The Financial Industry Regulatory Authority (FINRA) yesterday said it has fined Barclays Capital $3 million for misrepresenting delinquency data and inadequate supervision on the issuance of subprime RMBS.
In settling this matter, Barclays did not admit or deny the charges, although the bank consented to the entry of FINRA's findings.
FINRA stated that from March 2007 through December 2010, the bank misrepresented the historical delinquency rates for three subprime RMBS it underwrote and sold.
The inaccurate delinquency information posted on the institution's Web site was referenced as historical data in five subsequent RMBS investments. The data also had errors considerable enough to impact a buyer's assessment of subsequent securitized offerings.
Additionally, FINRA said that Barclays did not establish an adequate system to maintain and update relevant disclosure on its Web site.
Subprime RMBS issuers are supposed to disclose historical performance data for previous deals that have mortgage loans similar to those in the RMBS being offered to investors. According to FINRA, the historical delinquency rates are "material" to buyers when they look at RMBS value and when they determine if future returns might be interrupted by borrowers' failure to make mortgage payments.
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."
Allen D. Boyer and Andrew Kampel conducted the investigation with Susan Light, enforcement chief counsel. supervising.