Notebook on MBS Litigation

Posted on April 12, 2011 by Fred Rivera

The Securities and Exchange Commission could be going to school on private litigation being brought against MBS issuers.

In a recent article from the April 2011 issue of  Mortgage Banking Magazine, Perkins Coie attorneys Pravin Rao and Suleen Lee discuss recent MBS litigation trends and related SEC enforcement priorities.  The article discusses how mortgage-backed securities have become a significant priority for the Securities and Exchange Commission's (SEC) investigative resources.  It also describes what might constitute a potential SEC action against banks, and suggests proactive measures banks should take to ensure they do not become ensnared by regulatory or private litigants.

Read "Notebook on MBS Litigation" article from Mortgage Banking Magaznine.

 

 

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SEC and FINRA Sue Brokers for Alleged Mortgage Backed Securities Fraud

Posted on May 29, 2009 by Fred Rivera

The SEC and Financial Industry Regulatory Authority (FINRA) filed separate lawsuits alleging that 16 brokers from the now defunct Brookstreet Securities Crop. fraudulently mislead investors that derivatives based on mortgage-backed securities were safe and conservative investments.  In its complaint, the SEC alleges that 10 Brookstreet brokers failed to inform customers about the risks associated with investing in collateralized mortgage obligations.  The brokers portrayed collateralized mortgage obligations as secure investments to more than 750 customers, which ultimately cost those investors more than $36 million in losses, but earned the brokers $18 million in commission and salaries, according to SEC allegations.  The SEC is seeking civil penalties and repayment of ill-gotten gains.

FINRA filed a companion complaint against six other former Brookstreet brokers.  According to a FINRA press release,  from June 2004 through May 2007, the brokers sold collateralized mortgage obligations to customers when the brokers themselves lacked a basic understanding of these complex and illiquid securities.

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