WASHINGTON (CN) - Merrill Lynch will pay $132 million to settle charges of misrepresenting two collateralized debt obligations it structured and sold, and kept inaccurate records on a third CDO, the SEC said.
The collateral for all three CDOs was primarily credit default swaps based on residential mortgage-backed securities, the SEC said in its cease-and-desist order.
The CDOs were called Octans I, Norma CDO I, and Auriga CDO. The three CDOs were each valued at $1.5 billion.
Merrill Lynch Pierce Fenner & Smith "failed to inform investors in Octans I and Norma that an undisclosed third party named Magnetar Capital LLC (together with affiliates, 'Magnetar') - a hedge fund firm that bought the equity in the transactions but whose interests were not necessarily the same as those of the CDOs' other investors - had rights relating to, and exercised significant influence over, the selection of the CDOs' collateral," the SEC says in its 22-page order.
Merrill Lynch agreed to disgorge $56.3 million, pay as much again as a penalty, and pay $19.3 million in interest.
As is customary with the SEC it did not have to admit that it did anything wrong, but it promised not to do it again.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.
Additional Reads
-
Merrill Lynch Fined $8M March 25, 2019 -
SEC Whacks Merrill Lynch August 21, 2018