Boots Asensio's Brokerage
(click for details)
Asensio "Barred" from
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."
think it epitomizes regulatory fraud.
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 define the meanings of the ratings used
• 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
appear to write his scripts?
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.
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.
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.
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.
We have added
hearing panel ruling to the Reading Room because it is part of the Asensio
please be aware
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.
Asensiogate2 page has the most about the panel's
report. It will be easiest to understand if you read the
Asensiogate page first.
Page Created 3/20/05 ● Updated 9/19/05 ● Updated 1/20/06 ● 2/12/06 ● 3/08/06