Operated a Worldwide Day Trading Business.

[ by Howard Haykin ]

The SEC on Tuesday, charged a Toronto-based brokerage firm and its top 2 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.
 

Profiles of Respondents.   Biremis Corporation, a wholly-owned subsidiary of holding company BRMS Holdings, has been an SEC registered broker-dealer since 2004.  Biremis was run from an office in Toronto, Canada, though in filings with the SEC and FINRA, it listed its principal place of business at an address in Boston.  That address was a commercial business service that simply served as a U.S. conduit for Biremis’ mail.  Biremis had no employees, operations, or books or records in the U.S..  Through their ownership of BRMS Holdings, Inc., Peter Beck and Charles Kim owned 75% and 25%, respectively, of Biremis.

Biremis, which offered sponsored access to U.S. market centers and exchanges, had a 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.  Biremis also served as the broker-dealer for an affiliated Canadian day trading firm, Swift Trade Inc.

Peter Beck, 57, is co-founder, President, and sole director of Biremis and affiliated companies. During the Relevant Period, Beck owned 75% of BRMS Holdings, Inc., the holding company which wholly owns Biremis.  Beck holds Series 24, 55, and 63 licenses. Beck resides in Toronto, Ontario, Canada and San Jose, Costa Rica.

Charles Kim, 40, is co-founder and VP of Biremis and affiliated companies.  During the Relevant Period, Kim owned 25% of BRMS Holdings, Inc..  Kim holds a Series 7 license. Kim has no prior disciplinary history. Kim resides in Toronto, Ontario, Canada.
 

Biremis had prior disciplinary actions:

• FINRA fined Biremis $5K, $20K, and $25K, respectively, In 2008, 2010 and 2011 for OATS reporting violations.

• FINRA censured firm in 2010 and 2011, related to the OATS violations.

• Nasdaq censured Biremis and fined it $10K in 2010 for supervisory deficiencies concerning the prevention of erroneous orders and transactions.

• FINRA censured Biremis and fined it $50K in 2010 for failing to inadequate supervisory procedures that failed to prevent firm it from employing for over a year and a half a Controller who was statutorily disqualified from the securities industry as a result of a Canadian criminal conviction for embezzlement.

• The U.K. FSA in 2011 found Biremis affiliate Swift Trade, Inc. to have committed market abuse through layering on the London Stock Exchange.  A fine of £8 million was levied.

• The Ontario Securities Commission in 2012 found Biremis, Swift Trade, Inc. and 4 other securities businesses affiliated with Biremis, along with Beck or Beck’s family trust, jointly and severally liable for financial management deficiencies, trade review deficiencies, books and records violations, and non-compliance with dealer registration requirements under the Ontario Securities Act. The OSC also barred Biremis and Swift Trade from trading or acquiring securities in Ontario for 6 years.

Peter Beck also had a record of prior disciplinary actions.  To see this information, go to page 5 in the linked SEC Order, below.

SEC’s Findings and Allegations.   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.

In its complaint, the SEC made these allegations:  (i) Biremis failed to address repeated instances of layering by many of the overseas day traders using its system;  (ii) co-founders Peter Beck and Charles Kim ignored repeated red flags indicating that overseas traders were engaging in layering manipulations.

Many of the Biremis-affiliated overseas day traders allegedly engaged in repeated instances of layering from January 2007 to mid-2010.  Beck and Kim learned from numerous sources – including 3 U.S. broker-dealers and a Biremis employee - that layering was occurring, yet they failed to take any steps to prevent it.

e.g. -   in spring 2008, representatives of a U.S. broker-dealer warned Beck and Kim that certain overseas traders were “gaming” U.S. stocks by altering those stocks’ bid and offer prices in order to buy or sell the stock at the altered price. Beck and Kim failed to act on this information.

Biremis also allegedly failed to retain virtually all of its IMs related to its broker-dealer business, and failed to file any SARs related to the manipulative trading.  Such willful actions would violate Exchange Act Section 17(a) and Rule 17a-8 (re: SARs) and Section 17(a) and Rule 17a-4(b)(4) (re: instant messages).

Biremis, Beck, and Kim allegedly failed reasonably to supervise the firm’s associated persons (the overseas day traders) with a view to preventing and detecting their layering manipulations. The order also finds that Biremis

Terms and Conditions of SEC Settlement.   To settle SEC charges, Biremis and the 2 executives agreed to the following sanctions:  (i) firm’s registration as a U.S. broker-dealer is revoked;  (ii) executives Beck and Kim are permanently barred from the industry;  (iii) Beck and Kim each will pay a $250K penalty.

For further details, go to:   [SEC PR 12-271, 12/18/12] and [SEC Order].