June 14 Bank of America's (BAC.N) Merrill Lynch is being investigated by the Securities and Exchange Commission over its sale of a mortgage-related security created for an Illinois hedge fund, the Financial Times reported, citing people familiar with the matter.
The SEC is investigating whether Merrill told buyers that hedge fund Magnetar helped select assets for a $1.5 billion collateralized debt obligation (CDO) known as Norma, the paper reported.
The top watchdog is also looking to see if Merrill mispriced assets in the CDO, the Financial Times said.
The manager of the security, NIR Capital Management run by Corey Ribotsky, is also being investigated to determine if it fulfilled its obligations, the paper said, citing the same sources.
Spokespersons for the SEC and Merrill were not available for comment outside business hours. (Reporting by Abhiram Nandakumar in Bangalore)