NEW YORK ( TheStreet) -- The Securities and Exchange Commission is investigating the sale by Merrill Lynch of a complex mortgage-related security it created for an Illinois hedge fund, The Financial Times reported, citing people familiar with the matter.
The SEC is investigating whether Merrill told buyers that hedge fund Magnetar helped select the assets included in a $1.5 billion CDO and bet against those same assets, the people told the newspaper. Magnetar has denied claims it selected the portfolio.
Regulators are also looking into whether Merrill Lynch mispriced assets in the CDO, the people said.
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