The Financial Industry Regulatory Authority has fined Deutsche Bank Securities Inc. US$7.5 million for misrepresenting mortgage delinquency data underlying subprime securities that it underwrote.
FINRA said Wednesday it found that the firm “negligently misrepresented and underreported the percentages of mortgages that were delinquent in the prospectus supplements of six subprime residential mortgage backed securities issued in 2006.”
The firm also failed to correct errors by a third party vendor and servicers, which underreported the historical delinquency rates of the mortgages underlying 16 additional subprime MBS issued in 2007, FINRA said.
Deutsche Bank Securities neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
“It is critically important that firms provide accurate information for their customers to use in evaluating investments,” said James Shorris, FINRA executive vice president and acting chief of enforcement. “Future returns on subprime securitizations are affected by mortgage holders who fail to make loan payments. Delinquency rates constitute material information for investors. Deutsche Bank Securities’ failure to ensure that the delinquency information was accurate is an unacceptable failure to meet this important obligation.”