Investment Bank Sued for Failing to Disclose Client’s Role in CDO
The SEC has filed a lawsuit against a major investment bank for failing to disclose that its hedge fund client helped structure a synthetic CDO pool against which the client purchased credit-default swaps. According to the SEC, the hedge fund client influenced the third party retained to select pool securities. The SEC argues that the defendant should have disclosed the role of the hedge fund client and its adverse interest in success of the CDO. The hedge fund client paid the defendant approximately $15 Million in structuring and marketing fees.