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ARTICLE · 25 FEBRUARY 2011

Underwriter Due Diligence

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An Underwriter (the "Underwriter") has agreed to pay $3.3 million in a settlement with the Ontario Securities Commission in connection with the initial public offering of subprime mortgage company FMF Capital Group Inc. (FMF).

CanadaLitigation, Mediation & Arbitration
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Article by Margot Finley
Edited by David Di Paolo

An Underwriter (the "Underwriter") has agreed to pay $3.3 million in a settlement with the Ontario Securities Commission in connection with the initial public offering of subprime mortgage company FMF Capital Group Inc. (FMF). As part of the settlement, the Underwriter admitted that it engaged in conduct contrary to the public interest in that it "conducted due diligence in a manner that did not comply with reasonable underwriting practices." The Underwriter did not admit liability or misconduct, but will be reprimanded.

The Underwriter acted as the lead underwriter in a $197.5 million financing done by FMF, a Michigan-based subprime mortgage firm, in March 2005. As part of its underwriting, the Underwriter signed a certificate stating that to the best of its knowledge the FMF prospectus constituted full, true and plain disclosure of all material facts relating to FMF's income participating units. FMF soon

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