The Royal Bank of Scotland has agreed to pay a £93m settlement by the US Securities and Exchange Commission for misleading investors in sub-prime mortgages.
RBS Securities, a subsidiary of the RBS, agreed the settlement deal following allegations it misled investors in a 2007 subprime residential mortgage-backed security offering.
RBS has agreed to a final judgment that orders it to disgorge $80.3m, plus prejudgment interest of $25.2m and a civil penalty of $48.2m. RBS has agreed the settlement without admitting or denying the SEC’s allegations.
The SEC will use the money to compensate investors for harm suffered as a result of RBS’s conduct.
RBS said the loans backing the offering “generally” met the lender’s underwriting guidelines but the SEC said 30 percent of the loans fell so short of the guidelines that RBS should have excluded them from the offering entirely.
The SEC said RBS gave investors a misleading impression of the quality of the loans backing the offering and the likelihood of their repayment.
RBS, which was then known as Greenwich Capital Markets, quickly reviewed a very small portion of the loans.
As a result it paid around $4.4m for its work as the lead underwriter on the transaction, the SEC said in a complaint filed in federal court in Connecticut.
SEC division of enforcement co-director George S Cannellos said: “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.
“Today’s action punishes that misconduct and secures more than £93m in relief for those harmed by this shoddy securitization.”