Ex-Nomura Traders Latest Sued by SEC Over Lies About Bondsby
Former CMBS desk heads said to gain $750,000 in illicit profit
Regulators’ claims are latest in crackdown on sales practices
Two former Nomura Holdings Inc. traders who ran a commercial mortgage-backed securities desk were sued by U.S. regulators for allegedly lying to clients about bond prices to inflate the bank’s profit’s and boost their own compensation.
James Im, 40, and Kee Chan, 46, misrepresented bond prices, generating an extra $750,000 in profits for the trading desk, the Securities and Exchange Commission said in a statement Monday. Chan, who agreed to an industry bar, settled the allegations without admitting or denying the agency’s findings. He will also pay more than $200,000 in penalties. The case against Im continues, the SEC said.
“Im and Chan operated under cover of an opaque CMBS secondary market to gain illegal trading profits and potentially larger bonuses,” Andrew Calamari, head of the SEC’s New York office, said in the agency’s statement.
Attorneys for Im and Chan didn’t immediately respond to requests for comment.
The cases are the latest in the U.S. government’s crackdown on how bonds are traded in the opaque market for securitized debt. Since the 2008 financial crisis, more than 20 Wall Street traders have been placed on leave or dismissed from their jobs amid the investigations. At least eight other traders have been criminally charged. Former Nomura colleagues of Im and Chan’s are currently on trial in New Haven, Connecticut.
The two misrepresented where bonds were bought and sold, bids or offers the bank made or received and how much the lender would earn from trades, the SEC said.
According to the agency’s complaint, Im bragged in June 2012 about inducing a client to increase a bid, earning an additional $12,500 profit for the trading desk. Afterwards, he allegedly boasted to the original seller of the debt that he scored the extra profit:
Im: i told him i bot at 78-8 actually
Seller: nice one
Im continued to misrepresent bond prices even after the 2013 indictment of another trader prompted Nomura to warn its employees about truthfulness. The bank told them, “first and foremost for everyone is do not lie," according to the SEC.