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Merrill Lynch charged with misleading investors in CDOs, agrees to $131 mn settlement

By Religare
|

The Securities and Exchange Commission has charged Merrill Lynch with making faulty disclosures about collateral selection for two collateralized debt obligations (CDO) that it structured and marketed to investors, and maintaining inaccurate books and records for a third CDO.

Merrill Lynch agreed to pay USD 131.8 million to settle the SEC's charges.The SEC's order instituting settled administrative proceedings finds that Merrill Lynch failed to inform investors that hedge fund firm Magnetar Capital LLC had a third-party role and exercised significant influence over the selection of collateral for the CDOs entitled Octans I CDO Ltd. and Norma CDO I Ltd.

 

Magnetar bought the equity in the CDOs and its interests were not necessarily aligned with those of other investors because it hedged its equity positions by shorting against the CDOs.

Dion Global Solutions Ltd.

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