BMO Pays $40 Million on Mortgage-Bond Lapse in Deal With SEC (1)

BMO Capital Markets Corp. employees sold mortgage-backed bonds using misleading information to make them more marketable, the US Securities and Exchange Commission said Monday.

The broker-dealer, a unit of Bank of Montreal, agreed to pay $40 million to settle the claims without admitting to or denying the allegations.

Between December 2020 and May 2023, employees mixed collateral bonds backed by pools of residential mortgages using a sliver of higher-interest mortgages in a way that made third-party data providers generate inaccurate information about the bonds’ structure, according to the SEC’s cease and desist order. The firm’s policies failed to ...