Corporate & Securities Law

The SEC's docket of probes stemming from the subprime-mortgage crisis has grown at least 40 percent since January amid mounting investor losses and the collapse of Bear Stearns. 

The SEC has more than 50 open inquiries relating to the credit-market turmoil, compared with about 3 dozen in January.  The SEC is examining suspected fraud, market manipulation and breaches of fiduciary duty. 

Global credit markets froze last year amid rising defaults on mortgages to the least creditworthy borrowers, triggering almost $400 billion in losses and writedowns at the world's biggest banks and securities firms.  Still, the surging caseload may not lead to a wave of civil and criminal charges, as many inquiries are in early stages and hinge on accounting questions. 

In March, the SEC opened probes into whether investors, including hedge funds, spread lies about Bear Stearns and Lehman Brothers to profit from declines in the firms' shares.  Speculation that Bear Stearns was facing a cash shortage spurred client withdrawals at the 85-year-old firm, forcing its sale to JPMorgan Chase.

The FBI has struggled to keep pace with the growing number of cases.  The agency this month told 26 of its 56 field offices to focus on the subprime crisis and stop opening investigations into other financial crimes including price fixing, mass marketing and wire fraud.

FBI officials said last week they are probing 19 companies, including investment banks and hedge funds, for suspected accounting fraud or other white-collar crimes related to mortgage securities.  It had 14 such cases in January.

SNSFE continues to investigate subprime loss cases and those with information should contact SNSFE attorneys.

Source:  Bloomberg.com