The Royal Bank of Scotland has agreed to settle allegations that it misled pension funds about the risk involved in the investment of residential mortgage-backed securities.

At issue are RMBS that were sold to CalPERS, California’s public employee pension fund, and CalSTRS, the state’s pension fund for teachers.

RBS is accused of misrepresenting the RMBS by failing to accurately disclose the true characteristics of many of the underlying mortgages.

Source: Mortgage Daily