Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, August 29, 2012

SEC Charges Florida Brokers with Fraudulent Markup Scheme

The SEC charged two former brokers in Miami with fraud for overcharging customers approximately $36 million by using hidden markup fees on structured notes transactions.  According to the SEC, Fabrizio Neves, assisted by Jose Luna, conducted the scheme while working at LatAm Investments LLC, a defunct broker-dealer. The pair defrauded two Brazilian public pension funds and a Colombian institutional investor that purchased from LatAm the structured notes issued by major commercial banks.

To conceal the excessive markups that Neves charged customers, Neves directed Luna to alter the banks' structured note term sheets in half of the transactions by either whiting out or electronically cutting and pasting the markup amounts over the actual price and trade information, and then sending the forged documents to customers. Neves and Luna further concealed the egregious markups in most transactions by first purchasing the notes into accounts in the name of nominee entities they controlled in the British Virgin Islands.

The SEC also instituted an administrative proceeding against LatAm's former president Angelica Aguilera, who was the direct supervisor over Neves and Luna. The SEC's Enforcement Division alleges that Aguilera failed reasonably to supervise Neves and Luna.

Luna has agreed to the entry of a judgment ordering him to pay disgorgement of $923,704.85, prejudgment interest of $241,643.51, and a penalty amount to be determined.

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