SEC Nears Deals With Banks Over CDOs

Apr 15 2011 | 12:40pm ET

Shortly after a damning Senate report blasted banks' behavior in selling collateralized debt obligations, nearly a half-dozen firms are racing to strike deals with the Securities and Exchange Commission.

The regulator is in talks with Citigroup, Bank of America Merrill Lynch, JPMorgan Chase, Morgan Stanley and UBS. All five are eager to settle investigations into their CDO practices, which in some cases—such as JPMorgan's—involves allegedly secret hedge fund input.

Settlements could be struck as soon as next week, The Wall Street Journal reports, although some are likely to take months to finalize. The SEC is seeking individual deals with each bank, rather than an industry-wide agreement.

JPMorgan, for example, is being scrutinized for the $1.1 billion Squared CDO it allegedly structured and marketed on behalf of hedge fund Magnetar Capital. As in the Goldman Case, where the bank was accused of creating the CDO for Paulson & Co., JPMorgan is accused of misleading investors in the product about Magnetar's role.

Magnetar has not been accused of any wrongdoing. It denies that it had a major role in the selection of the securities that went into the Squared transaction.

According to the Journal, it is likely that none of the banks will face a fine as large as the $550 million Goldman Sachs paid to make the regulator's CDO lawsuit against it go away last year. And the deals are likely to vary greatly in size.


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR