The Secretary of the Commonwealth of Massachusetts has fined State Street Corp. $5 million over its role as investment manager in the Carina CDO.
State Street Global Advisors (SSgA), acting as investment manager of Carina CDO Ltd., was responsible for the selection, acquisition and sale of collateral assets for the CDO. The secretary of the commonwealth said in its claim that SSgA also assumed an active role in marketing the CDO to investors.
According to the claim, the investment manager allowed Magnetar Capital to bet on the failure of some or all of the portfolio. Magnetar is a large U.S. hedge fund that took part in the discussions to create the CDO and also bought the equity piece of the deal.
The suit said SSgA's failure to disclose its information relating to Magnetar's involvement in the Carina transaction rendered the marketing materials it used to sell the CDO materially false or misleading.
SSgA received a senior management fee of $3.5 million over the life of the CDO in exchange for acting as investment manager of the Carina deal.
SSgA has accepted agreed to the settlement but said that it neither admits nor denies the finding and conclusion of the investigation.