The Financial Industry Regulatory Authority (FINRA) of US has fined Deutsche Bank Securities $7.5m for negligently misrepresenting delinquency data in connection with the issuance of subprime securities.
FINRA found that Deutsche Bank Securities negligently misrepresented and underreported the percentages of mortgages that were delinquent in the prospectus supplements of six subprime residential mortgage backed securities (MBS) issued in 2006.
According to FINRA, the firm also failed to correct errors by a third party vendor and servicers, which underreported the historical delinquency rates of the mortgages in connection with its offer and sale of 16 additional subprime MBS issued in 2007.
Further, Deutsche Bank Securities failed to establish a system to supervise its reporting of required historical delinquency information.
James Shorris, EVP and acting chief of enforcement at FINRA, said: “It is critically important that firms provide accurate information for their customers to use in evaluating investments. 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.”