SEC to Bring More Litvak-Type Bond Cases in 2016, Unit Head Says

  • Osnato says regulator won't just target Wall Street dealers
  • Fraud conviction of trader Litvak was overturned in December

Wall Street’s main regulator is pursuing more enforcement actions that involve some of the most opaque debt markets even after the model case against trader Jesse Litvak was overturned in December.

“You will see more Litvak-type cases” this year, Michael Osnato Jr., head of the complex financial instruments group at the Securities and Exchange Commission’s division of enforcement, said Friday at a panel in Washington. These cases won’t just focus on Wall Street bond dealers, he said. So far the agency has mainly gone after middlemen who trade the debt, so the new probes could include potential misrepresentations by firms such as hedge funds about what they paid for bonds.

A federal appeals court tossed former Jefferies & Co. trader Litvak’s March 2014 conviction for defrauding the U.S. government and making false statements. It said Litvak should have been able to present testimony from experts suggesting his tactics were common behavior on Wall Street, and ordered a retrial on charges that he cheated his customers by lying about the prices the firm paid for bonds. His new trial is set to start in July.

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