Bloomberg reports that a $205 million 2006 Citigroup (NYSE: C) CDO deal, the Jackson Segregated Portfolio, did not contain any disclosure that Morgan Stanley (NYSE: MS) helped shape the portfolio and was betting again the CDO (CDO news). Six of the seven series of Jackson Segregated Portfolio bonds eventually defaulted, costing investors more than $150 million of losses.

This is roughly akin to what Goldman Sachs (NYSE: GS) stands accused of with its ABACUS deal: failing to disclose that an entity that helped select the portfolio was also making massive bets against those very portfolios. My guess is that there were many similar deals. Regulators likely have a list. At least one Morgan Stanley deal is also being probed by regulators. This may all be prelude, as we've suggested before, to some sort of global settlement that includes perhaps 8 to 10 big banks.

Recall that in a 2002 settlement, 10 banks paid $1.4 billion total and pledged to change the way their analysts and investment bankers interacted to prevent conflicts of interest. This time, the price of any settlement may be much higher. It will likely include various reforms including the imposition of a compliance officer. 

For more:
- here's the Bloomberg article about Citigroup

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