CORRECTED-UPDATE 1-Morgan Stanley makes Kelleher sole institutional banking head

head@ (Corrects 3rd paragraph to make clear Kelleher is already a member of the operating committee)

Nov 5 (Reuters) - Morgan Stanley has revamped its institutional securities business, announcing on Monday that Paul Taubman will retire as co-head of the trading and banking unit while co-head Colm Kelleher will remain as president.

The change comes as Morgan Stanley is reducing its historic reliance on trading in the wake of new rules and regulations and betting more heavily on selling securities advice and products to wealthy individuals and families.

Taubman, 52, who was with Morgan Stanley for more than 30 years, will retire at year-end, the company said. Kelleher, 55, who was chief financial officer of the company during the financial crisis, will remain a member of the firm's operating committee.

The change underlines the difficulties of having two executives near the same age co-running central businesses. According to published reports, Kelleher and Taubman had been butting heads almost since they were named to run the stressed institutional businesses more than two years ago.

Kelleher had been focusing on overseeing the firm's sales and trading businesses, while Taubman was in charge of investment banking, or selling capital-raising and merger services to corporations.

As part of the reorganization, Kelleher has elevated Mark Eichorn and Franck Petitgas to co-head the investment banking unit run by Taubman. Kenneth de Regt, head of fixed income trading, and Ted Pick, head of equities, will continue to run those trading businesses day-to-day and report to Kelleher.

Eichorn, 48, has headed mergers and acquisitions in the Americas since 2009, and will be based in New York. Petitgas, 51, is head of international capital markets and will continue to oversee the trading businesses from London. They both report to Kelleher, who remains based in London.

``I am confident that under Colm's leadership we will continue to align sales and trading more closely with investment banking and capital markets to drive synergies between these businesses and optimize our ability to grow our revenue base and drive profits,'' Morgan Stanley Chief Executive James Gorman, 54, said in a prepared statement.

In another change, institutional securities vice chairman Jeff Holzschuh, 52, who focuses on the power and utilities industries, has taken the new title of chairman of institutional securities and will serve an ambassadorial function concentrating on ``key client relationships globally,'' the company said.

Eichorn and Holzschuh also are joining the company's management committee. Petitgas is already on the panel.

(Reporting By Jed Horowitz; Editing by Gerald E. McCormick and John Wallace)