The Securities and Exchange Commission said Wednesday that it charged two former brokers in Miami with fraud for overcharging customers $36 million by using hidden markup fees on structured notes transactions.
The SEC alleges that Fabrizio Neves conducted the scheme while working at LatAm Investments LLC, a broker-dealer that is no longer in business. The SEC said he was assisted by Jose Luna, who has settled the charges, agreeing to pay $923,704.85, prejudgment interest of $241,643.51, and a penalty amount to be determined. Luna neither admitted nor denied the allegations in the SEC’s complaint. Luna also agreed to settle a related SEC administrative proceeding by agreeing to be barred from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent, or credit rating agency the SEC said.
In the alleged scheme, Nieves and Luna defrauded two Brazilian public pension funds and a Colombian institutional investor that purchased from LatAm the structured notes issued by major commercial banks, the SEC said. 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, the SEC said.
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