Jan. 4 (Bloomberg) -- U.S. regulators, concerned brokerages may have sold clients money-losing securities tied to subprime mortgages, are seeking information about how the investments were marketed, a person familiar with the situation said.

The Financial Industry Regulatory Authority, which polices about 5,100 brokerages, sent letters Dec. 14 to more than a dozen firms that sell collateralized mortgage obligations, a type of security linked to home-loan payments, said the person, who declined to be identified because the inquiry isn't public. One letter obtained by Bloomberg seeks sales spreadsheets, marketing materials, and procedures and methods for matching products to clients' investment needs.

Mounting losses from securities tied to home loans are prompting regulators to examine how Wall Street firms valued and promoted the products. Finra Chief Executive Officer Mary Schapiro said in September the agency was scrutinizing sales of mortgage-backed products to retirees, and had sent a round of letters seeking information on the transactions.

``Finra believes these are potentially risky and complicated products, and they have concerns about suitability,'' said Brian Rubin, a partner at Sutherland Asbill & Brennan LLP in Washington who has clients that received the December letters. He declined to name them.

Finra's letters were reported yesterday by the Wall Street Journal on its Web site.

Industry Cross-Section

The letters, marking the second step in the watchdog's review, were sent by Finra's enforcement division and require recipients respond by Jan. 8, the person familiar with the effort said. Recipients were chosen to represent a cross section of the industry, not because they're suspected of wrongdoing.

Finra spokesman Brendan Intindola declined to comment.

CMOs cut up payments from pools of home loans to create bonds that offer a variety of characteristics, known as tranches, based on income and risk. Finra's Web site warns that the products should be reserved for ``sophisticated investors'' who are ``prepared to do a lot of homework.''

The regulator's letters ask firms to hand over training materials, advertising and other sales documents, and to describe how they managed loans to investors to purchase the products. They also require firms to list customer complaints related to the investments.

Finra and other U.S. regulators have opened a growing number of inquiries as they seek to understand the extent of Wall Street's culpability behind investor losses on mortgage-backed securities.

SEC Focus

The Securities and Exchange Commission is focusing on issues including how banks valued mortgage-backed securities, how promptly they disclosed losses and whether executives at lenders dumped shares before loan defaults surged.

State officials, including New York Attorney General Andrew Cuomo and Massachusetts' Secretary of the Commonwealth William Galvin, are also scrutinizing investment banks. Illinois Attorney General Lisa Madigan is investigating Countrywide Financial Corp.'s loans.

Finra's letters specifically ask for documents offered to customers describing CMOs that were created and available for sale in March and June, when the market began to collapse.

The letters also seek information on employees, such as brokers who generated the highest commissions from selling CMOs and supervisors who reviewed the suitability of the investments for clients.

``This request should not be construed as an indication that the enforcement department or its staff has determined that any violations'' have occurred, Finra wrote in the letter obtained by Bloomberg. Nor is it ``a reflection upon the merits of the securities involved or any person who effected transactions in such securities.''

To contact the reporters on this story: David Scheer in Washington at dscheer@bloomberg.net; Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: January 4, 2008 01:11 EST