Updated from 1:57 p.m.

Financial stocks were generally tracking lower than the major indices Friday, and leading the laggards with a 38.3% drop was Sterling Financial ( SLFI).

The Lancaster, Pa., bank said that an investigation into one of its affiliates turned up a "sophisticated loan scheme." Sterling said that the scheme was confined to its Equipment Finance LLC affiliate and that no customer accounts in Sterling's banks or other affiliates were compromised.

"Our investigation has now revealed evidence that Sterling and its shareholders were subjected to a significant, sophisticated loan scheme, specifically designed to deceive and avoid detection," the bank said. "Our priority now is to address the problem and continue serving our customers. Decisive actions have been taken to reinforce oversight and centralize operational management at EFI."

In response to Sterling's findings, the company terminated several EFI employees, including the chief operating officer. The investigation remains ongoing. The stock also received two downgrades; Ferris Baker Watts lowered it from buy to sell, and Sun Trust Robinson Humphrey changed its rating from neutral to reduce. Shares were down $6.19 at $9.97.

Nasdaq Stock Market ( NDAQ - Get Report) slumped 3.4% after agreeing to buy the OMX, which operates stock exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga and Vilnius.

Nasdaq will pay 208.10 kroner per share for OMX, valuing the Nordic exchange at $3.7 billion. The combined company, to be led by Nasdaq Chief Executive Bob Greifield, will have a market cap of roughly $7.1 billion. Nasdaq shares were $1.14 lower at $32.84.

Some Canadian banks saw active trading Friday, among them Royal Bank of Canada ( RY - Get Report), which dipped 2.2% despite reporting a quarterly rise in earnings. The bank said it earned C$1.3 billion, or 98 Canadian cents a share (U.S.$1.2 billion and 91 U.S. cents), vs. C$1.1billion, or 85 cents a share, in the prior-year period. Revenue increased 11% to $2.7 billion. Even so, shares were down $1.22 at $54.63.

Meanwhile, shares of Toronto Dominion Bank ( TD - Get Report), which delivered a large quarterly profit gain Thursday, continued their climb Friday, recently adding $1.79, or 2.8%, to $66.95. And Bank of Montreal ( BMO - Get Report), which received several analyst upgrades and price-target revisions Thursday, was trading higher Friday after opening on a gap up. The stock was recently $1.59, or 2.5%, higher at $66.05.

More broadly, the KBW Bank Index was up slightly at 117.07, and the NYSE Financial Sector Index was 0.4% higher at 9,843.94.