Morgan Stanley Finance LLC filed a Free Writing Prospectus to Preliminary Pricing Supplement No. 19,740 on October 28, 2026, for Contingent Income Memory Buffered Auto-Callable Securities linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index, due November 17, 2031.

Key Highlights

  • Underlier: The securities are linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index (SPUMP40), which was established on March 14, 2022.
  • Contingent coupon range: The filing states a contingent coupon of 13.25% to 14.25% per annum, paid monthly, with a memory feature, subject to the underlier meeting the coupon barrier level of 80% of the initial level on the relevant observation date.
  • Buffer amount: A 15% buffer is described, with the filing noting a maximum loss of 85% per security.
  • Estimated value: The estimated value is $903.20 per security, or within $53.20 of that estimate, against an original issue price of $1,000 per security.
  • Automatic early redemption: Beginning after one year, the securities may be automatically redeemed monthly if the underlier closes at or above 100% of the initial level on a redemption determination date.
  • Maturity and pricing dates: The pricing date is November 12, 2026, with a final observation date of November 12, 2031, and a maturity date of November 17, 2031.
  • CUSIP: 61781TC43, issued under Registration Statement Nos. 333-293641 and 333-293641-01.

MSFL SPUMP40 Auto-Callable Securities: Terms and Risks Disclosed

According to the filing, the issuer is Morgan Stanley Finance LLC (MSFL), with Morgan Stanley serving as guarantor. The securities are described as Contingent Income Memory Buffered Auto-Callable Securities due November 17, 2031, and are linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index. The filing states that the index incorporates a fixed decrement of 4% per annum, which "will adversely affect the performance of the Index in all cases, whether the Index appreciates or depreciates." The index is also described as having "very limited operating history," having been established on March 14, 2022.

The filing discloses hypothetical payment-at-maturity scenarios per security, excluding any contingent coupon. According to those disclosures, a 0% or positive change in the underlier results in $1,000.00 returned, a decline of 15% also returns $1,000.00 (the buffer), a decline of 16% returns $990.00, a decline of 50% returns $650.00, and a decline of 100% returns $150.00. The filing notes that all payments are subject to the credit risk of Morgan Stanley.

The filing highlights that the estimated value of $903.20 per security is less than the $1,000 original issue price, stating that "the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities." The securities will not be listed on any securities exchange, and secondary trading may be limited, according to the filing. The filing further notes that U.S. federal income tax consequences of an investment in the securities "are uncertain."

What Was Disclosed

Morgan Stanley Finance LLC filed preliminary terms for structured auto-callable securities linked to the SPUMP40 index, disclosing coupon terms of 13.25% to 14.25% per annum, a 15% buffer, an estimated value of $903.20 per security, and a suite of risk factors relating to the securities, the underlier, and conflicts of interest.