NEW YORK (
) -- The
Securities and Exchange Commission
has broadened its probe of mortgage bonds sold by
(SF - Get Report)
to include whether the securities were suitable for the five Wisconsin school districts that suffered losses on them,
The Wall Street Journal
The SEC probe is trying to determine if the schools should have been sold three different collateralized debt obligations, said people familiar with the situation, the
The newspaper noted the SEC investigation marks the first time that one of the agency's probes of companies involved in the sales of mortgage bonds has focused on suitability as a key part of the investigation.
SEC officials also are investigating the Stifel investment banker who helped the schools buy the mortgage bonds, according to his records with the Financial Industry Regulatory Authority, the
The Wisconsin schools set up trusts to hold the investments and the trusts put about $200 million into the CDOs, much of it borrowed money, the newspaper reported. The trusts' cash investment of about $45 million was consumed by losses, and a bank from which the trusts borrowed money has demanded that the trusts repay the rest of the money.
In April, Stifel said in a regulatory filing that it had been warned by the SEC that the firm might face civil-fraud charges over the CDO sales. An SEC spokesman declined to comment for the
-- Written by Joseph Woelfel
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