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Probe opens on Wall Street ratings
of subprime lenders
UBS, Bear Stearns get subpoenas over 'rosy' analysis
of New Century
Inman News
Saying their research of subprime lenders such as New
Century Financial Corp. was "very rosy," Massachusetts
Secretary of State William Galvin has issued subpoenas
to Wall Street investment banks UBS Securities LLC and
Bear Stearns & Co., the Associated Press reported
Tuesday.
Galvin said he's investigating research reports Wall
Street investment firms issued on New Century and other
subprime lenders. At this point in the investigation,
it's too early to say if other investment firms will
be subpoenaed, he said.
The subpoenas seek records on fees and commissions earned
by the firms relating to subprime lenders, and communications
between hedge fund clients invested in subprime lenders,
AP reported. UBS and Bear Stearns have until March 27
to turn over all documents generated by subprime lending
analysts at the two firms.
A UBS spokeswoman told AP the company is proud of its
research track record in general, and a Bear Stearns
spokeswoman defended the work of its New Century analyst.
The New York Stock Exchange suspended trading of New
Century's shares this week, and is taking steps to delist
the company because of its financial difficulties.
In a March 8 Securities and Exchange Commission filing,
the California-based lender said it had stopped funding
loans because it had lost financing from at least five
creditors.
One of those creditors is UBS Real Estate Securities
Inc., which is demanding repayment of $1.5 billion in
repurchase obligations for bad mortgage loans, according
to a New Century SEC filing Tuesday.
New Century announced in February that it would be forced
to restate results for the first three quarters of 2006
because it failed to properly account for losses on bad
loans it was obligated to repurchase.
New Century has also revealed that it is the subject
of a criminal investigation by the U.S. Attorney's Office
for the Central District of California, which is looking
into trades of New Century securities, and accounting
errors related to the company's allowances for loan repurchases.
New Century is facing at least 10 lawsuits seeking class-action
status to represent aggrieved shareholders.
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