HOUSTON, Sept. 22, 2010 (GLOBE NEWSWIRE) -- The Law Firm of Shepherd Smith Edwards & Kantas LLP () continues to investigate all claims regarding Collateralized Mortgage Obligations (CMOs). Recently, another brokerage firm has come under fire for marketing these products. The Financial Industry Regulatory Authority (FINRA) fined HSBC Securities (USA) Inc. $375,000 for recommending unsuitable sales of inverse floating rate CMOs. HSBC Securities is a subsidiary of HSBC Holdings PLC (NYSE:HBC). Allegedly, HSBC recommended these complex products to retail customers without fully explaining the risks of an inverse floating rate or addressing other suitability factors. Furthermore, FINRA alleged HSBC failed to properly supervise the sales of the CMOs to its customers.
According to James S. Shorris, FINRA Executive Vice President and Acting Chief of Enforcement, "The losses incurred by HSBC's customers likely would have been avoided had the firm sufficiently trained its brokers on the suitability and risks of inverse floating rate CMOs and reasonably supervised their brokers to ensure that they were making suitable recommendations."
A CMO is an invest vehicle that pools mortgages and issues tranches. Each tranche has unique risks and characteristics. Unlike most fixed income products, CMOs do not pay off at maturity, but instead make principal payments throughout the life of the security. Inverse floater CMOs pay adjustable rates of interest which move opposite from standard interest rate indexes, such as LIBOR. FINRA, and its predecessor the NASD, has maintained that inverse floating rate CMOs "are only suitable for sophisticated investors with a high-risk profile."
Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and others with more than 100 years of combined experience in the securities industry and in securities law. Since 1990, we have represented thousands of investors nationwide to recover losses. We have represented clients in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. Collectively, we have represented clients in more than 1,000 matters in negotiation, mediation, arbitration and litigation.
CONTACT: Shepherd Smith Edwards & Kantas Aaron Wall agwall@sseklaw.com Robert Kantas rkantas@sseklaw.com 800-259-9010
