More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
The Financial Industry Regulatory Authority (FINRA) announced Thursday that it has fined Barclays Capital Inc. $3 million for misrepresenting delinquency data and for inadequate supervision in connection with the issuance of residential subprime mortgage securitizations (RMBS).
According to FINRA’s findings, from March 2007 through December 2010, Barclays misrepresented the historical delinquency rates for three subprime RMBS it underwrote and sold. The inaccurate delinquency data posted on Barclays' website was referenced as historical information in five subsequent RMBS investments and contained errors significant enough to affect an investor's assessment of subsequent securitizations, the agency said.
Barclays neither admitted nor denied the charges in settling the matter, but consented to the entry of FINRA's findings.
"Barclays did not have a system in place to ensure that delinquency data posted on its website was accurate,” said Brad Bennett, FINRA executive vice president and chief of enforcement, in a statement. “Investors were supplied inaccurate information to assess future performance of RMBS investments."
Additionally, FINRA said, Barclays failed to establish an adequate system to supervise the maintenance and updating of relevant disclosure on its website,.
Issuers of subprime RMBS must disclose historical performance information for past securitizations that contain mortgage loans similar to those in the RMBS being offered to investors. According to FINRA, investors depend on the accuracy of historical delinquency rates, which are material to assessing the value of RMBS and in determining whether future returns may be disrupted by mortgage holders' failures to make loan payments.