SEC Sees Pervasive Bad Behavior in Complex Debt: Credit Markets
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After stunning mortgage-bond traders by seeking to put one in jail, U.S. investigators see more inappropriate behavior that needs to be addressed in the market for such complicated debt.
Investigators are finding signs that dealers are still lying to clients and striking improper deals such as parking debt, according to Michael Osnato, head of the complex financial instruments group in the Securities and Exchange Commission’s enforcement division. Traders or investors park bonds by selling them to accomplices with an understanding that they’ll repurchase the securities at a later date, in an attempt to skirt capital or internal rules.