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SEC Charges Bank Leumi With Conducting Unregistered U.S. Cross-Border Business


Washington D.C., Oct. 18, 2016 —

The Securities and Exchange Commission today announced that Israeli-based Bank Leumi has agreed to pay $1.6 million and admit wrongdoing to settle charges that it 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 SEC’s order finds 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, approximately 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.

“The broker-dealer and investment adviser registration provisions provide core protections to investors,” said Scott Friestad, Associate Director of the SEC’s Division of Enforcement.  “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.”  

The SEC’s order finds 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 $1,517,715 penalty.

The SEC’s order finds that Bank Leumi le-Israel B.M, Leumi Private Bank, and Bank Leumi (Luxembourg) S.A. violated Section 15(a) of the Securities Exchange Act of 1934.  Leumi Private Bank also violated Section 203(a) of the Investment Advisers Act of 1940.  Bank Leumi agreed to admit the facts in the SEC’s order, acknowledge that its conduct violated the federal securities laws, and accept a censure and a cease-and-desist order. 

The SEC’s investigation was conducted by Lory Stone and David S. Karp, and the case was supervised by Laura B. Josephs.


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