National City Corp., a financial holding company based in Cleveland, agreed to settle a class action brought by the New York State Common Retirement Fund and other purchasers of National City common stock for allegedly misrepresenting the quality of mortgage loans backing its RMBS. The suit, filed in 2008, alleged that National City mischaracterized as prime approximately $10 billion in subprime loans, and misrepresented the loans’ quality and performance. Plaintiff alleged violations of Sections 10(b) and 20(a) of the ’34 Act and Sections 11 and 15 of the ’33 Act. National City will pay $168 million to the class. The settlement, announced on August 8, 2011, must still be approved by U.S. District Judge Solomon Oliver of the Northern District of Ohio. Press Release.
Settle
JP Morgan Settles with the SEC for $154 Million Over CDO Disclosures
On June 21, 2011, the SEC announced that JP Morgan Chase & Co. agreed to pay $153.6 million in disgorgement and penalties to settle claims brought by the SEC in the Southern District of New York. The SEC alleged that JP Morgan structured and marketed a $1.1 billion collateralized debt obligation and failed to disclose that the hedge fund, Magnetar Capital LLC, whose economic interests allegedly were adverse to the CDO’s investors, played a significant role in the portfolio selection process with the knowledge of JP Morgan. According to the SEC, while participating in the selection of the investment portfolio, Magnetar shorted $600 million of the assets it helped to select. The SEC also filed a separate complaint against Edward Steffelin, the head of the registered investment advisory firm that the offering documents represented would select the investments in the portfolio. Steffelin has not settled. JPM Settlement Announcement. JPM Compl. Steffelin Compl.