Dec 18 (Reuters) - The top U.S. securities regulator on Tuesday bolstered sanctions against the former Biremis Corp, a brokerage expelled from the securities industry in July that handled U.S. trading for a now-defunct day trading company, according to regulatory documents.
Two former executives for Toronto-based Biremis agreed to be permanently barred from the securities industry and to pay a total of $500,000 in civil penalties for failing to supervise overseas day traders, according to the U.S. Securities and Exchange Commission. The now defunct Biremis and its two founders, Peter Beck and Charles Kim, ignored repeated red flags suggesting that the traders were engaging in a manipulative practice known as layering, the SEC said.
A lawyer representing Biremis, Beck and Kim was not immediately available for comment. The three neither admitted nor denied the SEC’s findings, according to a settlement. Biremis served as the broker-dealer for an affiliated Canadian day trading firm, Swift Trade Inc.
The SEC’s action, which also includes revoking Biremis’ license as a U.S. broker-dealer, comes five months after the Financial Industry Regulatory Authority (FINRA), Wall Street’s industry-funded watchdog, imposed its own penalties against Biremis. FINRA expelled Biremis from the industry in July along with Beck, who was also the firm’s chief executive.
The SEC case includes a settlement with Biremis Vice President Kim, who was not named in the FINRA case.
Among the problems at Biremis was a lack of procedures to detect and prevent “layering,” a scheme that involves placing sham orders intended to influence market prices and then canceling those orders.
The brokerage’s worldwide day trading business allowed up to 5,000 traders in 30 countries to gain access to U.S. markets, the SEC said. Many of those day traders engaged in repeated instances of layering from January 2007 to mid-2010, according to the SEC.
Biremis, Beck, and Kim had “substantial control” over the overseas day traders. Those measures included backing their trading with capital and setting daily loss limits on each trader. They also had authority to reprimand, suspend, and terminate traders, according to the SEC.
Beck and Kim learned from numerous sources, including three U.S. broker-dealers and a Biremis employee, that layering was occurring, according to the SEC.
For example, a U.S. broker-dealer warned Beck and Kim in 2008 that some overseas traders were “gaming” U.S. stocks by altering bid and offer prices so they could buy or sell the stock at the altered price, according to the SEC.
Beck and Kim did not act on the information or take other steps to prevent layering, the SEC said.