On June 26, 2013, FINRA, the Financial Industry Regulatory Authority Inc., fined a Miami investment firm over one million dollars for allegedly charging excessive mark-ups and mark-downs on bond sales.
StateTrust Investments Inc., was fined $1.045 million and was ordered to pay $353,319 in restitution to their customers for charging unfair prices in 563 corporate-bond transactions between March, 2007, and June, 2010.
Additionally, FINRA suspended Jose Luis Turnes, StateTrust's chief trader, for six months and fined him $75,000. In April, 2012, Finra suspended Jeffrey Cimbal, the firm's chief compliance officer, for five months and fined him $20,000 for failing to supervise Turnes.
In an InvestmentNews article, Mark Schoeff, Jr., writes that in 85 of the transactions, the company increased the price of the bonds it sold 8% or more above the market rate or bought bonds from customers at 8% or less below the market rate and then sold them to bank and insurance affiliates, of whom Mr. Turnes was the largest indirect shareholder, at a slight markup. StateTrust Investments did not disclose to customers the pricing discrepancies on the 85 transactions, which ranged from 8.03% to 23.58%. In 227 of the deals, the company marked-up or marked-down the bond prices more than 5%. The fraudulent charges on all the transactions totaled $336,472.03.
StateTrust, employs about 17 people and has a branch office in Caracas, Venezuela. StateTrust has had other disciplinary problems and was fined by FINRA for trade reporting deficiencies in 2007, 2008, 2011 and 2012.
"FINRA will continue to aggressively pursue firms and individuals who charge customers excessive markups and markdowns," Thomas Gira, Finra's executive vice president and head of market regulation, said in a statement.
If you feel your stock account was inappropriately marked-up or marked-down, Soreide Law Group offers a free consultation and portfolio analysis to decide if you have legal grounds to pursue a FINRA arbitration. To speak with a lawyer call (888) 760-6552.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.