WASHINGTON – Royal Bank of Scotland Plc will pay $153.7 million to resolve U.S. regulatory claims that a brokerage unit misled investors in a 2007 financial product linked to subprime mortgages.
RBS told investors that the loans backing the $2.2 billion security “generally” met the lender’s underwriting guidelines even though nearly 30 percent fell so short of the standards that they should have been excluded, the Securities and Exchange Commission said in a statement today.
The company’s Stamford, Conn.-based RBS Securities Inc. unit, then known as Greenwich Capital Markets Inc., was paid about $4.4 million for underwriting the transaction yet only quickly reviewed the investment, the SEC said. RBS knew or should have known that many of the loans did not meet the lender’s underwriting standards, according to the statement.
“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,” George Canellos, co-director of the SEC’s enforcement division, said in a statement.
RBS said in a statement that it cooperated fully with the SEC throughout the investigation and that the settlement payments are covered by provisions the bank has already made. In resolving the claims, RBS didn’t admit or deny wrongdoing.