SEC in Talks to Settle Mortgage Fraud Charges with Major Wall Street Banks

U.S securities regulators are in talks with several major Wall Street banks, including JPMorgan (JPM), Citigroup Inc (C), Morgan Stanley (MS), BofA’s Merrill Lynch (BAC) and UBS AG (UBS) to settle fraud allegations relating to the sale of toxic mortgage bonds to various investors that helped unleash the financial crisis, the Wall Street Journal reported late Thursday, citing sources familiar with the matter.

The expected settlements with the US Securities and Exchange Commission [SEC], which according to WSJ sources is aiming to reach a series of settlements with individual firms over the sales of mortgage bonds, rather than a big industrywide deal, could be reached as soon as next week, while some of the other deals could take months to work out.

The regulator’s decision to go for individual settlements, which are expected to surpass the $550 million penalty that Goldman Sachs (GS) paid last year to settle its Abacus 2007-AC1 mess, reflects substantial differences in the nature of the civil fraud allegations faced by each bank, the sources told the Journal.

All of the banks named in the report and the SEC declined to comment to WSJ.

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