Nomura to pay $26.5m settlement to US securities watchdog

July 15, 2019

Nomura will pay $26.5m (£21m) to settle charges in the US that it failed to properly supervise five former traders who lied to customers about mortgage bond prices.

The Japanese bank's settlement with the US Securities and Exchange Commission (SEC) relates to allegations that its traders misled customers about bond prices, understated the profit Nomura would make and pretended to negotiate to buy bonds that Nomura had already purchased.

Although the bank did not admit to any wrongdoing, Nomura agreed to pay $1.5m in civil fines and make a $25m restitution to customers who bought and sold commercial and residential mortgage-backed securities between 2010 and 2014.

A Nomura spokeswoman declined to comment.

Sanjay Wadhwa, senior associate director of the SEC's New York office, said: "Firms must have adequate supervisory procedures, particularly surrounding the sale of complex instruments.

"Weak procedures, such as those found here, may enable employee misconduct to go undetected."

The finance industry watchdog said the fines reflected Nomura's cooperation and efforts to bolster its supervision and internal controls.

The former traders all faced criminal or civil charges over their alleged activity, but US authorities' ability to hold them accountable was questionable.

Three were tried on criminal charges in Connecticut.

Tyler Peters was acquitted, Ross Shapiro was acquitted on all but one count, which faced a jury deadlock, 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.

Nomura's settlement comes nine months after the bank agreed to pay $480m (£383m) to settle claims in the US relating to the mis-selling of mortgage-backed securities before the 2008 financial crisis.

The Department of Justice (DOJ) said the deal with the Japanese bank related to allegations that Nomura misled investors between 2006 and 2007, resulting in them suffering "significant losses".

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