Barclays Capital Fined For Misrepresentations Related to Subprime Securitizations

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Washington — The Financial Industry Regulatory Authority (FINRA) has announced that it has fined Barclays Capital $3m for misrepresenting delinquency data and inadequate supervision in connection with the issuance of residential subprime mortgage securitizations (RMBS).

Issuers of subprime RMBS are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the RMBS being offered to investors. Historical delinquency rates are material to investors in assessing the value of RMBS and in determining whether future returns may be disrupted by mortgage holders' failures to make loan payments.

FINRA found that 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. Additionally, Barclays failed to establish an adequate system to supervise the maintenance and updating of relevant disclosure on its website.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, 'Barclays did not have a system in place to ensure that delinquency data posted on its website was accurate; therefore, investors were supplied inaccurate information to assess future performance of RMBS investments'.

In settling this matter, Barclays neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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