The trial in the case brought by the Securities and Exchange Commission (SEC) against former Nomura trader James Im is set to be postponed. This becomes clear a brief order entered by Judge J. Paul Oetken of the New York Southern District Court.
The order, signed on September 14, 2021, states that, as a result of courthouse restrictions due to the Covid-19 pandemic and the backlog of criminal trials, the trial in this case, previously scheduled for December 6, 2021, will have to be rescheduled to 2022.
The SEC brought this action against James H. Im, co-head of the commercial mortgage-backed securities (CMBS) trading desk for Nomura Securities International. The SEC claims that Im committed securities fraud by providing false or misleading information to prospective buyers or sellers of mortgage bonds.
As a CMBS trader, Im facilitated transactions between investors seeking to buy and sell mortgage bonds. To maximize profits for Nomura, Im, like other CMBS traders, sought “to buy bonds at the lowest price an investor will accept” and then to sell those bonds “at the highest price [another] investor will pay.”
The SEC’s claims revolve around the manner in which Im allegedly sought to do this. The SEC highlights seven transactions, dating from 2010 through 2014, in which it contends that Im misrepresented whether and at what price Nomura had bought or could sell bonds.
Im concedes that, in six of these transactions, he inflated the price at which Nomura had purchased a bond or pretended that Nomura was still trying to purchase a bond when it in fact had already purchased the bond at a favorable price.
Im does not concede that he lied to facilitate the April 26, 2010 transaction highlighted by the SEC. In that transaction, an investor asked Im if Nomura would purchase a particular bond at a price of 13. Im replied that Nomura had received a bid of 11.5 for the bond and suggested that he “maybe [could] get [the bidder] up slightly more but 13 prob not gonna work.” Within a minute of Im’s citing the 11.5 bid, the investor agreed to sell the bond to Nomura for 11. Later that same day, Nomura sold the bond to the bidder for 12.25, securing 1.25 points in profit.
In negotiating to buy the bond, Im neglected to inform the investor that on the previous trading day, the bidder had told Im’s colleagues that he could “probably get to 12” and discussed a bid price of 12.5. Im and the SEC dispute the significance of the bidder’s earlier discussion with Im’s colleagues.
The SEC estimates that, among its seven highlighted transactions, Im’s acknowledged and supposed misrepresentations generated an additional $366,743 in profits for Nomura.
Although Im’s compensation at Nomura was not linked to his individual performance as a trader, it was linked to the overall performance of Nomura’s CMBS trading desk. And under Im’s leadership, the trading desk exceeded its revenue goals, in one year earning $36 million in revenue when Nomura hoped to earn between $25 and $30 million. From 2010 to 2014, the time period in which Im undertook the seven transactions, Im received a cumulative $3.79 million in discretionary bonuses.
Im disputes whether his statements generated additional profits for Nomura and thus additional compensation for himself.
Based primarily on the factual dispute as to whether his statements generated additional profits, Im filed a motion to dismiss the SEC’s claims in 2017. The Court denied the motion.