US securities regulators were stepping up their investigation into mortgage bond deals at the heart of the financial crisis, including pushing for a settlement of more than $200 million with Citigroup, The Wall Street Journal reported Thursday, citing people familiar with the matter.
Securities and Exchange Commission officials are in advanced talks with Citigroup to settle civil charges related to a $1 billion mortgage bond deal called Class V Funding III and created by the Wall Street company in 2007.
Among other things, SEC officials were examining what was disclosed to investors in the Citigroup deal, a collateralized debt obligation (CDO) created from other CDOs backed by subprime mortgages, according to people familiar with the situation.
In particular, officials are looking at allegations that Citigroup may have held short positions that would profit if the housing market fell, sources said.
Source: The Wall Street Journal