Liability for deals involving mortgage-backed securities issues may have been shifted from the brokers of these instruments to investment bankers and other underwriters that issue the instruments, thanks to a no-action letter granted to Kidder, Peabody & Co. from the Securities and Exchange Commission.

The letter, issued May 20 from the agencys Division of Corporate Finance, has many in the financial services industry, including chief financial officers, quietly blaming the agency for adding a huge administrative reporting burden to the prospectus process. They argue the letter to Kidder indirectly changes the landscape of disclosure requirements and leaves the issuers of the securities open to liability lawsuits.

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