Mizuho to Pay $127.5 Mil. to SEC for Subprime Bonds
Japan’s Mizuho Financial Group has agreed to pay $127.5 million to settle the Securities Exchange Commission (SEC) charges against a Mizuho unit that allegedly misled investors about investment vehicles backed by subprime mortgages, the SEC announced Wednesday.
Employees of Mizuho Securities USA Inc. (MSUSA) misled investors to buy about $1.6 billion worth of debt backed by using “dummy assets that inaccurately reflected the collateral” in connection with subprime bonds structured in 2007, the SEC said.
MSUSA’s settlement with the SEC consents to the entry of a final judgment requiring payment of $10 million in disgorgement, $2.5 million in prejudgment interest and a $115 million penalty, but without admitting or denying the SEC charges.
MSUSA “now has agreed to the settlement to avoid protracted litigation and distraction,” the company announced Wednesday.
The settlement will be paid from reserves that had already been set aside for most of the settlement amount in its consolidated account in the fiscal year ended March 31, 2012, the company added. Consequently, the payment of the settlement will not adversely effect its consolidated financial statements for the fiscal year through next March 31, it added.
MSUSA is no longer engaged in the collateralized debt obligation business as it terminated its CDO structuring unit in 2007, Mizuho Securities said in a statement, adding, “MSUSA is not under investigation by the SEC for any other transaction.”