StateTrust Investments Inc., of Miami, Fla., was fined over $1 million and firm’s lead trader, Jose Luis Turnes, was also fined $75,000 and suspended for six months as a result of a Financial Industry Regulatory Authority (FINRA) investigation.
The FINRA investigation turned up hundreds of instances there the company exaggerated the charged markups and markdowns on corporate bonds and in 85 of the instances, the company misled and defrauded customers. Over the course of three years, from March 2007 until June 2010, StateTrust corrupted about 563 corporate bond transactions, violating FINRA Rule 2010, the Standards of Commercial Honor and Principles of Trade provision.
As the acting right-arm of the scam, Turnes charged in the range of “8 percent to over 23 percent away from the prevailing market price.” In dollars, that equals to about $125,000, as noted in the FINRA settlement. “This is an absolute breach of the trust owed to investors by the securities industry,” according to securities attorney Peter Mougey with Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A. There is no plausible basis for these type of egregious charges on these trades, says Mougey.
StateTrust Investments Inc. has a history of FINRA scrapes on at least four other occasions from Feb. 2007 to Oct. 2012. According to the document, StateTrust was fined an accumulated $50,000 for charges including four counts of Trade Reporting and Compliance Engine (TRADE) reporting deficiencies with two of those counts running concurrently with “related supervisory deficiencies.”
A similar supervisory charge was filed in relation to Turnes. For failure to properly supervise Turnes, StateTrust Chief Compliance Officer Jeffrey Cimbal was fined $20,000 and was suspended for five months.
Turnes was reported to have no FINRA disciplinary sanctions filed against him prior to the current corporate bonds case.
Joshua de Leon is a writer and researcher with Ring of Fire.