The U.S. District Court of the District of Connecticut granted the SEC's Motion to Dismiss an enforcement action against a brokerage firm and global investment bank trader for allegedly lying to customers about bond prices in trades of mortgage-backed securities. In support of its Motion, the SEC said that the case has been "administratively closed since December 12, 2014" and that the parties agree on dismissal.
As previously covered, the trader was criminally charged for causing customers to overpay for bonds they purchased and accept lower prices for bonds sold. A jury convicted the trader at trial of one count of securities fraud. The trader appealed his conviction, arguing that the misstatements were not material to residential mortgage-backed securities ("RMBS") investors as a matter of law. The Second Circuit overturned the conviction and remanded to the District Court for additional proceedings, making this the second time that the Second Circuit overturned the trader's conviction in this particular case.
The trader served seven months of a two-year prison sentence before the Second Circuit overturned his conviction. In August of 2018, a District Court Judge dismissed the criminal charges against the trader.
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