On October 6, 2008, the Federal Reserve Board (“FRB”) approved the proposal by Mitsubishi UFJ Financial Group, Inc. (“Mitsubishi”) to acquire up to 24.9% of the voting stock of Morgan Stanley, which indirectly controls two national banks and a federal thrift institution. Morgan Stanley became a bank holding company on September 21, 2008.

The acquisition was structured as a non-controlling investment by Mitsubishi and represents one of the first decisions by the FRB utilizing its new policy statement, which liberalized certain rules regarding equity investments in bank holding companies.

Mitsubishi provided commitments to the FRB that it would not exercise or attempt to exercise a controlling influence over the management or policies of Morgan Stanley. The commitments included certain restrictions on business relationships between Mitsubishi and Morgan Stanley. However, Mitsubishi is entitled to have a representative on the Morgan Stanley board and another representative as an observer at board meetings. Prior to issuance of the policy statement, investors with stakes in bank holding companies of greater than 15% generally were not entitled to board representation.

The transaction, which was processed on an expedited basis by the FRB due to the unusual and exigent circumstances affecting the financial markets, is an example of the FRB’s willingness to apply the principles outlined in its new policy statement to facilitate a significant non-controlling investment in a bank holding company. See Federal Reserve Board Releases Policy Statement on Private Equity Investments in Banks.