Given all the settlement activity recently between big banks and regulators, the news that the SEC had inked a settlement with a former Morgan Stanley trader accused of perpetrating sham trades seemed almost routine.

The former employee, Jennifer Kim, had agreed to pay $25,000 to settle charges she entered "fake swaps" into the firm's system to game the system and essentially evade the firm's risk limits policies. Ultimately, her ploy backfired, as the sham trades--entered on 32 occasions--were aimed at covering up legitimate trades that cost Morgan Stanley $24.5 million. Kim's supervisor, Larry Feinblum, previously agreed to pay $150,000 to settle similar claims.

The story took a twist when an SEC commissioner took the unusual step of publically dissenting with the settlement terms. Commissioner Luis Aguilar said the SEC was way too lenient with Kim, who he thinks should have been charged with fraud in light of "the intentional nature of her conduct." The Washington Post notes that there have been only two posted dissents to the agency's administrative enforcement actions since the beginning of 2004.

But ever since Judge Jed Rakoff blasted the SEC for what he saw as sweetheart settlement deal cut by the SEC and Bank of America--recall he forced the SEC to take a harder line and essentially come to harsher terms-we've seen several SEC settlement blasted. Just recently, the SEC was criticized for its $153.6 million settlement with JPMorgan Chase in another CDO-related enforcement case but taking no action against any employees or executives.

For more:
- here's the article

Related articles:
Judge: Ex-Goldman Sachs director can sue SEC  
SEC settles fewer insider trading cases