Now the SEC is just plain screwing with the magic

No, no, don’t dig into this, you’ll take down all of Wall Street…

Federal criminal prosecutors in New York are investigating whether UBS AG misled investors by booking inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped…

The SEC, deepening its own set of investigations into whether Wall Street firms improperly mispriced mortgage securities, recently upgraded probes of UBS and Merrill Lynch & Co. into formal investigations, people familiar with the matter say. This step, which requires approval of the full commission, gives the SEC broad subpoena power, or the authority to require firms and individuals to produce information…

The investigations could raise the stakes for Wall Street in the multiple probes examining whether financial firms deliberately misvalued, or “mismarked,” massive holdings of mortgage securities. Most of the current investigations into mortgage matters involve civil authorities; the U.S. attorney launches criminal investigations and has a history of prosecuting Wall Street-related matters. Last summer, federal criminal prosecutors began investigating the collapse of two internal hedge funds at Wall Street firm Bear Stearns Cos…

To bring fraud charges, “prosecutors need proof to convince a jury beyond a reasonable doubt that the banks made materially misleading statements about securities, and proof that they did it with the intent to deceive,” says Christopher J. Clark, a New York white-collar lawyer and former assistant U.S. attorney in Manhattan in the securities and commodities fraud unit. [Now what possible motive could anyone have had to do that?]

…In its investigations, the SEC also is delving into whether Wall Street firms placed higher values on securities they own than those they placed in customer holdings…

Source: Wall Street Journal.