SEC accuses 2 brokers of $1B subprime fraud

September 3, 2008 9:12:12 AM PDT
Federal regulators are accusing two Wall Street brokers of defrauding their customers by making more than $1 billion in unauthorized purchases of securities tied to subprime mortgages. The Securities and Exchange Commission alleges in a civil lawsuit that two Credit Suisse Securities brokers led corporate customers to believe that auction-rate securities being purchased in their accounts were backed by federally-guaranteed student loans and were safe like cash.

The SEC says the securities were backed by subprime mortgages, collateralized debt obligations and other high-risk investments.

The agency is seeking unspecified restitution and fines.