RBS Securities Agrees To $35 Million Penalty For Securities Fraud Scheme: U.S. Attorney

STAMFORD, CT — RBS Securities Inc. has agreed to pay $35 million in penalties and $9 million in restitution to victim customers as part of a non-prosecution agreement related to RBS's fraudulent trading, according to the U.S. Attorney's office.

“For years, RBS fostered a culture of securities fraud,” said U.S. Attorney Deidre Daly. “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.

RBS, mainly from its Stamford trading floor ran a scheme from 2008 to 2013 to defraud customers in trades of residential mortgage-backed securities and collateralized loan obligations in order to increase profit at the expense of victim customers, according to the U.S. Attorney's office.

RBS in certain instances would lie to a buyer about the seller's asking price or visa versa and then keep the difference, the U.S. Attorney's office alleged. In other instances RBS would charge buyers an extra unearned commission by making up fake third-party sellers.

RBS ignored complaints from its own employees that weren't part of the scheme, according to the U.S. Attorney's office.

RBS was able to avoid criminal charges in this case when it started cooperating with the government and entering into an agreement where they admitted hte seriousness of past criminal conduct, Daly said. The agreement only covers criminal charges on behalf of the company and doesn't protect against potential criminal charges for individuals who took part in the scheme.

Matthew Katke, a registered broker-dealer and managing director at RBS pleaded guilt to conspiracy to commit securities fraud and began cooperating with the government. Adam Siegel the Co-Head of U.S. Asset-Backed Securities, Mortgage-Backed Securities and Commercial Mortgage-Backed Securities Trading at RBS also pleaded guilt to the same and began cooperating with the government.

Image via Shutterstock