SEC & FINRA Examine CMO Sales and Marketing Practices

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have each began their own investigations into the sales and marketing practices of certain collateralized mortgage obligations (CMOs),

FINRA sent more than 12 broker-dealers a sweeps letter requesting more information about: the sales of principals only, interest only, and inverse floater trenches of CMOs and details about actions taking place between June 30, 2006 and July 31, 2007.

FINRA specifically requested:

• Customer names • Transaction dates • Account numbers • Prices per unit of sales • Identification numbers of registered representatives • CMO sales-related presentation, training, and marketing material • A list of customer complaints
By requesting the information, FINRA noted that this did not mean that any federal securities laws had been violated by anyone. FINRA says its requests are common practice when new products are offered to investors. FINRA wants to know how products are marketed and sold to investors and how the firms decide who to offer the products to.

FINRA wants to make sure that investors not properly suited for CMOs are not offered the product. FINRA recommends that CMOs should be offered to “sophisticated investors.”

If you are an investor who has lost money because of the unsuitable recommendation of a broker-dealer, you should speak with one of our stockbroker fraud lawyers right away. You are entitled to recover your losses. Contact Shepherd Smith and Edwards today.

Related Web Resources:

Brokers Probed by Finra on Mortgage Security Sales, Person Says, Bloomberg.com, January 4, 2008
Collateralized Mortgage Obligations (CMOs), SEC.gov