Investment bank agrees to pay $25m in penalties

NEW YORK — Jefferies Group, the investment bank and brokerage firm, agreed Wednesday to pay $25 million to settle accusations by the Securities and Exchange Commission that it failed to supervise traders who lied to investors about the price of mortgage-backed securities.

The settlement comes one week after a federal jury in New Haven found a senior Jefferies bond trader, Jesse C. Litvak, guilty of defrauding investors in mortgage-backed securities and generating more than $2.7 million for the firm.

The SEC on Wednesday accused the firm of failing to supervise Litvak and other members of his team who lied about the price of securities and subsequently the firm’s profits on those trades from 2009 to 2011.


Jefferies failed to equip its supervisors with the right tools to review trading activity on its mortgage-backed securities desk, the SEC said, adding that those supervisors in turn failed to check what bond traders were telling clients against the actual pricing information. The firm also failed to review conversations traders had with customers in group chats on Bloomberg terminals.

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“Had Jefferies better targeted its supervision to the risks faced by its mortgage-backed securities desk, many of the misstatements made by its employees could have been caught,” said Andrew Ceresney, director of the SEC’s enforcement division.

Paul Levenson, director of the SEC’s regional office in Boston, added, “Reviewing employees’ communications is a critical part of a brokerage firm’s supervisory responsibilities.”

A parallel action by the US attorney’s office for Connecticut was also announced Wednesday. A spokesman for Jefferies declined to comment.