Tuesday, June 21, 2011
The National Credit Union Administration (NCUA), as conservator for several failed wholesale credit unions, has, in separate actions, sued JP Morgan Chase and Royal Bank of Scotland in connection with their underwriting of morgage-backed securities sold to the credit unions. Both actions were filed on June 20 in federal district court in Kansas. In addition, NCUA stated it may bring actions against additional securities firms.
Brought under the Securities Act of 1933, both suits allege that the banks did not adhere to the underwriting standards set forth in the prospectuses and that the securities were "destined from inception to perform poorly."