Former R.B.S. Bond Trader Pleads Guilty to Securities Fraud
A former top trader at the Royal Bank of Scotland pleaded guilty in federal court in Connecticut on Monday to one count of conspiracy to commit securities fraud as part of the government’s investigation into Wall Street bond sales practices.
Adam Siegel, the former co-head of securitized bond trading at R.B.S., waived his right to indictment and agreed to cooperate. He admitted to conspiring to increase the bank’s profits by lying to customers about the prices of securities they were buying or selling. Mr. Siegel worked in R.B.S.’s office in Stamford, Conn.
The plea comes after the cooperation of Matthew Katke, a former R.B.S. corporate bond trader, who pleaded guilty in March to conspiracy to commit securities fraud in the Connecticut federal prosecutor’s investigation.
Regulators have been scrutinizing debt sales practices on Wall Street. In September, the Securities and Exchange Commission accused three former Nomura Securities bond traders of misleading customers on bond prices. They also face criminal charges brought by Deirdre M. Daly, the United States attorney for Connecticut, who announced Mr. Siegel’s guilty plea on Monday.
“Broker-dealers do not have a license to lie to their customers,” Ms. Daly said.
Certain types of bonds are bought and sold through brokers who facilitate trading and make money on the difference between the price paid to buy securities from one customer and sell them to another.
Ms. Daly has not won every case, however. Earlier this month, a federal appeals court overturned the 2014 conviction of Jesse C. Litvak, a former Jefferies Group head trader. The United States Court of Appeals for the Second Circuit said there was a lack of evidence that Mr. Litvak made material misstatements to the government, sending some of the charges back to the lower court to be retried.
Mr. Siegel was a trader in R.B.S.’s Stamford office from 2008 to 2014, supervising trading in residential mortgage-backed securities andcollateralized debt obligations.
The scheme happened in two ways, prosecutors said. The traders misrepresented the seller’s asking price to the buyer, and vice versa, keeping the difference for R.B.S. The traders also told customers who wanted to buy bonds that a fictitious third party was selling them, rather than telling them the securities were coming out of R.B.S.’s holdings. That allowed the traders to charge an unearned commission. The scheme targeted 35 victims, Ms. Daly said.
Source: NYTimes – Former R.B.S. Bond Trader Pleads Guilty to Securities Fraud
