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Articles Posted in Nomura Securities

HSBC will pay a $765M penalty over claims involving its packaging, marketing, and sale of residential mortgage-backed securities prior to the 2008 economic crisis. According to the US Attorney Bob Troyer, from the beginning HSBC employed a due diligence process that it knew was ineffective, “chose” to place faulty mortgages in deals, and disregarded these problems even as it sold the RMBSs to investors. As a result, contends the US government, investors, including federally-insured financial institutions that bought the HSBC Residential Mortgage-Backed Securities that were backed by faulty loans, sustained “major losses.”

HSBC had touted using a proprietary model that would choose 20% of the riskiest loans for further examination and another 5% that would be randomly chosen. The government, however, claims that the financial firm’s trading desk exerted undue influence on which loans would be securitized and sometimes failed to employ a random sample. Outside vendors then studied the chosen loans.

The US alleges that even when a number of loans were marked as low grade, HSBC “waived” them through or regraded them, and concerns about loans that had defaulted right away were purportedly disregarded. The bank even allegedly continued to buy loans from an originator who was found to likely be providing loans that were fraudulent.

38 stock loan traders from A.G. Edwards, Morgan Stanley, Oppenheimer, and Nomura Securities are accused of stealing over $12 Million in stock loan kickbacks from their Wall Street firms. The Securities and Exchange Commission has charged the employees with the more than $12 million theft.

The SEC says that from 1998-2006, the traders worked with fake stock loan finders to skim profits from their employers through finder fees as well as cash kickbacks from finders. The stock loan traders conducted actual, legal stock loans but logged that the transactions involved finders so there would be finder’s fees.

The finders were usually friends or relatives of the traders who were in charge of illegitimate “shell companies” that were not even a part of the stock loan business. The “finder” would then pay traders with stock loan kickbacks. The more sophisticated scams involved traders using their kickbacks to pay the other traders who had pushed through the loan transactions.

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