Representatives from financial services firm Morgan Stanley (MS) are denying any knowledge of an investigation by the Department of Justice (DOJ) into collateralized debt obligations (CDOs). “We have not been contacted by the Justice Department about the transactions … and we have no knowledge of a Justice Department investigation into these transactions,” a Morgan Stanley spokesperson told HousingWire in an e-mail. The comment comes in response to a Wall Street Journal report today that a recent Securities and Exchange Commission (SEC) investigation into structured finance investments like CDOs fueled the criminal probe by the DOJ. The SEC and DOJ are seen to be investigating whether or not Wall Street firms sold complicated products such as CDOs, whether mortgage, corporate loan or derivatives-based, at the expense of investor comprehension. As it stands, an investigation into Morgan Stanley CDOs would come amid charges by the SEC over a similar derivatives products sold to investors at a competing investment bank. The SEC in April charged investment bank Goldman Sachs (GS) and an executive director of its structured products group trading, Fabrice Tourre, for allegedly making misleading statements about the CDO transaction ABACUS 2007-AC1. A DOJ spokesperson would not  to confirm or deny the existence of an investigation into Morgan Stanley. An SEC spokesperson could not be reached for comment before this story was published. The WSJ posting said the investigation -- which is in preliminary stages -- looks into whether Morgan Stanley misled investors as to the extent of risk inherent in CDOs. For example, when the value of the mortgage-based collateral dips, or the performance of loans begin to decline, a CDO will experience write-downs, sometimes on a massive scale. The SEC also alleges that Goldman may have hedged itself against wide-reaching ABACUS failures, without offering investors the same buffer. In the Goldman case, Fabrice Tourre, in testimony at the Senate Permanent Subcommittee on Investigations hearing on the role of investment banks in the financial crisis, denied the SEC’s claims. He told the Subcommittee that seasoned investors were aware of the risk inherent in CDOs and other synthetic products at the height of trading. Write to Diana Golobay. Disclosure: the author holds no relevant investments.