Funds News

U.S. SEC to file more subprime enforcement cases

WASHINGTON, Feb 6 (Reuters) - The U.S. Securities and Exchange Commission expects to file additional subprime-related enforcement actions and has dozens of “very active” investigations underway, an SEC official said on Friday.

“We expect to be filing additional actions in this space, stay tuned,” said Rosalind Tyson, regional director of the SEC’s Los Angeles office.

Tyson said the agency is looking at mortgage originators, mortgage securitizers, credit rating agencies, and sellers of mortgage-backed securities.

“Many of these current investigations, most of them, involve complex fact situations,” said Tyson, speaking at the Practising Law Institute’s annual SEC Speaks conference.

Former SEC Chairman Christopher Cox, who recently left the post, said last July that the agency had more than four dozen subprime investigations pending.

The SEC is focused on whether lenders disclosed risk profiles of underlying loans, whether they valued their portfolios appropriately, and whether they made adequate risk disclosures to investors.

In its most high-profile subprime case to date, the SEC last June filed civil fraud charges against two Bear Stearns managers, accusing them of misleading investors about the financial state of the bank’s two biggest hedge funds before they collapsed in 2007.

The two managers were also arrested and indicted on conspiracy and securities fraud charges.

Tyson said one difficulty in the subprime investigations is proving fraudulent intent. “Poor business judgment does not equate to fraud,” she said.

The FBI is also investigating the mortgage industry and is looking at issues including all phases of the process of securitizing loans, insider trading, and whether firms properly disclosed the value of their assets. (Reporting by Karey Wutkowski and Rachelle Younglai; editing by John Wallace)