Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, December 18, 2012

SEC Revokes Registration of Brokerage Firm for Allowing Manipulative Trading

The SEC charged Biremis, a Toronto-based brokerage firm, and its top two executives for failing to supervise overseas day traders who used the firm’s order management system to engage repeatedly in a manipulative trading practice known as layering. In layering, a trader places orders with no intention of having them executed but rather to trick others into buying or selling a stock at an artificial price driven by the orders, which the trader later cancels.

The SEC’s investigation found that Biremis – whose worldwide day trading business enabled up to 5,000 traders on as many 200 trading floors in 30 countries to gain access to U.S. markets – failed to address repeated instances of layering by many of the overseas day traders using its system. The firm’s co-founders Peter Beck and Charles Kim ignored repeated red flags indicating that overseas traders were engaging in layering manipulations. Biremis served as the broker-dealer for an affiliated Canadian day trading firm, Swift Trade Inc.

Biremis and the two executives agreed to a settlement in which the firm’s registration as a U.S. broker-dealer is revoked and permanent industry bars are imposed on Beck and Kim, who also will pay a combined half-million dollars to settle the SEC’s charges.

According to the SEC’s order instituting settled administrative proceedings, Biremis, Beck, and Kim exercised substantial control over the overseas day traders. They backed the traders’ trading with capital from Biremis, determined the amount of Biremis capital available to each individual trader to purchase stocks, and set and enforced daily loss limits on each trader. They also wielded authority to reprimand, restrict, suspend, or terminate traders.

The SEC’s order found that many of the Biremis-affiliated overseas day traders engaged in repeated instances of layering from January 2007 to mid-2010. Beck and Kim learned from numerous sources – including three U.S. broker-dealers and a Biremis employee – that layering was occurring, yet they failed to take any steps to prevent it.

 

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