Finra Fines Merrill and Credit Suisse $7.5 Million
Merrill Lynch and Credit Suisse were fined a total of $7.5 million for misrepresenting subprime mortgage securities they were peddling to investors, according to an article in Forbes. The two major brokerage firms were specifically nailed for “misrepresenting delinquency data and inadequate supervision in connection with the issuance of residential subprime mortgage securitizations (RMBS)”, according to the article.
Examples of the misrepresentations are as follows: In 2006 Credit Suisse misrepresented historical delinquency rates for 21 subprime RMBS even though they knew they were inaccurate and they also failed to have in place a system to supervise the maintenance and updating of disclosures on its website. Merrill Lynch on the other hand, misrepresented the delinquency rates for 61 subprime RMBS but promptly recalculated and posted corrected data on its website after the errors were discovered in June 2007. Merrill was also found to have an inadequate system to supervise and review its reporting of historical delinquency information. Merrill Lynch’s portion of the fine was $3 million and the other $4.5 million was Credit Suisse’s fine.
As it turns out, both firms had received erroneous information from servicers or vendors who have the responsibility of collecting loan payment data from homeowners, including payments, delinquencies, foreclosures and pre-payment penalties.