SEC queries Paulson on CDO shorts, reports Financial Times

The Financial Times reports that the SEC has sent hedge fund manager Paulson a request for information over an investigation into the way banks sold CDOs. It follows subpoenas the US regulator sent to eight dealers in December, according to the article.

The article claims that Paulson, which made spectacular returns from short positions on the ABX index, also asked banks to create CDOs of ABS which the firm could take short positions. The Paulson fund bought the equity of these deals, according to the article, and, presumably, shorted tranches higher in the capital structure. The article adds that Paulson is not thought to be a target of the SEC investigation.