Tags: US | Fed | China | Morgan | Stanley

Fed Lets China Fund Expand Morgan Stanley Stake

Wednesday, 01 Sep 2010 12:31 PM

The Federal Reserve has approved a request by a Chinese sovereign wealth fund to acquire up to 10 percent of the voting shares of New York investment giant Morgan Stanley.

The Fed, which regulates bank holding companies such as Morgan Stanley, approved the deal Tuesday on a 5-0 vote.

The Fed said it gave the go-ahead to the stock acquisition because the China Investment Corp. had stated that it did not plan to seek a controlling interest in Morgan Stanley.

The order said that China Investment Corp., operating through a nonbank subsidiary, had in December 2007 invested in Morgan Stanley securities under an agreement that gave it the right to acquire Morgan Stanley common stock by August of this year.

The Fed said its investigation showed that approval of the agreement would not have an adverse impact on banking competition in the United States.

"CIC has stated that it does not propose to control or exercise a controlling influence over Morgan Stanley and that its indirect investment will be a passive investment," the Fed said in its approval order.

Chinese Investment Corp., which was established in 2007, is an investment fund which is wholly owned by the government of China.

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