U.S. News

SEC Has Opened 12 Debt Securities-Related Investigations


The U.S. Securities and Exchange Commission has opened 12 enforcement investigations into matters surrounding collateralized debt obligations (CDO), the agency's leader told a Congressional panel.

SEC Chairman Christopher Cox, in responding to questions about whether the CDO market needs more transparency, said that the agency's enforcement division has launched a dozen probes into "issues such as this."

"There is now a commonality of interest between banking regulators and securities regulators when it comes to safety and soundness" issues, Cox added in testimony at the House Financial Services Committee hearing.

A collateralized debt obligation or CDO is a security backed by a pool of loans or other fixed income securities.

Cox did not identify the names of any companies involved in the investigations, or elaborate on the nature of the probes or whether they involved subprime mortgage CDOs.

Cox was asked about CDOs by Rep. Carolyn Maloney, a New York Democrat who expressed concern that these financial securities might threaten the overall health of the U.S. economy. She also expressed similar concerns about collateralized loan obligations.

Bear Stearns, the fifth-largest U.S. investment bank, said on Friday it would loan up to $3.2 billion to the High-Grade Structured Credit Strategies Fund, which suffered big losses from investments in the repackaged subprime mortgage loan market when homeowner defaults started rising.

Concerns have been raised about other funds that invested in CDOs involving similar securities linked to subprime mortgages.