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October 30, 2017

RBS to pay $44m in fine over securities fraud

RBS Securities has agreed to pay $44m to settle US Department of Justice’s (US DoJ) allegations of defrauding customers in trades of residential mortgage-backed securities (RMBS) and collateralised loan obligations (CLOs) between 2008 and 2013.

The company has been found guilty of numerous charges following a probe by the government. The probe revealed that the company misrepresented material facts to deceive customers in trades as well as directed its traders to use fraudulent trading practices in order to boost profits.

Moreover, the company was found to use its proprietary trading operation, named prop desk, to deceive rival broker-dealers in trades. The company was also accused of lying to suspecting customers and denying remedial measures following complaints by its employees who were not involved in the scheme.

The fraudulent activities mainly occurred at RBS’ trading floor in Stamford, Connecticut, US DoJ said.

As part of the settlement, RBS will pay a monetary penalty of $35m and over $9m in restitution to affected customers.

US attorney Daly said: “For years, RBS fostered a culture of securities fraud.  “Those in a position of authority taught and encouraged fraudulent trading practices.  Worse, those supervisors and compliance personnel then took steps to prevent victims and honest RBS employees from discovering and exposing the scheme.

“After our joint investigation into fixed income trading began, RBS saw the error of its ways.  RBS was able to avoid criminal charges in this case only because of its voluntary self-reporting and extraordinary cooperative efforts.  By entering into this agreement, RBS has admitted the seriousness of its past criminal conduct and made a clean break.”

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