Reuters: Regulatory News: U.S. regulator sues Morgan Stanley, eight others over faulty securities

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U.S. regulator sues Morgan Stanley, eight others over faulty securities Sep 24th 2013, 02:41 Sept 23 | Mon Sep 23, 2013 10:41pm EDT Sept 23 (Reuters) - A U.S. regulator filed lawsuits against Morgan Stanley and eight other banks over the sale of nearly $2.4 billion in mortgage-backed securities to two credit unions that later failed, according to a filing. Morgan Stanley and Morgan Stanley Capital I Inc, Barclays , JPMorgan Chase & Co's unit Bear Stearns, Credit Suisse Group, Royal Bank of Scotland Group and UBS sold faulty securities to Southwest and Members United corporate credit unions, the National Credit Union Administration (NCUA) said in its complaint. Goldman Sachs Group Inc, Wachovia Corp, a unit of Wells Fargo & Co and Residential Funding Securities LLC, now Ally Securities, also sold faulty securities to Southwest, NCUA said. "We continue to pursue accountability and recovery in the wake of billions of dollars in sales of faulty securities that led to the collapse of several corporate credit unions and handed the industry the costly bill of paying for the losses," NCUA Board Chairman Debbie Matz said. Southwest and Members United corporate credit unions paid more than $416 million for the securities in question in the Morgan Stanley suit and more than $1.9 billion for securities sold by the other defendants. The NCUA lawsuits filed in the Manhattan district court say the banks made misrepresentations in connection with the underwriting and subsequent sale of the mortgage-backed securities. NCUA's complaints also allege that the offering documents of the securities sold to the failed corporate credit unions contained statements that were not true or omitted material facts. The banks had "abandoned the stated underwriting guidelines in the offering documents," according to the complaints, with the result that the securities were significantly riskier than represented. None of the banks could immediately be reached for comment. Link this Share this Digg this Email Reprints

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