The US Securities and Exchange Commission (SEC) has issued a statement saying that Israel-based Bank Leumi has agreed to admit wrongdoing and pay $1.6 million to settle charges that it provided investment advice and induced securities transactions for US customers for over a decade without registering as an investment adviser or broker-dealer as is required by US securities laws.
This is the second penalty imposed by the US regulator recently having last week levied a $50,000 fine on a New York firm for illegally offering an unregistered swap ‘Stock Picking’ game to retail investors, as reported by Finance Magnates.
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Violation of Federal Securities Laws
The SEC has found that Bank Leumi maintained several hundred securities accounts that were beneficially owned by US customers and managed more than $500 million in securities assets.
To manage and mitigate the risk of violating US laws, Bank Leumi began exiting the US cross border business in 2008 but despite this, around 100 US customer securities accounts remained open with the bank three years later and bank employees continued to have contact with US customers.
Scott Friestad, Associate Director of the SEC’s Division of Enforcement, commented: “The broker-dealer and investment adviser registration provisions provide core protections to investors. Bank Leumi’s efforts to come into compliance with these laws took years, during which time the bank continued to profit from its unlawful cross-border business.”
The SEC found that Bank Leumi made $3.3727 million in profits from its US cross-border business. Bank Leumi repaid $3.307 million of those profits in a deferred prosecution agreement with the US Justice Department in December 2014. Bank Leumi is also required to repay the remaining $65,700 including $8,713.20 in interest and a $1,517,715 penalty.