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 05/05/04  Appeals Court Upholds Fraud Verdict Against Asensio
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"Barred" from Industry
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Asensio "Barred" from Industry
           (but OWNS brokerage again!)
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Update: January 2006

Oh, the wages of sin.  Manuel Asensio may believe that he has been terribly abused by the NASD.  But the facts paint a different story.  It is difficult to believe that any NASD member who has behaved so outrageously has ever been treated more grandly. 

As we reported last year (see below), a NASD panel barred Asensio from the industry in January 2005.  Asensio filed an appeal, which stayed the ruling.  However, an appeal does not prevent NASD from notifying members of the hearing panel's action.  Such decisions are announced in NASD's monthly enforcement actions report despite the pending appeal.

Unless you are Manuel Asensio.  NASD is once again protecting him, keeping the hearing panel action secret.  No one knows unless they happen to come by this website.  

But it gets worse.  NASD says you cannot own a brokerage unless you show the capacity to follow its rules.  

Unless you are Manuel Asensio.  In September 2005—eight months after the hearing panel found Asensio's noncompliance with NASD rules so "egregious"  that he was barred from the industry—ownership of Integral Securities (previously known as Asensio Brokerage Services), was returned to his name. He filed a Form BD retaking the share of Integral previously held by the Alta Mar trust.  It was duly processed.

We're not kidding.  NASD's file on Integral shows that Owen Hernandez, Asensio's cousin, still owns less than 5%.   Asensio owns 50-74%, and the rest is mysteriously unaccounted for. Such missing information is apparently fine with District 10; Asensio has previously left ownership of even larger amounts of the business unexplained. 

It's hard enough to believe that NASD would hand a brokerage license to someone it had barred for refusing to follow rules. But that's just the beginning. This is the very license that was supposedly taken from Asensio for lying on a sworn application—as required by law.  Not to mention that NASD rules require all owners of brokerages to be personally registered.  Asensio hasn't been registered since he resigned in September, 2003.   Obviously District 10 will let Asensio get away with anything. 

NASD members who do play by the rules might want to ask the organization to explain why a serial rule-breaker like Asensio should be permitted to own a brokerage without having to be registered and live by the rules that they do. Who knows.  Maybe NASD really thinks that its handling of this matter epitomizes its slogan: "investor protection and market integrity." 

We think it epitomizes regulatory fraud.


update posted 1/20/06  ●  original story below from 3/20/05

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Original article, with updates  

It's an official, but well-kept secret.  A hearing panel of the NASD has barred Manuel Asensio from the securities industry.  The panel heard the set of charges against Asensio and his (supposedly) former brokerage firm filed against them by NASD's Division of Enforcement.  It then barred Asensio from associating with any NASD member firm in any capacity.  This was attributable to a specific charge—his failure to provide documents and information requested by NASD staff.

Asensio was not fined for his failure to provide information.  However, he and Integral Securities (previously known as Asensio Brokerage Services) were ordered to pay about $3100 in costs.  Integral was also fined $20,000 for additional charges pertaining to Asensio's research reports:

•  making statements that were unwarranted or misleading

•  failing to make clear and comprehensive disclosures of stock ownership

•  failing to define the meanings of the ratings used

•  failing to incorporate a line graph price chart showing price changes in relation to the dates of his commentaries

•  failing to disclose the percentage of buy, hold/neutral, or sell ratings

Wrongdoing That Pays

Specifics about the above charges can be found in the full hearing panel ruling.*  This 24-page document confirms that, once again, NASD has picked some minor quibbles and imposed a fine amounting to a mere slap on the wrist.  Who will be deterred by a 20K fine for lying in research reports when doing so was worth far more to Asensio and the hedge fund clients who appear to write his scripts?  

As it turns out, the charges were related to Asensio's reports on PolyMedica (PLMD). For example, the charge that he failed to make "clear and comprehensive disclosures of stock ownership" pertained to claims that his firm was short PLMD. This was not always so; he closed the position in June 2002, but continued to issue reports claiming the firm held the stock short.     

You'd think that while on the subject, NASD would have addressed Asensio's failure to reveal long positions his clients held in PLMD (and other stocks).  This practice has misled untold numbers of investors and even company executives who have assumed that his clients were supporters of their companies.  In fact, they were secretly behind campaigns to destroy them.  We know that NASD's Division of Enforcement has received several formal complaints about this situation.  Yet, the panel report did not say a word about his failure to disclose client long positions.  

