Skip to main content

FINRA Fines Northern Trust Securities for Not Monitoring Collateralized Mortgage Obligations

NationalMortgageProfessional.com
Jun 02, 2011

The Financial Industry Regulatory Authority (FINRA) has announced that it has fined Northern Trust Securities $600,000 for deficiencies in supervising sales of collateralized mortgage obligations (CMOs) and failure to have adequate systems in place to monitor certain high-volume securities trades. FINRA found that from October 2006-October 2009, Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, in large part because it used an exception reporting system that failed to capture or analyze substantial portions of the firm’s business, including all CMO transactions, certain trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds. FINRA found that from January 2007 to June 2008, 43.5 percent of the firm’s business was excluded from review. The absence of systems to monitor equity trades of over 10,000 shares or fixed income trades of over 250 bonds also resulted in a failure to review these trades for suitability, concentration, excessive trading, excessive mark-ups or commissions, or for trading in restricted stocks. “Northern Trust’s deficient systems and procedures allowed more than 40 percent of its transactions to proceed without review, which in turn left vulnerable investors exposed to the risk of losing all or a substantial portion of their principal through potential over-concentration in CMOs,” said Brad Bennett, FINRA executive VP and chief of enforcement. In concluding this settlement, Northern Trust neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. The enforcement action was brought by Laura Leigh Blackston, senior regional counsel, under the supervision of Andrew Favret, associate VP and regional chief counsel of the Department of Enforcement.
Published
Jun 02, 2011
Fed Slows Rate Hike Pace, OK’s 0.25% Bump

Rate hike is 8th since March 2022.

Regulation and Compliance
Feb 01, 2023
Report: Fannie, Freddie Note Sales Undercut Homeownership Goals

National Consumer Law Center report says sales to private investors strip borrowers of access to loss-mitigation options.

Regulation and Compliance
Jan 31, 2023
FHA Expands COVID-19 Recovery Loss-Mitigation Options

Updated and expanded options intended to help more borrowers avoid foreclosure.

Regulation and Compliance
Jan 31, 2023
Complex Algorithms Causing Complex Compliance Issues

Complying with Reg B and ECOA on adverse action

Regulation and Compliance
Jan 27, 2023
The State Of Remote Work In Mortgage

Regulations are catching up with remote work, are you prepared?

Regulation and Compliance
Jan 27, 2023
Becoming The Interest Rate Expert

Understand the five main variable components of rate-sheet pricing and interest rates

Regulation and Compliance
Jan 27, 2023