolio (available only if you are a US person and are not eligible for BDP, or if you exceed the Deposit Maximum as defined in the BDP Disclosure Statement)
  • Treasury Liquidity Fund - Cayman Islands Exempted Company that invests all its assets in Institutional Class of the Morgan Stanley Institutional Liquidity Funds Treasury Portfolio, a US money market fund (Cayman Company is not governed by the US Investment Company Act of 1940, as amended, and is available only if you reside outside the US)
  • US Government Money Market Trust (available only for Individual Retirement Accounts that are not eligible for BDP)

Your sweep balance will be held in an omnibus account at one or more sweep banks. No deposits or withdrawals will be accepted directly from you by the sweep banks; instead, money is moved based on the activity that takes place in your account.

Your deposits in BDP pay interest. The current rate of interest for BDP can be found at etrade.com/rates. There are no changes to interest accrual, tiers, and the payout process as a result of the change from your current sweep option to BDP other than those specifically addressed in the Notice of Changes you received from us.

Retirement and education savings accounts (and change of custodian)

Effective on your transfer date, E*TRADE will transfer your Individual Retirement Account (IRA), Coverdell Education Savings Account (CESA), and/or qualified retirement plan (QRP) account to Morgan Stanley. Here’s what this means for these types of accounts:

  • E*TRADE will resign as your IRA, CESA, or QRP account custodian.
  • Morgan Stanley will become the new custodian of your account(s).
  • New Morgan Stanley retirement account documents will govern, not those of E*TRADE, as further explained below. However, for 401(k), profit sharing, or money purchase plans governed by E*TRADE’s prototype document (Prototype QRP), that document is not changing and still governs your QRP, but Morgan Stanley will become the document sponsor.
  • Morgan Stanley will become the new IRS-approved nonbank custodian for your account if your account is an IRA or CESA or is maintained as part of a Prototype QRP that is exempt from the trust requirement under ERISA, does not have a trustee appointed, and is using a qualifying custodial arrangement (with E*TRADE as the custodian) under Section 401(f) of the Internal Revenue Code.
  • After the transfer to Morgan Stanley, IRA, CESA, and Prototype QRP accounts will have new IRS approval letters.
  • In addition to the Self-Directed Account Agreements that will govern your account, your retirement account will be subject to additional retirement account agreements and documents. To find the documents that will apply to your retirement account, please access the appropriate document for your account type at Important Documents & Agreements. You should retain the relevant documents for your records, but you are not required to sign or return these documents to Morgan Stanley.

SIPC, FDIC, and other disclosures

SIPC coverage

Morgan Stanley is a member of SIPC. Under SIPC, securities and uninvested cash (free credit balances) are protected in the event of a forced liquidation of Morgan Stanley for net equity claims up to $500,000, of which up to $250,000 may be for uninvested cash. SIPC coverage does not protect investors against securities fraud claims, market fluctuations, or other losses that are not related to net equity claims due to the insolvency of Morgan Stanley. Information about SIPC, including the SIPC brochure, may be obtained by contacting SIPC at 202-371-8300 or
by visiting sipc.org.

Effective at the time of the transfer, your account(s) will be protected under Morgan Stanley’s SIPC membership. Your SIPC coverage protection limits will not change. If you maintain more than one account at Morgan Stanley in separate capacities (e.g., individual and joint), the account(s) maintained in each capacity would be protected by SIPC up to the prescribed limits. However, if you maintain more than one account at Morgan Stanley in the same capacity, all such accounts maintained in that capacity must be aggregated for SIPC protection limits.

Excess of SIPC coverage

In addition to SIPC protection, in the unlikely event that client assets are not fully recovered and the full SIPC protection limits have been paid, Morgan Stanley’s supplemental insurance policy would be available to provide protection above the prescribed SIPC limits. This coverage is subject to an aggregate firmwide cap of $1 billion, with no per-client limit for securities and a $1.9 million per-client limit for the uninvested cash balance portion of any remaining shortfall.

As previously communicated to you, your E*TRADE account(s) are currently covered under the Morgan Stanley excess of SIPC supplemental insurance policy. Your excess SIPC coverage will not change upon account transfer. You can view additional information online about Morgan Stanley’s SIPC and excess of SIPC protection.

FDIC insurance

Certificates of Deposit (CDs) issued by FDIC member institutions that are purchased through Morgan Stanley and deposit accounts maintained through Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association (including, but not limited to, accounts with funds invested in the Bank Deposit Program, Savings, and Global Currency) are eligible for FDIC insurance up to applicable US dollar limits (visit fdic.gov). Unless otherwise specifically disclosed to you in writing, other investments and services offered through Morgan Stanley are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, a bank, and involve investment risks, including possible loss of principal amount invested. Morgan Stanley is a registered broker-dealer, not a bank. CDs are insured by the FDIC, up to a maximum of $250,000 (including principal and interest) for all deposits held in the same capacity (e.g., individual or joint) per CD depository.

Automatic enrollment in the Morgan Stanley Class Action Service

After the transfer, you will be automatically enrolled in the Morgan Stanley Class Action Service (Class Action Service), which is administered by Broadridge Investor Communication Solutions Inc. (Broadridge). Broadridge automatically processes all proof of claim forms each time a security within your account(s) is impacted by a class action lawsuit. Any proceeds recovered from the Class Action Service will be subsequently deposited into your eligible account(s). In exchange for administering the Class Action Service, Broadridge will deduct 6% from any class action settlement received on your behalf. Morgan Stanley will notify you prior to processing any proof of claim form in order to give you the opportunity to opt out of a specific class action lawsuit. If, at any time, you do not wish to participate in the Class Action Service, you may choose to un-enroll by contacting Customer Service. The Class Action Service terms and conditions are included in the Self-Directed Account Agreements, which you can view under Important Documents & Agreements.

For information about updates to our client agreement, privacy policy, and relationship summary, see Important Documents & Agreements.