SEC, States Launch Probe Of Wall Street Muni Deals

Law360, New York (May 14, 2010, 11:57 AM EDT) -- Federal and state regulators are reportedly scrutinizing the role major Wall Street banks have played in trading derivatives that bet against municipal bonds.

The U.S. Securities and Exchange Commission has begun to probe municipal credit default swaps that gave investors the opportunity to essentially sell municipal bonds short, the Wall Street Journal reported Friday, citing unnamed sources familiar with the matter.

The early-stage investigation is focused on uncovering potential conflicts of interests by banks that both sell municipal bonds for cities and set themselves up to...
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