Massachusetts fines SSgA $5 million over CDO
By Douglas Appell | February 28, 2012 3:53 pm
State Street Global Advisors was fined $5 million by Massachusetts for “failure” to disclose to investors in a collateralized debt obligation vehicle SSgA was managing information regarding the role being played by a hedge fund that was betting against the CDO, according to a news release from Secretary of the Commonwealth William F. Galvin.
In a telephone interview, Brian McNiff, Mr. Galvin's spokesman, said SSgA will pay a $1.5 million civil administrative penalty as well as $3.5 million to effectively disgorge all of the fees, profits and commissions the money manager earned for its role as investment manager of the $1.56 billion Carina CDO.
According to the news release, SSgA failed to inform investors that hedge fund Magnetar Capital was being allowed to participate in meetings at which decisions were made on what debt instruments would go into the CDO portfolio, at the same time Magnetar was “shorting some or all of the portfolio.”
An e-mailed statement from SSgA parent State Street confirmed that the company had reached a settlement with the Massachusetts Securities Division of Mr. Galvin's office, while neither admitting nor denying the division's “findings or conclusions concerning information contained in the offering documents for the CDO.”