Merrill Lynch and Standard & Poor's may face civil charges over their sale of collateralized debt obligations allegedly structured on behalf of Magnetar Capital.
The Securities and Exchange Commission hopes to file the lawsuits in the next few months, the Financial Times reports, ending a probe that has already ensnared Citigroup, Goldman Sachs and JPMorgan Chase. All three banks settled the allegations.
But the SEC is still looking into a $1.5 billion CDO set up by Merrill Lynch, now part of Bank of America, for Magnetar, as well as another structured by Mizuho Financial Group and rated by S&P. The latter would be the first such case against a rating agency.
"It's fair to say we're not at the end," Kenneth Lench, head of structured and new products enforcement at the SEC, told the FT. "There will be a handful of additional cases, I believe, over the next several months."
Neither Magnetar nor any other hedge fund has been accused of any wrondoing in the CDO cases.