Nomura Securities International agreed to pay $25 million to settle charges from the Securities and Exchange Commission that it failed to adequately supervise traders in mortgage-backed securities.
Regulators said Nomura bond traders made false and misleading statements to customers while negotiating sales of commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS).
Traders misled customers about the prices they paid for securities, the amount of profit they would get on trades, and who currently owned the securities. The SEC also said Nomura lacked compliance and surveillance procedures to detect this misconduct, which inflated the firm’s profits.
Nomura agreed to be censured and to reimburse the full amount of the profits it earned. It also agreed to pay a $1 million penalty in the RMBS-related case and a $500,000 penalty in the CMBS-related case.
The SEC said the fines reflected Nomura’s cooperation and efforts to upgrade its supervision and other internal controls.
“These orders underscore that 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 Regional Office. “Weak procedures, such as those found here, may enable employee misconduct to go undetected.”
Nomura did not admit wrongdoing.
Since 2013, six people from Nomura have been charged by federal authorities in connection with fraudulent bond-trading activities. In May 2017, the SEC charged James Im and Kee Chan, who ran the ran the commercial mortgage-backed securities desk at Nomura, with deliberately lying to customers to inflate profits. Chan settled with the SEC. The civil case against Im was still open.
The SEC’s investigation into the CMBS fraud was conducted by its New York regional office and supervised by Sanjay Wadhwa. The RMBS probe was conducted by the complex financial instruments unit and the Boston regional office.
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