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FEDERAL HOUSING FINANCE BOARD RESTRUCTURES OFFICE OF FINANCE; WARNS DEALERS OF EXPULSION

 FEDERAL HOUSING FINANCE BOARD RESTRUCTURES OFFICE OF FINANCE;
 WARNS DEALERS OF EXPULSION
 WASHINGTON, Jan. 16 /PRNewswire/ -- The Federal Housing Finance Board announced a major restructuring of the Office of Finance (OF), a joint office of the Federal Home Loan Bank System. The Finance Board also formally reprimanded its selling group for reporting violations and restated its position that in the future any violations could lead to expulsion.
 "We insist that the debt selling groups maintain the highest level of integrity. We are advising dealers that future willful violations of agreements will mean expulsion. There will be no probation, a dealer will be out," Daniel F. Evans, Jr., Finance Board chairman, said today.
 The Finance Board has established a new board of directors to govern the activities of the OF, subject to the oversight of the Finance Board. The OF is responsible for the sale of Bank System consolidated obligations to investors through several "selling groups" of brokerage firms and financial institutions.
 "I am pleased that a solution has been worked out which meets the Finance Board's needs, as well as the Securities and Exchange Commission's request for a coordinated response between our two agencies as to dealer groups. Our actions will further assure the integrity of the markets for the system's securities," Evans added.
 The Finance Board is taking the following actions:
 -- Appoint a new board of directors consisting of three members.
 -- Restructure the OF, including the elimination of duplicate functions to enhance efficiencies. This will result in a significant downsizing of OF's size and budget.
 -- Hire a new OF director as part of the restructuring.
 -- Review the size of the dealer groups, draft new contracts for dealer group members as well as review the current bond allocation process.
 In early December, the Finance Board Examination Division concluded the second of two comprehensive examinations on the sale of System securities. Examiners found that 90 of 93 bond selling group members admitted to exaggerations of customer demand and inaccurate reporting of actual sales. In addition to reporting violations, many selling group members also purchased securities as principal for their own trading and investment accounts, in violation of contractual prohibitions against such purchases. However, examiners concluded that the violations had not injured public investors in System securities or the Bank System.
 In a letter issued last September at the Finance Board's direction, the OF notified all selling group members that further reporting or other violations could result in their expulsion. The Securities and Exchange Commission has requested that it be allowed to coordinate for all government sponsored enterprises (GSEs) any imposition of civil money penalties against selling group members.
 -0- 1/16/92
 /CONTACT: Charles H. Powers of Federal Housing Finance Board, 202-408-2986/ CO: Federal Housing Finance Board; Office of Finance ST: District of Columbia IN: FIN SU:


MK -- DC011 -- 0512 01/16/92 12:24 EST
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Publication:PR Newswire
Date:Jan 16, 1992
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