Bank of America agreed on Thursday to pay the Securities and Exchange Commission a $131.8 million penalty to settle an investigation linked to the structuring and sale of two complex mortgage securities that its Merrill Lynch division sold to investors.
The settlement arises from a series of collateralized debt obligations that Merrill Lynch cobbled together and marketed. The hedge fund Magnetar Capital, based in Evanston, Ill., had a role in helping pick some of the mortgage securities in the C.D.O.’s.
The S.E.C., in an administrative order, accused Merrill Lynch of misleading investors by failing to disclose Magnetar’s role in influencing the selection of the underlying securities in the C.D.O.’s. Merrill Lynch also failed to disclose that the hedge fund had not only invested in the deal but was also shorting, or betting against, its performance in some instances, the S.E.C. said.
The S.E.C., in an administrative order, accused Merrill Lynch of misleading investors by failing to disclose Magnetar’s role in influencing the selection of the underlying securities in the C.D.O.’s. Merrill Lynch also failed to disclose that the hedge fund had not only invested in the deal but was also shorting, or betting against, its performance in some instances, the S.E.C. said.
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