Mass. fines Deutsche Bank $17.5 million over CDO conflicts
BOSTON, March 13 |
BOSTON, March 13 (Reuters) - Massachusetts on Wednesday fined Deutsche Bank AG $17.5 million, saying it deceived clients in creating and marketing $10 billion worth of collateralized debt obligations.
Secretary of the Commonwealth William Galvin said Deutsche Bank Securities Inc, a unit of Germany's largest bank Deutsche Bank, failed to fully disclose what was in the financial products or that hedge fund Magnetar Capital was betting their value would fall.
Deutsche Bank Securities and Magnetar co-invested in at least six different CDOs with a value of $10 billion, Galvin's office said. Galvin's office specifically investigated Deutsche Bank Securities Inc's (DBSI's) role in a $1.56 billion CDO named Carina.
"Nowhere in the marketing materials for Carina was there any reference to the conflicts of interest with DBSI SSG (DBSI Special Situations Group) and Magnetar in the structuring, underwriting and marketing of Carina," Galvin's office said, noting that investors suffered "catastrophic losses" when ratings agencies downgraded the notes to junk status within a year after Carina was created.
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