RBS unit to pay $150 mln to settle U.S. SEC charges

Reuters

By Sarah N. Lynch

WASHINGTON, Nov 7 (Reuters) - A unit of the Royal Bank ofScotland agreed to pay more than $150 million to settlecivil charges alleging it misled investors in a financialcrisis-era subprime mortgage product, U.S. regulators said onThursday.

The Securities and Exchange Commission said the money itwill collect from RBS Securities Inc would go towardcompensating harmed investors.

The bank agreed to settle with the SEC without admitting ordenying the charges, which allege that it misled investors aboutthe quality of the underlying loans and the likelihood theywould be repaid.

In a statement, the company said it "cooperated fully" withthe SEC and expects to make a total payment to the SEC of $153.7million.

RBS is 81-percent owned by the British government. The banksaid that its payments to the SEC are "covered by provisionsalready made by RBS."

The $2.2 billion offering at the center of the SEC's casewas made in 2007.

The SEC said that RBS told investors that the loansunderlying the security "generally" met the lender'sunderwriting guidelines, but in fact 30 percent of it fell shortand should have been excluded from the loan pool.

A unit of the bank was paid $4.4 million as lead underwriterfor the deal, but only hastily reviewed a small portion of theloans, the SEC added.

"In its rush to meet a deadline set by the seller of theseloans, RBS cut corners and failed to complete adequate duediligence, with predictable results," said George Canellos, aco-director of the SEC's enforcement division.

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