SEC Charges Florida Brokers for Defrauding Brazilian Public Pension Funds in Markup Scheme

The SEC Division of Enforcement instituted administrative proceedings against LatAm Investments LLC's former president Angelica Aguilera, pursuant to Section 15(b) of the Exchange Act, for failing to oversee two brokers in connection with the markups and markdown on structured products charged to the Brazilian Funds and another foreign institutional customer. Aguilera was the direct supervisor of the brokers, but had delegated compliance responsibility for reviewing markups and commission to the firm's chief compliance officer (who lacked supervisory authority over the brokers). Accordingly, the brokers were able to carry out the fraudulent markup scheme undetected.

The SEC Complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against the brokers to enjoin them from future violations of the federal securities laws.

Lofchie Comment: This is a fairly plain-vanilla fraud case, except for its dimension, but one interesting aspect is the disciplinary action against the President of the broker-dealer, who does not seem to have been directly involved with the fraud, and one might guess was little more than a figure head in a firm that was seemingly run by powerful sales persons. If that reading of the case is right, the action serves as a warning against a person taking a title for which the person is not qualified and does not have real authority.

Cross-Reference(s): Securities Act Sec. 17(a); Exchange Act Sec. 10(b) and 15(b); Exchange Act Rule 10b-5; Lofchie's Guide to Broker-Dealer Regulation, Supervision Chapter.

View release in full here (links externally to SEC website). Additional materials: SEC Complaint for Injunctive and Other Relief; SEC Press Release; SEC Litigation Release

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