Morgan Stanley Finance Issues Buffered Auto-Callable Securities Linked to Dow Jones and Technology ETF

Structural Design and Underlying Asset Linkage

The securities represent a complex structured investment product that combines elements of both traditional debt and conditional equity-linked features. The notes are issued by Morgan Stanley Finance LLC as part of its Series A Global Medium-Term Notes program and are fully backed by Morgan Stanley's guarantee, meaning investors are exposed to the credit risk of Morgan Stanley itself. The underlying performance measurement is based on the worst-performing of two distinct assets: the Dow Jones Industrial Average (INDU Index) and the State Street Technology Select Sector SPDR ETF (XLK Fund), a structure that creates asymmetric downside risk for investors.

The dual-underlier structure means that a significant decline in either the Dow Jones Industrial Average or the technology-focused ETF will negatively impact returns, even if the other underlier appreciates or declines less substantially. This approach does not provide asset diversification benefits but rather concentrates risk by tying all returns to the weakest performer. The initial levels were set at 52,146.42 for the INDU Index and $175.59 for the XLK Fund as of the strike date of July 17, 2026.

Contingent Coupon Payment Mechanics and Observation Schedule

The securities will pay a contingent coupon at an annual rate of 7.65% on designated coupon payment dates, but only if the closing level of both underliers remains at or above their respective coupon barrier levels on the related observation date. The coupon barrier levels are set at 80% of the initial levels: 41,717.136 for the INDU Index and $140.472 for the XLK Fund. If either underlier closes below its coupon barrier level on any observation date, investors receive no coupon payment for that interest period, regardless of the other underlier's performance.

The disclosure specifies multiple observation dates tied to coupon payment dates throughout the life of the securities. The final observation date is scheduled for July 17, 2028, subject to postponement for non-trading days and certain market disruption events. This contingent structure means investors face the risk of receiving no interest payments over the entire two-year term if either underlier declines by more than 20% from its initial level at any observation date. The coupon payment corresponding to the final observation date will be made on the maturity date of July 20, 2028.

Automatic Early Redemption Provisions and Call Thresholds

The securities incorporate automatic early redemption features that can terminate the investment before maturity if both underliers perform well. The first redemption determination date is July 20, 2027, with subsequent determination dates occurring on October 18, 2027, January 18, 2028, and April 17, 2028. On any redemption determination date, if the closing level of each underlier is greater than or equal to its call threshold level, the securities will automatically be redeemed on the corresponding early redemption date for a payment equal to the stated principal amount plus the contingent coupon for that interest period.

The call threshold levels are set at 100% of initial levels: 52,146.42 for the INDU Index and $175.59 for the XLK Fund. This means if both indices have not declined from their initial levels, the issuer can redeem the securities early. The early redemption dates corresponding to the determination dates are July 23, 2027, October 21, 2027, January 21, 2028, and April 20, 2028. Once the securities are automatically redeemed, no further payments will be made and the investment terminates.

Buffer Feature and Maturity Repayment Structure

At maturity, if the securities have not been automatically redeemed earlier, the repayment amount depends on whether the final levels of both underliers meet or exceed their respective buffer levels. The buffer levels are set at specific percentages of the initial levels, providing a cushion against moderate declines. If the final level of each underlier is greater than or equal to its buffer level, investors receive the full stated principal amount of $1,000 per security in addition to any final contingent coupon payment that may be due.

However, if the final level of either underlier falls below its buffer level, investors face principal loss on a one-to-one basis. Specifically, for every 1% decline in the worst-performing underlier beyond the buffer level, investors lose 1% of the stated principal amount. This loss can be significant, and investors may receive substantially less than their initial investment. The disclosure indicates there is a minimum payment at maturity, though the specific floor amount was not disclosed in this pricing supplement. This structure creates substantial downside risk for investors who do not benefit from early redemption.

Pricing and Commission Structure

The securities were priced to the public at $1,000 per security, representing the full stated principal amount. The aggregate principal amount issued totaled $610,000, indicating that 610 individual securities were sold. The agent, Morgan Stanley & Co. LLC (a wholly owned subsidiary of Morgan Stanley), received a fixed sales commission of $27.50 per security sold, totaling $16,775 in aggregate commissions and fees. Selected dealers and their financial advisors will collectively receive this compensation from the agent on a fixed basis.

The estimated value of the securities on the pricing date of July 17, 2026, was $962.10 per security, representing a discount of approximately $37.90 or 3.79% from the issue price. This discount reflects the value attributed to the issuer's cost of hedging the contingent coupon and automatic early redemption features, as well as compensation for the principal-at-risk structure. The proceeds to Morgan Stanley Finance LLC after commissions totaled $593,225 from the $610,000 aggregate principal amount offered.

