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

Cerity Partners names Will Peng chief innovation officer
Cerity Partners names Will Peng chief innovation officer

The leading ultra-high-net-worth RIA joins other large wealth firms, including Raymond James and LPL, in creating executive roles focused on artificial intelligence strategy

BlackRock expands Aladdin's private markets benchmarking tools
BlackRock expands Aladdin's private markets benchmarking tools

New Preqin-powered benchmarks add transparency to private equity and credit performance across BlackRock's platforms.

Fed's Bowman pushes for lighter-touch AI oversight at smaller firms
Fed's Bowman pushes for lighter-touch AI oversight at smaller firms

Supervision vice chair speaks following recent launch of AI adoption practices by regulators.

Why fixed income still belongs in your clients' portfolios
Why fixed income still belongs in your clients' portfolios

In an era of AI euphoria and market FOMO, getting back to basics with fixed income may be the most contrarian and most important move advisors can make.

Voya expands advisor managed accounts to add private market assets
Voya expands advisor managed accounts to add private market assets

Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.