Jennifer Kim, an ex-Morgan Stanley (MS) trader, has consented to a $25,000 settlement to resolve SEC allegations that she hid proprietary trades that that went above and beyond the financial firm’s risk limits. The alleged misconduct resulted in approximately $24.5m in losses for Morgan Stanley. SEC Commissioner Luis Aguilar, however, is calling the terms of her settlement “inadequate.” In his written dissent, he said that Kim also should have been charged with committing antifraud provisions violations.
Kim and Larry Feinblum, who was her supervisor, are accused of employing “fake” swap orders a minimum of 32 times to conceal their risks. The swap orders they entered into were ones that they intended to cancel soon after. This let them trick the monitoring systems, which recorded lower net risk positions. This alleged maneuvering allowed them to employ a trading strategy that would let them profit from the difference in prices between foreign and US markets.
In December 2009, Feinblum, who lost $7m in a day, told his supervisor about how he and Kim had concealed their positions and went above risk limits. Feinblum, who no longer works for Morgan Stanley, has settled the related securities claims against him for $150,000.
As part of her settlement, Kim agreed to a minimum three-year bar from the brokerage industry. She also consented to cease and desist from future records and books violations.
Even in settling, Feinblum and Kim are not denying or admitting wrongdoing.
Ex-Morgan Stanley Trader Settles SEC Claims Over Hiding Risk, Bloomberg, July 12, 2011
Ex-Broker to Pay $25K Over Risky Trades; Aguilar Objects to Penalty as ‘Inadequate’, BNA Securities Law Daily, July 14, 2011
SEC Order Against Kim (PDF)
More Blog Posts:
Ex-Morgan Stanley Trader to Settle SEC Unauthorized Swaps Trading Claims for $150,000, Stockbrroker Fraud Blog, June 13, 2011
Morgan Stanley to Pay $500,000 to Resolve SEC Charges that it Recommended Unapproved Money Managers to Clients, Stockbroker Fraud Blog, July 27, 2009
Broker Settles SEC Charges He Defrauded Elderly Nuns, Stockbroker Fraud Blog, January 13, 2011
If you believe that your losses were a result of trader misconduct, contact our stockbroker fraud law firm right away.