The Jefferies Group, the investment bank and brokerage firm, agreed on Wednesday to pay $25 million to settle accusations by the Securities and Exchange Commission that it failed to supervise traders who lied to investors about the price of mortgage-backed securities.
The settlement comes one week after a federal jury in New Haven found a senior Jefferies bond trader, Jesse C. Litvak, guilty of defrauding investors in mortgage-backed securities and generating more than $2.7 million for the firm.
The S.E.C. accused the firm on Wednesday of failing to supervise Mr. Litvak and other members of his team who lied about the price of securities and subsequently the firm’s profits on those trades from 2009 to 2011. The prices of mortgage-backed securities are difficult to ascertain because they are not traded publicly and transactions take place less frequently.
The latest action is part of a move by the S.E.C. to take a more aggressive stance in bringing cases against individuals and firms suspected of misconduct during and after the financial crisis.
Jefferies failed to equip its supervisors with the right tools to review trading activity on its mortgage-backed securities desk, the S.E.C. said, adding that those supervisors in turn failed to check what bond traders were telling clients against the actual pricing information. The firm also failed to review conversations traders had with customers in group chats on Bloomberg terminals.
“Had Jefferies better targeted its supervision to the risks faced by its mortgage-backed securities desk, many of the misstatements made by its employees could have been caught,” said Andrew J. Ceresney, director of the S.E.C.’s enforcement division. “Other firms trading instruments like mortgage-backed securities should take note of the consequences of failing to do so and should take this opportunity to tailor their own supervision.”
Paul Levenson, director of the S.E.C.’s regional office in Boston, added, “Reviewing employees’ communications is a critical part of a brokerage firm’s supervisory responsibilities.”
A parallel action by the United States attorney’s office for the District of Connecticut was also announced on Wednesday.
The firm has agreed to pay customers more than $11 million, which includes the profits earned by the firm as well as ill-gotten gains of $4.2 million. It agreed to pay an additional $4.2 million penalty to the S.E.C., as well as $9.8 million as part of a nonprosecution agreement with the United States attorney’s office.
A spokesman for Jefferies declined to comment. The firm informed investors in January that it had reached a nonprosecution deal to resolve investigations by the S.E.C. and the United States attorney’s office.