Confirming need for ultra transparency, Regulator fines Barclays Capital over inaccurate data supplied to subprime mortgage investors

The NY Times Dealbook reports that FINRA has fined Barclays Capital over inaccurate data supplied to subprime mortgage investors.

The Financial Industry Regulatory Authority said on Thursday that it had fined Barclays Capital $3 million for misrepresenting information about subprime mortgage securities the bank had sold from 2007 to 2010.

The fine appears a little light given a) the fees that Barclays Capital would have made on these deals and b) the losses incurred by investors who purchased the securities as a result of the misrepresentation.

Finra, as the nonprofit self-regulator is known, said in a statement that Barclays Capital had provided inaccurate data about the delinquency rates of mortgages packed into three securities. 

The misrepresentations “contained errors significant enough to affect an investor’s assessment of subsequent securitizations,” according to the agency. 

That data was then referenced for five additional subprime securities, the agency said. 

“Barclays did not have a system in place to ensure that delinquency data posted on its Web site was accurate,” J. Bradley Bennett, the agency’s enforcement chief, said in a statement. 

“Therefore, investors were supplied inaccurate information to assess future performance of RMBS investments.”

Please re-read the highlighted sentence.  There could not be a clearer confirmation of the need for ultra transparency.  With full disclosure on an on-going basis of the loans, this could not have happened.

Did Barclays ever put in a system and correct the delinquency data?  If not, how could anyone price these securities today?

Barclays Capital neither admitted nor denied wrongdoing, though it consented to the fine. A spokeswoman for the bank declined comment.

No surprise here.