Monday, December 24, 2012

DJ: SEC Looking at Other CDO Cases

Following today’s allegations of fraud against Goldman Sachs (GS), the Securities & Exchange Commission plans to “look very closely at ‘similar deals’ by other Wall Street firms that sold CDOs, backed by souring mortgages,” writes Dow Jones Newswires’s Michael Corkery this afternoon, citing comments by SEC Director of Enforcement Robert Khuzami.

Khuzami, who spoke to reporters at Tulane University Law School, said the issue in the Goldman case was not the selection of mortgage-backed securities underlying derivatives sold by Goldman, but rather the lack of disclosure of those securities.

“Our message to brokers, banks and dealers is that you have to play fair. You have to provide full disclosure or you are going to face the consequences,” Corkery quotes Khazumi as stating.

Khazumi pointed out that responsibility lay with Goldman, not hedge fund Paulson & Co., because, “Goldman made the representations, Paulson did not.”

Khazume said the SEC has been looking at the Abacus collateralized debt obligations of Goldman for some time, without disclosing when that began. He declined to say if he might have to recuse himself because he formerly worked in the legal office at Deutsche Bank (DB).

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