Federal prosecutors stepping up subprime probe: report

NEW YORK (Reuters) - Federal prosecutors have asked the Securities and Exchange Commission for information gathered from an investigation of Merrill Lynch & Co's (MER.N: Quote, Profile, Research, Stock Buzz) activities in mortgage securities, The Wall Street Journal reported on Friday.

The report, quoting people familiar with the matter, said the SEC has been examining issues such as whether Merrill booked inflated prices of mortgage bonds it held, despite knowing the valuations had dropped.

It was unclear whether the SEC had already handed over information to the Justice Department's U.S. attorney's office in Manhattan, the Journal said.

Representatives for the U.S. attorney's office were not immediately available for comment.

Merrill recorded about $24 billion in write-downs during the second half of last year, mostly because of its exposure to subprime mortgage-related assets.

(Reporting by Ritsuko Ando; Editing by David Cowell)