Wednesday, February 29, 2012

More SEC Charges Coming Related to MBS Disclosures

By Tim Husson, PhD and Olivia Wang, PhD

According to the Wall Street Journal today, several banks may soon face charges related to the disclosure of risks related to their sales of mortgage-backed-securities in 2006. The SEC is reportedly concerned about whether these banks "misled investors about the underlying pool of assets."

We have several posts lately and a research paper on similar disclosure issues for both collateralized loan obligations and mortgage-backed-securities, in which we describe how the warehousing of assets before the closing date of a deal could allow banks to hide losses on these assets from investors. Our research into these issues is ongoing and we will continue to follow the regulatory actions taken in regard to these complex securities.

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