Due Diligence - Securities Applications and Regulatory Requirements

TASA ID: 388

This article is to inform and assist the individual or entity who is claiming that their securities professional and firm failed in their duty to conduct thorough, proper investigation/research, commonly known as "due diligence." Investment professionals, regulators and lawyers often inappropriately use the term due diligence, which causes confusion in both the implementation of "due diligence" work and later in the attempt to ferret out what were and were not the regulatory requirements under the rules relating to due diligence.

The Current Financial Crisis

TASA ID: 1258

The United States has been in the midst of a financial crisis since mid-2006 that resulted from residential real estate foreclosures.  The foreclosures caused severe pressures in subprime mortgage markets and ultimately in global money markets.  As a result of stricter accounting standards and downgrades by credit rating agencies, various complex mortgage backed financial instruments had to written down on financial institution balance sheets.  As housing prices declined, financial institutions worldwide faced severe losses that threatened their survival.  By September 2008, severe credit tightening was becoming evident.  In response to these events, Congress passed legislation authorizing the Secretary of the Treasury to spend up to $700 billion to purchase troubled financial assets. 

A Primer on Subprime Mortgage Loans

TASA ID: 322

There are other factors that may cause a borrower to fall into the subprime category. For example, some borrowers might be classified as subprime despite having an excellent credit history because they choose not to provide the lender with the opportunity to verify their income or assets stated in the loan application process. Loans of this type are called "stated income" loans or "stated asset" (SISA) loans or "no income-no asset" (NINA) loans.  Due to a subprime lender's perceived higher risk in making these types of loans, the borrower is considered a subprime credit.

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