NEW YORK (Reuters) – Nomura Holdings Inc will pay $26.5 million to settle U.S. Securities and Exchange Commission charges that it failed to properly supervise five former traders who lied to customers about mortgage bond prices.
FILE PHOTO: Investors stand in front of a screen showing the logo of Nomura Holdings in Tokyo, Japan, December 1, 2015. REUTERS/Toru Hanai/File Photo
The accord relates to allegations that the traders misled customers about prices at which they bought bonds, understated the profit Nomura stood to make and sometimes pretended they were still negotiating to buy bonds that Nomura had already purchased.
Without admitting wrongdoing, Nomura agreed to pay $1.5 million in civil fines and make $25 million of restitution to customers who bought and sold commercial and residential mortgage-backed securities from roughly 2010 to 2014.
“Firms must have adequate supervisory procedures, particularly surrounding the sale of complex instruments,” said Sanjay Wadhwa, senior associate director of the SEC’s New York office. “Weak procedures, such as those found here, may enable employee misconduct to go undetected.”
The SEC said the fines reflected Nomura’s cooperation and efforts to upgrade its supervision and other internal controls.
A Nomura spokeswoman declined to comment.
The former traders each faced criminal or civil charges over their alleged activity, but federal authorities have had only mixed success in holding them accountable.
Three were tried on criminal charges in Connecticut. Tyler Peters was acquitted, Ross Shapiro was acquitted on all but one count, on which a jury deadlocked, and Michael Gramins had his conviction set aside.
The other two traders, James Im and Kee Chan, were sued by the SEC in Manhattan. Chan settled in May 2017, while the civil case against Im remains open.
Federal authorities have charged at least 11 people, including six from Nomura, in connection with deceptive bond trading practices since 2013.
Reporting by Jonathan Stempel in New York; Editing by Dan Grebler