Legal
SEC Charges Another Brokerage Firm Over Failing To Halt Manipulative Trades
The Securities and Exchange Commission has charged a Toronto-based brokerage firm and two of its executives over failing to prevent overseas day traders from using its order management system to layer trades.
Layering is a practice whereby a trader places orders without the intention of having them executed. This is designed to trick others into buying or selling a stock at an artificial price driven by the orders, which are later cancelled. In September the SEC charged a New York-based brokerage and three executives over similar compliance failures.
In the latest case, the SEC found that Biremis, a brokerage firm which runs a worldwide day trading business that allows around 5,000 traders to access US markets, failed to address “repeated instances of layering by many of the overseas day traders using its system.” The firm’s co-founders, Peter Beck and Charles Kim, ignored “repeated red flags”, the authorities allege.
As a result, Biremis’s registration as a US broker-dealer has been revoked and Beck and Kim face permanent industry bars. The duo will also pay a combined fine of around $500,000 to settle the SEC’s charges.
“They [Beck and Kim] have learned the painful lesson that supervisors who fail to heed repeated red flags of misconduct will no longer have any place in the securities industry,” said Robert Khuzami, director of the SEC’s enforcement division.
The overseas traders engaged in repeated instances of layering from January 2007 to mid-2010, according to the Commission’s order, and numerous sources – including a Biremis employee – alerted Beck and Kim.
“Broker-dealers must recognize that their supervisory responsibilities over their associated persons don’t end at the US border,” said Antonia Chion, associate director of the SEC’s enforcement division. “Broker-dealers face severe consequences if they fail to supervise their traders who engage in manipulative trading, whether those traders are located in the US or abroad.”
Biremis, Beck, and Kim neither admitted nor denied the findings contained in the SEC’s order.
