Morgan Stanley Structured Notes Could Expose Investors to Significant Losses
The White Law Group is reviewing potential securities claims involving structured products issued by Morgan Stanley tied to the ARK Innovation ETF.
The investment in question—Contingent Income Auto-Callable Securities due August 26, 2022, linked to the ARK Innovation ETF (CUSIP: 61771EM54)—was issued with a total face amount of $12,400,000. These notes offered enhanced income opportunities but carried substantial risk if the underlying ETF underperformed.
Details of the Investment
Issue Date: February 26, 2021
Maturity Date: August 26, 2022
Underlying Asset: ARK Innovation ETF (NYSEARCA: ARKK)
Product Type: Contingent Income Auto-Callable Note
Face Value: $12,400,000
Estimated Value at Pricing: $960.90 per $1,000 note
Key Payout Terms:
? If ARKK ? 62.25 (75% of initial value of $83.00): $1,000 + $8.33 monthly coupon (1.0% monthly or 12% annually)
? If ARKK < 62.25 at maturity: Payout = $1,000 × (final ARKK price ÷ $83.00) — investor may suffer significant losses
Note Features:
- 6-month non-call period
- Automatically called if ARKK trades above the adjusted threshold
- High yield only if ARKK maintains minimum performance
Why This Investment Could Be Risky
- No income is paid if ARKK closes below the downside barrier
- Potential for total loss of principal if ARKK declines sharply
- Not FDIC insured and subject to Morgan Stanley’s credit risk
- Price at issuance ($960.90) was significantly below par
Risks to Consider
- Direct exposure Morgan Stanley ARK, known for high volatility
- No principal protection
- Performance depends on a single, actively managed ETF
- May result in zero returns or substantial capital loss
FAQs – Morgan Stanley ARKK Linked Notes (CUSIP: 61771EM54)
Q: What is this note linked to?
A: The note tracks the performance of the ARK Innovation ETF (ARKK), an actively managed fund focused on disruptive innovation stocks.
Q: How do I earn income from this product?
A: If ARKK stays above the downside threshold (62.25), you receive a $8.33 coupon each month, equivalent to a 12% annualized yield.
Q: Can I lose money?
A: Yes. If ARKK falls below 75% of its initial value and the note is not called early, your payout at maturity could be significantly reduced.
Q: What’s the early call feature?
A: The note can be automatically redeemed starting 6 months after issue if ARKK meets or exceeds its call threshold on a determination date.
Q: What’s the worst-case outcome?
A: If ARKK crashes well below the downside level, you could lose a substantial portion of your investment at maturity.
Free Consultation
If you purchased these notes and believe they were misrepresented or unsuitable for your risk tolerance, contact The White Law Group at (888) 637-5510 or visit whitesecuritieslaw.com for a free consultation.
Last modified: June 9, 2025
