Morgan Stanley to pay $1.25bn over charges

New York - US banking giant Morgan Stanley Tuesday said it agreed to pay $1.25bn 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 $150m 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 $13bn 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 $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.