“The Securities and Exchange Commission is investigating whether a Wall Street boom in complicated bond deals is creating new avenues for fraud, according to people close to the probes.
SEC investigators are looking at whether banks and companies are using the bond deals to hide certain risks illegally, said the people close to the probes. A number of likely cases in that area are in the pipeline, one of the people said.
Separately, the government has expanded an inquiry into how Wall Street banks sell the deals, the people added. The securities being examined aren’t traded on any exchanges or open platforms, and their prices are negotiated privately between buyers and sellers.
The probes could pose a new legal headache for banks, which have faced years of government investigations and large financial settlements involving their conduct leading up to the financial crisis.
In previous investigations, the SEC primarily explored how the banks put the deals together. The new probes look at how these complex securities are being used and traded.
A spokesman for the SEC declined to comment.
The securities, which are packages of corporate loans and debts assembled and sold by Wall Street banks to investors, boomed in popularity before the financial crisis—and then crashed after it. They have seen a resurgence in popularity as investors pump more money into riskier, higher-yielding investment products.
Before the crisis….”
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