The SEC fined and barred an investment bank’s head CMBS trader for lying to customers about pricing, spreads, and compensation over a 2-year period. According to the SEC, the defendant oftentimes used elaborate stories and doctored documents to support his untrue statements. The SEC asserts that clients relied on the incorrect information when making purchase/sale decisions. The SEC maintains that the respondent knowingly ignored compliance policies requiring truthfulness in dealings with customers. The defendant benefited through higher discretionary bonuses resulting from his illicit activities, thereby making him directly liable for securities fraud.
OUR TAKE: It is noteworthy that the SEC took action against the trader himself rather than his firm, which presumably avoided liability because it had implemented adequate policies and procedures. SEC Commissioner Piwowar has previously indicated that the SEC should pursue individuals rather than firms.