FINRA, the Financial Industry Regulatory Authority, is investigating a $40 million fraud at Halifax Mortgage Partners (HMP), a financial adviser to mortgage brokers and other institutional investors.
The company has been placed on notice by FINRA for violations of FINRA regulations governing investment advisers.
The investigation is led by a Financial Industry Executive Council (FINEC) investigation team and the Office of the Comptroller of the Currency (OCC).
The Financial Industry Group (FIG), the largest investment banking association in the U.S., is investigating the incident.
FINRA has issued a “notice of potential violations” for HMP, but has not made any arrests, according to the notice.
HMP said in a statement that it was “shocked and saddened” by FINSA’s decision.
FINSA has not issued a formal statement about the matter.
FINRCs website states that it is “investigating allegations of misconduct by HMP in connection with a matter involving a potential violation of the investment advisers Act of 1930.”
The Financial Services Council (FSC), the nation’s largest investment advisory group, has been investigating HMP for a month.
HEP said that it has been cooperating with FINRA’s investigation.
FINA is “working with HEP on a formal notice of potential violation” and is looking for more information, the agency said.
HPP has been the subject of a number of scandals over the past few years.
FINARA said in April that it had opened an investigation into the mortgage broker’s alleged involvement in an offshore scheme.
The agency said HMP had been involved in an “extortion” scheme, where HEP allegedly used an intermediary to pay HMP “several millions” in fees to HMP’s own bank account to purchase the assets of its customers.
The scheme allegedly took place from October 2010 through April 2016.
FINRAS probe HMP was not immediately available for comment on Monday.
The complaint is subject to a gag order, which means it could take years to bring charges against HMP.
FINARas investigation comes on the heels of another FINRA probe into HMP last year, when FINRA said that HMP engaged in a scheme to pay off HEP’s mortgage loans.
FINRECT, a mortgage brokerage company that was acquired by HEP in February, was also investigated by FINARA for allegedly facilitating the purchase of HMP securities in 2010.
FINTRAS report FINTRAC, which is part of the FINRA regulator, said in its April report that HEP “used a third party to purchase a large amount of HEP securities” from a company called PNC Mortgage Services.
The report noted that PNC “had been involved with a variety of frauds, including PNC’s role in buying $1.3 billion in mortgage-backed securities from HMP.”
PNC denied the allegations.
FINST, which has a subsidiary, HEP Asset Management, also was investigated by the FINTRANS report.
The SEC investigated PNC and FINTRA for their role in the PNC-HEP scheme.
FINTERA has also been investigating FINTRAST since last year.
The watchdog agency said in June that it would conduct a formal investigation of FINTRACE, HMP and PNC for alleged violations of the Investment Advisers Act of 1940.
