Alejandro Falla, of Coral Cables, Florida, a stockbroker formerly registered with BAC Florida Investments, was fined $60,000.00 and suspended for eighteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity per an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that Falla made misleading statements and omissions pertaining to mark-ups and markdowns. Department of Market Regulation v. Falla, No. 20160500923-01 (Sept. 26, 2016).
According to the Order, Falla was BAC’s chief executive officer and head trader. Apparently, BAC made arrangements with GAL for BAC to advise Florida customers. The Order stated that between August of 2013 and June of 2014, Falla effected sixty-one markdowns and markups transactions pertaining to certain fixed income investments; however, customers were not aware of such charges. The Order revealed that Falla also did not abide by BAC’s and GAL’s agreement for customers to be subject to markdowns and markups of no more than fifteen basis points.
Apparently, Falla engaged in pre-arranged dealing with TC, where Falla purchased bonds from a customer at a pre-arranged lower price with TC, which was reduced by a fifteen percent markdown. The Order revealed that the Street transaction price caused customers to pay markdowns exceeding fifteen percent. Falla, according to the Order, subsequently re-purchased the bonds from TC, whereby TC received a price that had exceeded the price which TC initially paid.
For example, in August 20, 2013, two-hundred bonds were sold by Falla within Falla’s firm account to the Street in order to effect a sale order from a customer, where such bonds were sold at a price point of 83.5. Rather than the bonds being purchased at 83.35 to reflect the fifteen percent markdown arrangement, Falla sold the bonds to TC at a price of 82. The Order indicated that Falla informed customers he was purchasing the 200 bonds at 81.85. Falla seemingly purchased the bonds for one-hundred and sixty-five points lower than 83.5 – the Street’s price.
The Order stated that Falla misrepresented to customers the true costs of bond acquisitions and sales which he bought or sold for them. Further, customers reportedly did not know about Falla’s arrangement with TC concerning pre-arranged trades. Moreover, Falla apparently concealed his acquisition costs to his firm. The Order indicated that Falla acted deliberately.
Further, BAC Florida customers were not aware that they were paying substantially more than fifteen percent markups or markdowns pursuant to the transactions, and that BAC Florida had been making substantial profits as a result. FINRA ultimately found that the affected customers overpaid by a total of $99,543.21. As such, FINRA found that Falla’s conduct was violative of Securities Exchange Act of 1933 Section 17(a)(2), and FINRA Rules 2010, 5310(a), and 5210.
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