A Free Pass on Fraud 

NASD censured Asensio in 2000 for lying about his track record.  So you might also think NASD would have made sure he honestly reported the performance of his PLMD call. No one bothered.  Nor does it look like Asensio was concerned that NASD would check on him.  He's been up to his old tricks. He began coverage of PLMD on October 25, 2001, when it traded in the high 16s.  But to inflate his record, he's changed the initiation date to July 26, 2001 (when it was almost 40).  To calculate his return, he doesn't use the price he actually paid to cover.  He uses a hypothetical value:  the lowest price the stock has reached since he started coverage.  Using these two phony values--neither of which reflect the price at which he initiated or covered--he claims a 76% profit on his PLMD call.

Had NASD been interested in doing more than slapping his wrist again, Asensio should have had a real problem here.  NASD reveals that he covered his position on June 26, 2002.  PLMD traded between $21.85 and $24.80 that day—no where close to the record low price of $9.50.  When his price at initiation of coverage (high 16s) is factored against his actual price to cover ($22-25) the  result is not a huge profit but a substantial loss.  Amazingly, NASD does not ask whether a person who deliberately falsifies his record in this manner is fit to be a member of the securities industry.  It imposes no fine or penalty of any kind for his repeat deception. But it finds minutiae such as the absence of line graphs and definitions worth talking about—as if this is of any consequence to investors as compared to honesty in calculating return. 

Of course, what mattered most to NASD was avoiding the question that shows just how incompetent and corrupt the organization truly is.  That question is whether Asensio concealed an unpaid fraud verdict against him on his broker-dealer license application in 1993—and why NASD officials have been so willing to let him to keep a license that by every indication was fraudulently obtained.  Surely NASD attorneys know that perjury is far more serious than neglecting to include line graphs, failing to define terms, and refusing to provide information to the staff.

Three Appeals to Go

Asensio and Integral are appealing the ruling against them to NASD's National Adjudicatory Council (NAC).  This is a committee that reviews disciplinary decisions.

The appeal could take a year or more.  (We'd expect it by the spring of 2006.)  We're hesitant to predict the outcome, but would admittedly be surprised if Asensio finds much sympathy from NAC.   Asensio may not want to disclose information about his various businesses to NASD, but he was obligated to do so and refused. We suspect the best he could hope for from NAC would be a ruling that gives him a fixed amount of time to comply, then bars him if he fails to do so.  

If Asensio doesn't like the NAC ruling, he can appeal to the SEC, then a federal appeals court.  That could add several years or so to the process.  However, there is a difference (in theory).  Once NAC rules, the bar takes effect.  There is no stay of the ruling while someone appeals a bar to the SEC and the court.

Of course, if a bar actually takes effect, enforcement will presumably fall to NASD's District 10.  That's the biggest rub of all.  No one can be trusted less to police Asensio than his District 10 guardian angels.  A ruling is only as good as the will to enforce it, and that will is badly lacking at District 10 (and elsewhere).  In the meantime, Asensio is enjoying the privilege of working in the industry without the obligations that come with being a member of it.  

Originally, we called the hearing panel action a small victory for investors, a big embarrassment for Manuel Asensio, and a sobering reminder of the sorry state of the NASD.  But we've changed our minds.  It's now been three years since NASD was given compelling evidence Asensio's license fraud.  District 10 obviously found it actionable. Yet the man still has a license to operate a brokerage.   There is no victory for investors here—unless you call the opportunity to see the NASD's true colors something to celebrate. 

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* About the Hearing Panel Ruling 

We have added hearing panel ruling to the Reading Room because it is part of the Asensio story.  However, please be aware that the ruling is not a reliable source of information about the history of Asensio's brokerage or his disciplinary history.  The section entitled Organizational Structure and Business of Asensio Brokerage (pages 5-7) is especially misleading.  It makes no mention of the license fraud complaint and the shenanigans that followed as NASD's District 10 proved itself more committed to protecting a corrupt member than the public.  The Asensiogate2 page has the most about the panel's report. It will be easiest to understand if you read the Asensiogate page first. 

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Page Created 3/20/05 ● Updated 9/19/05 ● Updated 1/20/06 ●  2/12/06  ●  3/08/06