SEC probing three dozen subprime cases: source

NEW YORK Fri Dec 21, 2007 1:46pm EST

Two houses display 'For Sale' signs side by side on Mulan Street in Corona, California May 2, 2007. U.S. securities regulators have opened about three dozen investigations, including into such firms as UBS AG, related to the subprime market collapse, a person familiar with the matter said on Friday. REUTERS/Mark Avery

Two houses display 'For Sale' signs side by side on Mulan Street in Corona, California May 2, 2007. U.S. securities regulators have opened about three dozen investigations, including into such firms as UBS AG, related to the subprime market collapse, a person familiar with the matter said on Friday.

Credit: Reuters/Mark Avery

NEW YORK (Reuters) - U.S. securities regulators have opened about three dozen investigations, including into such firms as UBS AG (UBSN.VX), related to the subprime market collapse, a person familiar with the matter said on Friday.

Among the issues the U.S. Securities and Exchange Commission is looking into is how financial firms priced mortgage-backed securities and whether they should have told investors earlier about the declining value of those securities, the source said.

Earlier, the Wall Street Journal, which first reported the news, said the SEC was also examining Morgan Stanley (MS.N) in addition to previously reported investigations of Merrill Lynch & Co Inc MER.N and Bear Stearns Co Inc BSC.N.

Representatives for the SEC, UBS and Morgan Stanley declined to comment.

The number of investigations has increased since June, when the commission said it had launched a dozen probes into collateralized debt obligations linked to subprime mortgages and created a working group to focus on subprime market problems.

The Journal reported that regulators are also looking at whether the Wall Street firms put higher values on their own securities than on those they assigned to customer holdings.

The SEC has specifically spoken to a trader at a now- defunct hedge fund of UBS's Dillon Read unit and a trader from Royal Bank of Canada (RY.TO) following his assertions in the Journal the bank had intentionally mis-marked government agency and corporate bonds, the newspaper reported.

"We have already articulated our position in detail in this matter and have no further comment," an RBC spokesman said.

The regulators are also probing whether Wall Street firms should have moved some off-balance-sheet entities holding mortgage securities to their books earlier, the Journal added.

(Reporting by Paritosh Bansal, Karey Wutkowski and Emily Chasan; Editing by Lisa Von Ahn)

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