Credit Risk and Guarantor Obligations

All payments on these securities are subject to the credit risk of Morgan Stanley Finance LLC and its guarantor, Morgan Stanley. The disclosure emphasizes that if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. The securities are unsecured obligations and do not provide any security interest in or access to any underlying reference asset or assets. This means investors have no claim on the indices or ETF that underlie the securities; they are solely dependent on Morgan Stanley's creditworthiness for repayment.

The guarantee by Morgan Stanley is described as full and unconditional, making Morgan Stanley the primary obligor alongside Morgan Stanley Finance LLC. However, the unsecured nature of these notes means they are subordinated to any secured debt and other senior obligations of Morgan Stanley. Investors must assess Morgan Stanley's financial condition and credit rating as an integral part of evaluating the risk-return profile of this investment, as the underlying index performance and structured features provide no protection against issuer default.

Principal-at-Risk Investment Profile and Target Investor Characteristics

The securities are explicitly identified as principal-at-risk securities, meaning investors must accept the possibility of losing a significant portion of their initial investment. The disclosure states that these securities are designed for investors who are willing to risk their principal and accept the possibility of receiving no coupon payments over the entire two-year term in exchange for the buffer feature and the opportunity to earn an interest rate of 7.65% annually if conditions are met. The potential loss is not limited to a small percentage of principal but can extend to substantial declines if either underlier falls significantly below its buffer level.

Notably, the disclosure clarifies that investors in these securities will not participate in any appreciation of either underlier, despite holding a structured note with equity-linked features. The buffer feature provides limited downside protection, only cushioning declines of up to a certain percentage before losses accrue on a one-to-one basis. Investors must be comfortable with the characteristics of this investment, including the risk of receiving no coupons if either underlier declines by 20% or more, and the possibility of significant principal loss if declines are substantial.

Regulatory Status and Investment Characteristics

The securities are part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, registered under Registration Statement Nos. 333-293641 and 333-293641-01. This pricing supplement (Pricing Supplement No. 17,311) was filed pursuant to Securities and Exchange Commission Rule 424(b)(2) and dated July 17, 2026. The securities are supported by a product supplement, index supplement, tax supplement, and prospectus, all dated April 8, 2026, which provide additional detailed terms and conditions.

The disclosure explicitly states that these securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of or guaranteed by a bank. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if the documentation is truthful or complete, as is standard in such disclosures. The minimum investment amount and whether these securities are available to all investors were not disclosed in this pricing supplement.

Performance Metrics and Risk Concentration

The use of the worst-performing underlier as the basis for determining all returns creates a structure where performance is determined by the weaker of two distinct asset classes: the broad-market Dow Jones Industrial Average and the concentrated technology sector ETF. This structure means that a technology sector downturn or underperformance relative to the broader market could trigger coupon barriers and buffer level breaches, even if the overall stock market remains stable or advances. Conversely, a broad market decline could trigger losses even if the technology sector performs well.

The specific barrier levels—100% for call thresholds, 80% for coupon barriers, and an unspecified percentage for buffer levels—represent the pricing methodology's assessment of probability-weighted outcomes. The contingent coupon rate of 7.65% annually appears calibrated to compensate investors for the risk of non-receipt and principal loss, though investors should compare this yield to traditional fixed-income alternatives with similar or lower risk profiles. The two-year maturity concentrates the reinvestment risk and timing considerations, as investors must decide whether to hold through automatic redemption opportunities or maintain exposure through maturity.

Tax Treatment and Additional Disclosure Documents

The securities have an associated tax supplement dated April 8, 2026, which provides guidance on the tax treatment of these instruments. The tax treatment of contingent coupon payments, automatic early redemption proceeds, and any principal loss at maturity may have different tax consequences for individual and institutional investors. The disclosure file includes this tax supplement as an integral part of the offering documentation, and investors are advised to review it in conjunction with the other prospectus materials and to consult with their own tax advisors regarding the specific tax implications of holding and potentially realizing gains or losses on these securities.

The complete offering documentation comprises multiple interconnected documents that together specify all material terms, conditions, and characteristics of the securities. Investors are instructed to read the pricing supplement together with the related product supplement, index supplement, tax supplement, and prospectus, each accessible through hyperlinks in the official filing. The substantial length and complexity of the documentation reflects the layered nature of the structured product and the numerous contingencies affecting coupon payments, early redemption, and final maturity payments.