David F. Wong of New York New York a stockbroker formerly employed by Barclays Capital Inc. has been suspended by Securities and Exchange Commission (SEC) from associating with any broker-dealer or investment adviser according to an Order containing findings that Wong (1) made misleading or false statements to customers of the firm and (2) charged customers excessive mark-ups on investment transactions. In the Matter of David F. Wong Administrative Proceeding File No. 3-17955 (May 1, 2017).
According to the Order, between September of 2008 and August of 2014, Wong was a residential mortgage-backed securities trader at Barclays. At the time, Barclays traded non-agency residential mortgage-backed securities on the secondary market. The Order stated that Wong acted on Barclays’ behalf to buy securities for Barclays’ account and sell them to customers. Barclays reportedly profited on the transactions based on the difference between the purchase and sale price rather than through the imposition of a commission. The Order stated that purchases had often been negotiated by Wong at the same time that Wong had negotiated sales.
The Order revealed that during the 2008 – 2014 timeframe, misleading or false statements had been made directly or indirectly by Wong to customers buying and selling non-agency residential mortgage-backed securities. Apparently, Wong, inter alia, failed to be forthcoming about: the prices that the securities were able to be sold and purchased; Barclays profit in the trades; and whether the firm was actively negotiating with a seller in circumstances where the firm already acquiesced to buying a seller’s securities.
The Order stated that in one case, the sale of a bond with a face amount of $17,500,000.00 was in the process of being negotiated by Wong. Wong reportedly understood that the firm already bought the bond at issue for 44-08. Wong evidently made several misleading or false statements, including: his misrepresentation about the seller being offered 52-16; that Wong was unsure if the seller would be willing to lower a 52-16 offer based on the buyer’s 48-24 bid; that the buyer’s 49-00 bid was rejected and countered with 51-16; and that Wong would attempt to get the seller to drop the price. The Order revealed that the buyer purchased the bond for 50-00, enabling Barclays to profit in the amount of $840,000.00.
Evidently, Barclays was able to generate an estimated $1,832,000.00 in profits based upon the transactions involving misleading or false statements being made indirectly or directly by Wong. SEC concluded that Wong’s conduct in this regard was violative of Securities Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5.
Moreover, the SEC stated that Wong also charged customers mark-ups which were not associated with the usual market prices. In one case, Wong reportedly bought a bond with a face amount of $90,000,000 for 10-00. The bond was sold the same day by Wong for 11-04. Apparently, this amounted to an intra-day mark-up of 11.25 percent, enabling the firm to accumulate an estimated $1,012,500.00 profit. The Order stated that in sum, the firm unreasonably profited by approximately $1,477,000.00 because of the excessive mark-ups charged by Wong.
SEC found that Wong failed to disclose those mark-ups to customers of the firm, and the disclosure of that information would have been to germane to customers’ decisions to invest, especially in light of the non-transparent landscape of non-agency residential mortgage-backed securities trading in the secondary market. Consequently, SEC concluded that Wong’s conduct was violative of Securities Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5.
In addition to being suspended by SEC, Wong was assessed a civil monetary penalty of $125,000.00 and ordered to cease and desist from committing future violations of Securities Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5.
Wong was discharged by Barclays on January 20, 2016, based upon accusations that he made erroneous statements to customers while negotiating securities trades.
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