US securities regulators have opened about two dozen investigations related to the subprime market collapse and expect it to be a main focus in the coming year, a top official said on December 05.
The US Securities and Exchange Commission is looking at whether there has been any fraud or record-keeping violations in connection with the sale of securities backed by subprime mortgages, said Mark Schonfeld, director of the New York regional office.
The inquiry could involve looking at how publicly held companies or hedge funds valued assets backed by subprime mortgages, Schonfeld told Reuters in an interview at his office in Manhattan.
Lenders and issuers of securities backed by subprime mortgages could also come under scrutiny, with the SEC looking at whether there were any material misrepresentations or omissions in connection with the lending practices or underwriting of these securities, he said.
"They all come down to essentially, what did people know and when did they know it?" Schonfeld said. "The question is, 'were they saying something at one time that was inconsistent with the facts as they knew them?'"
Most of the pending investigations are still in the early stages, Schonfeld said, declining to predict if and when any would lead to enforcement actions.
But the number of investigations has doubled since June, when the commission said it had launched a dozen probes into collateralized debt obligations linked to subprime mortgages and created a working group to focus on subprime market problems.
"They are fairly complex investigations," Schonfeld said. "They will take some time to resolve themselves." Most of the investigations have not been made public. Among those that are, Merrill Lynch & Co Inc disclosed last month that the commission was investigating matters related to its subprime mortgage portfolio.
Schonfeld said he also expected insider trading, including the role of hedge funds, to be another area of focus for the agency.
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