BERLIN (Reuters) - Germany will investigate whether to tighten rules governing when an investor needs to disclose a holding in a company after news that China's Geely purchased a $9 billion stake in Daimler DAIGn.DE surprised the market.

The swoop by Geely has rekindled fears in Germany of its highly-prized industrial expertise falling into Chinese hands.

One particular concern is that it is unclear how Li Shufu, Geely’s founder and main owner, was able to build up a 9.7 percent stake in Daimler, the owner of the Mercedes-Benz brand, without going public along the way..

Under current rules, investors must disclose when they cross regulatory thresholds including 3 percent and 5 percent of voting rights. But those rules do not apply to all types of financial instruments.

“Against the backdrop of the current case, the federal government will examine whether the existing rules are sufficient to provide an adequate level of transparency, or if further guidelines are necessary,” said an Economy Ministry report for the economics committee of the German parliament. The report was seen by Reuters on Wednesday.

Two people familiar with the matter told Reuters that Geely worked with Bank of America Merrill Lynch to help secure the stake using derivatives, skirting disclosure requirements. Bank of America Merrill Lynch has declined to comment.

NOT SEEKING BOARD SEAT

Any tightening of the disclosure rules would be their first major amendment since Germany's move to prevent "sneak attacks" after carmaker Porsche in 2008 accumulated a stake of around 30 percent in Volkswagen VOWG_p.DE while keeping investors in the dark.

Porsche used "cash-settled options" to buy the stake by stealth. German auto-parts supplier Schaeffler SHA_p.DE did something similar, secretly cornering about a third of the shares of larger rival Continental CONG.DE via swap deals.

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Geely’s Li, meanwhile, brushed off concern that he could seek influence over Daimler’s strategy via representation on its board.

“I respect the values and culture of Daimler. I have never asked for a seat on the supervisory board, and that doesn’t have any priority for me,” German weekly Bild am Sonntag quoted Li as saying in an interview.

Germany Economy Minister Brigitte Zypries this week voiced concern over the possibility that a competitor to Daimler could gain a seat on its board, where strategic matters are discussed.

To protect domestic industry, Germany could also make further changes to its rules on foreign investments in its companies, according to the Economy Ministry.

“The next government will certainly keep an eye on this,” an Economy Ministry spokesman told a regular news conference on Wednesday.

Germany already tightened its rules on foreign takeovers last year, the first European Union country to do so, after a series of deals saw China gain access to high-tech know-how, while attempts by German companies to buy full control of Chinese rivals remains prohibited.