NEW YORK (
) -- The
Federal Reserve Board
allowed the Chinese government's investment arm to buy up to 10% of
shares Tuesday as part of an agreement struck in 2007.
In approving the deal, the U.S. regulator stated CIC has committed "not to exercise or attempt to exercise a controlling influence over the management or policies of Morgan Stanley."
CIC now owns 116 million common shares of Morgan Stanley, making it the company's second-largest common shareholder behind
State Street Corp
is Morgan Stanley's largest shareholder with a 20% stake if preferred shares are taken into account.
The increased stake is the result of the mandatory conversion of preferred to common shares as part of an agreement struck by the two institutions in Dec. 2007. The 2007 investment was one of several large stakes in U.S. financial companies taken by sovereign wealth funds as the crisis unfolded.
Merrill Lynch, now owned by
Bank of America
struck similar deals with the investment arms of Singapore, Korea and Kuwait at around the same time.
Written by Dan Freed in New York
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