The U.S. Securities and Exchange Commission (SEC) recently announced that Israeli-based Bank Leumi has agreed to pay $1.6 million and admit wrongdoing to settle charges. In terms of the charges the bank provided investment advice and induced securities transactions for U.S. customers for more than a decade without registering as an investment adviser or broker-dealer as required under U.S. securities laws.
The agency found that Bank Leumi maintained several hundred securities accounts that were beneficially owned by U.S. customers and managed more than $500 million in securities assets for U.S. customers.
To manage and mitigate the risk of violating U.S. laws, Bank Leumi began exiting the U.S. cross border business in 2008. But despite these efforts, roughly 100 U.S. customer securities accounts remained open with the bank three years later, and bank employees continued to have contact with U.S. customers.
Scott Friestad, Associate Director of the SEC’s Division of Enforcement, commented:
The broker-dealer and investment adviser registration provisions provide core protections to investors. Bank Leumi’s efforts to come into compliance with these laws took years, during which time the bank continued to profit from its unlawful cross-border business.
Finally the investigation found that Bank Leumi made $3.3727 million in profits from its U.S. cross-border business. Bank Leumi disgorged $3.307 million of those profits in a deferred prosecution agreement with the U.S. Justice Department in December 2014. Bank Leumi must disgorge the remaining $65,700 in its settlement with the SEC plus $8,713.20 in interest and a $1.52 million penalty.