“First and foremost for everyone is Do Not Lie,” Nomura advises in training sessions; instead, the SEC alleges two ex-traders “fraudulently generated more than $750,000.”
The SEC has charged a pair of former head traders at Nomura Securities International with “deliberately lying to customers” to inflate the profits of the commercial mortgage-backed securities (CMBS) desk in New York and allegedly line their own pockets.
The SEC alleges that James Im and Kee Chan, who ran the CMBS desk, “each misrepresented price information while acting as intermediaries on trades with Nomura’s customers who sought to buy and sell CMBS on the secondary market.”
In addition, on occasions, Im and Chan “allegedly pretended they were still negotiating bond purchases with a third-party seller at higher prices when Nomura had already acquired the bonds at a lower price,” the commission says.
Specifically, the SEC alleges that, “in one instance, Im bragged about his purposeful deception of a customer, and Chan once altered an email to a customer to prop up his lie about the bid price for a bond.”
Together they “fraudulently generated more than $750,000,” according to the SEC, and “received substantial bonuses based largely on the desk’s performance.”
Chan, 46, a resident of Manhasset, N.Y., was associated with Nomura as a registered representative from August 2009 through June 2012. During this time, Chan was one of two head traders on Nomura’s CMBS desk in New York, and held the position of managing director, fixed income, securitized products trading, Americas.
Im, 40, a resident of Tarrytown, N.Y., was associated with Nomura as a registered representative from August 2009 through December 2014. Im was the other head trader on Nomura’s CMBS desk in New York, from August 2009 through June 2012, after which he ran the desk alone through December 2014. During this time, Im also held the position of managing director, fixed income, securitized products trading, Americas.
Chan’s and Im’s alleged misrepresentations and deceptions took place in the period from 2010 through March 2012, the commission specifies.
Among the matters about which they allegedly lied to Nomura customers, the SEC says, were: “i) the prices at which Nomura had bought or sold the securities; (ii) the bids and offers that Nomura made or received on the securities; (iii) the compensation that Nomura would receive for intermediating the trades, in the form of the difference, or ‘spread,’ between its purchase and sale prices; and/or (iv) who owned the security.”
As the SEC’s complaint puts it: “In addition to knowingly or recklessly misrepresenting material price information, Chan embellished his lies by repeatedly describing to customers, who were negotiating to buy CMBS from him, colorful but entirely fictitious exchanges he supposedly just had with customers who were purportedly still negotiating to sell that security to Chan. In at least one instance, Chan went so far as to alter and then forward to a customer an internal Nomura email in order to ‘corroborate’ Chan’s lie about what Chan had bid for the security.”
Chan has agreed to settle the charges against him by paying $51,965 in disgorgement plus $11,758 in interest and a $150,000 penalty, the commission notes, adding that, although he neither admits nor denies the allegations, Chan has “also agreed to be barred from the securities industry with the right to reapply after three years.”
The Chan settlement is subject to court approval, the SEC notes, while the case against Im continues.
The SEC’s complaints, filed in Manhattan federal court, charge Chan and Im with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5.
The SEC also points to the January 2013 “indictment of a trader of mortgage-backed securities at another firm for similar misconduct, news of which was widely circulated among mortgage-backed securities traders, [and] promptly led to further training sessions at Nomura during which Im and other traders were again instructed, among other things, as follows: ‘First and foremost for everyone is Do Not Lie.’ Not withstanding such admonition, Im still continued lying to Nomura customers.”
With typically blunt panache, The New York Post called the two-ex Nomura traders “bone-headed,” for allegedly bragging in chats and emails that they’d ripped off customers. The action against them is the “latest suit targeting Wall Street for sleazy sales practices,” the venerable tabloid observed.
“As alleged in our complaints, Im and Chan operated under cover of an opaque CMBS secondary market to gain illegal trading profits and potentially larger bonuses by lying to firms on the other side of their trades about the prices at which they were buying and selling securities,” Andrew M. Calamari, director of the SEC’s New York regional office, says in a statement.
FTF News contacted a Nomura media representative, requesting comment and asking if Nomura, too, was a victim of the alleged Im-Chan fraud, and whether or not its own oversight procedures were changed after the fraud was discovered.
By press time there had been no reply from Nomura officials.
To read the SEC charges against Chan, go to: http://bit.ly/2qSpW5Y
To read the SEC charges against Im, go to: http://bit.ly/2rQa6WK
New York-based Nomura Securities is a U.S. affiliate of Nomura Holdings, Inc., a public financial holding company headquartered in Tokyo.
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