Ex-Morgan Stanley Trader Caught in SEC Mortgage-Bond Probe

  • Nicholas Bonacci was fined by SEC, suspended for a year
  • Bonacci misled customers about value of mortgage bonds

Nicholas Michael Bonacci, a former mortgage-bond trader at Morgan Stanley, was fined by the Securities and Exchange Commission and suspended from the industry for a year for misleading customers about the value of the securities they were buying, causing them to pay more.

The settlement is the government’s latest after a multi-year investigation into possible wrongdoing in the trading of mortgage bonds and other securitized debt. Since the 2008 financial crisis, more than 20 traders on Wall Street have been placed on leave or have been dismissed amid the probes.

Bonacci, 31, misled Morgan Stanley customers in 2012 in at least five transactions about the price the bank had paid for the mortgage bonds he was selling, and how much the bank was getting paid for arranging the trades, the SEC said in an administrative order. He also sometimes told clients he was linking up customers to do a trade, when he was really selling the securities from the bank’s holdings, the order said. The misrepresentations boosted Morgan Stanley’s profits on the trades.

“We welcome the conclusion of this matter and the chance for Nick to move forward,” said David Anders, Bonacci’s attorney. Morgan Stanley declined to comment. 

Bonacci was placed on leave in 2014, Bloomberg reported at the time. He stopped working at Morgan Stanley in February 2016, according to employment records maintained by the Financial Industry Regulatory Authority. His civil penalty of $100,000 was determined based on his cooperation with the regulator in its investigation, through providing detail on his conduct and that of others, the order said. He also acknowledged responsibility for misconduct, the order said.

The SEC last month settled with a former Goldman Sachs Group Inc. trader, Edwin Chin, who was accused of similarly misleading customers.

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