Finra probing B-Ds' role in subprime underwriting: Source

The Financial Industry Regulatory Authority Inc. is actively investigating broker-dealer underwriters of subprime securities, a Finra official said this morning at the regulator's national conference in Baltimore.
JUN 24, 2010
The Financial Industry Regulatory Authority Inc. is actively investigating broker-dealer underwriters of subprime securities, a Finra official said this morning at the regulator's national conference in Baltimore. Meanwhile Finra is also preparing to bring more enforcement actions for selling Regulation D deals, commonly known as private placements. As for subprime securities: Finra is looking at whether broker-dealers reported incorrect data when creating the securities, said the official, who asked not to be identified. Such incorrect data could include possible misstatements by firms about the default rates for the underlying mortgages used to create the mortgage-backed securities. The Securities and Exchange Commission in April charged The Goldman Sachs Group Inc. with fraud for its marketing of a subprime mortgage product for institutional investors. Finra is also focusing on private deals for retail investors, attorneys at the Finra meeting said. “I think the regulators are looking at non-traditional products, those that are being marketed to a less sophisticated retail audience,” said Neal Sullivan, a partner with Bingham McCutchen LLP. “A classic example of that would be some of the Reg D offerings.” Mr. Sullivan made his comments after speaking on a panel this morning about enforcement case trends. “I think you hear from the Finra folks that they're starting to see an uptick in enforcement cases in this area,” he said. Mr. Sullivan believes there will be an increase in publicly announced private placement cases filed against broker dealers. “And unfortunately," he said, "some will reflect fraudulent practices.”

Latest News

Summit Financial, MassMutual boost advisor appeal with growth-focused tech
Summit Financial, MassMutual boost advisor appeal with growth-focused tech

Summit Financial unveiled a suite of eight new tools, including AI lead gen and digital marketing software, while MassMutual forges a new partnership with Orion.

SEC enforcement actions drop sharply, with focus shifting to investor fraud
SEC enforcement actions drop sharply, with focus shifting to investor fraud

A new analysis shows the number of actions plummeting over a six-month period, potentially due to changing priorities and staffing reductions at the agency.

MAI inks mega-deal with Evoke Advisors to form $60B AUM firm
MAI inks mega-deal with Evoke Advisors to form $60B AUM firm

The strategic merger of equals with the $27 billion RIA firm in Los Angeles marks what could be the largest unification of the summer 2025 M&A season.

Employees tapping retirement funds amid financial strain, led by Gen Zs
Employees tapping retirement funds amid financial strain, led by Gen Zs

Report highlights lack of options for those faced with emergency expenses.

LPL Financial on target to retain 90% of Commonwealth financial advisors, Wolfe Research analyst says
LPL Financial on target to retain 90% of Commonwealth financial advisors, Wolfe Research analyst says

However, Raymond James has had success recruiting Commonwealth advisors.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.