SEC Accuses Three Nomura Securities Brokers of Fraudulent Price Manipulation of Residential Mortgage Backed Securities

The Securities and Exchange Commission (SEC) issued a press release announcing fraud charges against three Nomura Securities International (Nomura Securities) traders accused of repeatedly lying to customers relying on them for accurate pricing information about residential mortgage-backed securities (RMBS). The SEC complaint focuses on Ross Shapiro, Michael Gramins, and Tyler Peters who allegedly defrauded customers in order to generate millions of dollars in additional revenue for Nomura Securities, a New York located brokerage firm where the three traders worked. The traders are accused of misrepresenting the bids and offers being provided to Nomura Securities for RMBS as well as the prices at which Nomura Securities bought and sold RMBS and the spreads the firm earned intermediating RMBS trades. In addition, the SEC alleged that the three brokers then also trained and directed junior traders at the firm to engage in the same misconduct. The SEC’s action is also being paralleled by the U.S. Attorney’s Office for the District of Connecticut who announced criminal charges against Shapiro, Gramins, and Peters.

According to the complaint Shapiro, Gramins, and Peters generated at least $5 million in additional revenue for Nomura Securities through their lies and omissions to customers. In addition, the subordinates the three traders trained and coached generated at least $2 million in additional profits for the firm. The SEC found that Nomura Securities determined bonuses for Shapiro, Gramins, and Peters based on several factors including revenue generation and during the time period in question Nomura Securities paid total compensation of $13.3 million to Shapiro, $5.8 million to Gramins, and $2.9 million to Peters.

According the SEC, the customers who dealt with the traders sought and relied on market price information provided by the three traders because the market for this type of RMBS is opaque and accurate price information is difficult for a customer to determine. Consequently, the SEC alleged that honest and accurate information was particularly important under the circumstances. The SEC alleged that Shapiro, Gramins, and Peters even invented phantom third-party sellers and fictional offers when Nomura Securities already owned the bonds in order to carry out their scheme.

In connection with the investigation into the three traders, the SEC entered into deferred prosecution agreements with three other individuals who cooperated with the SEC and provided enforcement staff with access to critical evidence that otherwise would not have been available.

Investors who have suffered losses may be able recover their losses through securities arbitration. The investment attorneys at Gana LLP are experienced in representing investors in cases where their broker has acted inappropriately. Our consultations are free of charge and the firm is only compensated if you recover.

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