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Morgan Stanley to pay US$1.25b in mortgage settlement

US banking giant Morgan Stanley on Tuesday said it agreed to pay US$1.25 billion to settle charges that it misled investors on the sale of mortgage-backed securities ahead of the housing bust.

NEW YORK: US banking giant Morgan Stanley on Tuesday said it agreed to pay US$1.25 billion to settle charges that it misled investors on the sale of mortgage-backed securities ahead of the housing bust.

Morgan Stanley will boost its legal reserves by US$150 million to pay out the settlement to the US Federal Housing Finance Agency, Morgan Stanley said in a securities filing.

The settlement marks the latest big government agreement with a US banking giant in the aftermath of the housing bust.

In November, JPMorgan Chase agreed to a US$13 billion settlement on mortgage-backed securities. Bank Of America and Goldman Sachs have also announced big settlements.

The settlement resolves a September 2011 suit in which the FHFA, the conservator of Freddie Mac and Fannie Mae, alleged that Morgan Stanley made "untrue statements and material omissions" in the sale of about US$11 billion in worth of mortgage security securities, Morgan Stanley said in a 2013 securities filing.

Tuesday's securities filing described the deal as "an agreement in principle" and said it is still subject to "final approval" by the parties.

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