Don't lie about debt prices or you could end up in jail. And ifyou've already lied, watch out.

That's the message to traders in the US$375 billion opaquemarket for collateralized loan obligations (CLOs) after MatthewKatke, a former Royal Bank of Scotland Group Plc CLO trader,pleaded guilty Wednesday in the U.S. to committing securitiesfraud. Katke agreed to cooperate with federal prosecutors'investigation into a multimillion-dollar scheme to cheat customerswho bought and sold bonds.

While investigators have been scrutinizing the activities ofseveral mortgage-bond traders since the credit seizure of 2008,their latest action shows they've also been focusing on a marketthat's tried to distance itself from debt backed by home loans thatspurred the crisis. CLOs, which slice pools of speculative-gradecorporate debt into pieces of varying risk and return, have beenissued at an unprecedented clip during the past few years.

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