The Securities and Exchange Commission is reportedly probing whether the surging market for collateralized loan obligations is paving the way for banks to illegally hide certain risks or commit fraud.
The apparent investigation into these complex securities, known as CLOs, comes as the U.S. winds down a flurry of crisis-era cases focusing on collateralized debt obligations, or CDOs.
According to The Wall Street Journal, the SEC has a number of CLO cases in the pipeline amid fears these complicated deals create new avenues for fraud.
The paper said the agency has also expanded an inquiry into how Wall Street banks sell CLO deals, which are negotiated privately between buyers and sellers.
The SEC declined to comment on the news.
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