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

Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team
Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team

Meanwhile, Raymond James and Tritonpoint Partners separately welcomed father-son teams, including a breakaway from UBS in Missouri.

SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures
SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures

Paul Atkins has asked staff to solicit public comment on novel ETFs, pausing the clock on as many as 24 filings linked to the booming event contracts market.

Private capital's $1 trillion bet on the American retirement account
Private capital's $1 trillion bet on the American retirement account

From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.

Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May
Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May

Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.

Why uncertainty is making behavioral coaching more valuable than ever
Why uncertainty is making behavioral coaching more valuable than ever

Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management