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SEC Seeks to Clean Up Bond Markets

Bloomberg reports that the head of the complex financial instruments group in the SEC’s Enforcement Division, Michael Osnato, is finding evidence of troubling activity in the bond markets.  Osnato notes that the lack of transparency “just creates an atmosphere where people feel they can get away with things -- and they largely have for a long time.” The group is investigating “pervasive” instances of “[l]ying to your customer, parking bonds for improper reasons, crossing bonds for improper reasons that aren’t in the clients’ best interest,” as well as the fairness of auctions of large blocks of bonds conducted by banks (known as bids-wanted-in-competition). The investigations come on the heels of increased enforcement action from both FINRA and the SEC against bond traders, including the criminal conviction for fraud of a Jefferies & Co managing director for misrepresenting facts related to the pricing of mortgage-backed securities. 

 

 
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