By Sarah N. Lynch
WASHINGTON Nov 7 (Reuters) - A unit of the Royal Bank of Scotland agreed to pay more than $150 million to settle civil charges alleging it misled investors in a financial crisis-era subprime mortgage product, U.S. regulators said on Thursday.
The Securities and Exchange Commission said the money it will collect from RBS Securities Inc would go toward compensating harmed investors.
The bank agreed to settle with the SEC without admitting or denying the charges, which allege that it misled investors about the quality of the underlying loans and the likelihood they would be repaid.
In a statement, the company said it "cooperated fully" with the SEC and expects to make a total payment to the SEC of $153.7 million.
RBS is 81-percent owned by the British government. The bank said that its payments to the SEC are "covered by provisions already made by RBS."
The $2.2 billion offering at the center of the SEC's case was made in 2007.
The SEC said that RBS told investors that the loans underlying the security "generally" met the lender's underwriting guidelines, but in fact 30 percent of it fell short and should have been excluded from the loan pool.
A unit of the bank was paid $4.4 million as lead underwriter for the deal, but only hastily reviewed a small portion of the loans, the SEC added.
"In its rush to meet a deadline set by the seller of these loans, RBS cut corners and failed to complete adequate due diligence, with predictable results," said George Canellos, a co-director of the SEC's enforcement division.