Former Jefferies Bond-Trading Chief Recommended for Discipline

Jefferies LLC’s former co-head of fixed-income William H. Jennings was served with a regulatory notice recommending disciplinary action against him for failing to properly supervise mortgage-bond traders.

Jennings is accused of “failure to enforce a reasonable supervisory system,” the Financial Industry Regulatory Authority said in a notice dated Dec. 29. Such a recommendation typically precedes filing of a formal complaint, unless parties come to an alternative agreement.

In four instances, Jennings failed to “reasonably and properly supervise” employees “so as to prevent false statements from being made, or to correct false statements that had been made, to customers in connection with transactions in mortgage-backed securities,” the notice said. Jennings joined Jefferies in 2008 and departed in 2014.

“Any suggestion that William Jennings failed to discharge his supervisory responsibilities during his tenure at Jefferies is absurd,” David Zornow, Jennings’s attorney at Skadden Arps Slate Meagher & Flom LLP, said in an e-mailed statement, adding that Jennings plans to fight the case if Finra moves ahead with a complaint.

Richard Khaleel, a spokesman for Jefferies, declined to comment.

Asset-Backed Alert first reported the notice on Friday.

Former Jefferies trader Jesse Litvak was accused defrauding customers of more than $2 million on trades of residential mortgage-backed securities from 2009 to 2011. While Litvak was convicted on charges of fraud in March 2014, the ruling was overturned last month because of excluded testimony that contended such misrepresentations are widespread, forcing prosecutors to put together a new case.

The revelations, however, opened up a string of investigations that continue to develop across Wall Street firms, some of which have resulted in new charges as authorities make it a "top priority" to hold individuals responsible for misconduct on Wall Street.

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