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   Asensiogate Part Two: NASD's Sordid & Corrupt Saga Continues (2/22/06)
    
   NASD "Bars"Asensio, Then Returns Brokerage to His Name (1/20/06) 

    04/24/06 Naked Shorting Lawsuit  (Electronic Trading Group v. Big Brokerages)
 
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 05/05/04  Appeals Court Upholds Fraud Verdict Against Asensio
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November 30, 2002

Asensiogate Part II—NASD's Sordid Saga Continues

Note:  Instead of our customary style, we'll be presenting part II as a series of individual entries—similar to a blog.  This will allow us to post each section of the story as it is completed, so you won't have to wait for more details until every aspect of the story has been written up. Please check back regularly for updates.
 

Hear No Evil                                                                      

As explained in Part 1, a NASD panel says the Alta Mar scam never happened. It claims Integral Securities pka Asensio Brokerage tried to transfer ownership to the Alta Mar trust but District 10's Membership Committee wouldn't hear of it. 

We say the panel and the Membership Committee have some 'splainin to do.  They can start by telling us why NASD's own database listed Alta Mar as owner of Integral in April 2004 if the Membership Committee said no to the idea in February 2004.  They can tell us why, if the  Committee said "no way," Alta Mar was still listed as owner of Integral on the Form BD filed in December 2004. That filing was actually in effect on the day of the hearing panel's report (January 5, 2005).  They can also explain why NASD accepted Form BD filings from Integral that listed Alta Mar as owner for a full 19 months if the Committee denied the transfer request.  By our reading of the rules, the Committee had 45 days to say no from the time that Integral submitted its February 2004 request to transfer ownership.  We don't see evidence of a no answer in that time frame; we see evidence of a yes answer.  

As mentioned in Part 1, Asensio is almost certain to appeal NASD's meaningless "bar" against him to the SEC, and then to a  federal appeals court.  The panel report, and the one that follows from NASD's National Adjudicatory Council, will play central roles in any appeal.  You'd think NASD would feel an obligation to insure that the report is accurate and that no one uses it to cover up shenanigans that District 10 officials devised to let Asensio to stay in the industry when they were required by law to disqualify him.   
                            
  2/2/06                                                                                                                                                                                            

                                            
Lying to the SEC?  Is Nothing Sacred?     

The more we learn about the bizarre love affair between NASD and Manuel Asensio, the more we find that lying seems to be accepted operating procedure. 

Here's a prime example. The reader who filed the complaint about Asensio's license fraud received the following letter, dated March 14, 2005.  It is from Catherine McGuire, chief counsel of SEC's Division of Market Regulation:

Thank you for your October 20, 2004, letter to Chairman Donaldson regarding Integral Securities and Manuel P. Asensio.  We contacted NASD regarding this matter, and were informed that effective February 20, 2005, Mr. Asensio was barred from association with any NASD member firm. 

There's just one problem. It's not true. The "bar" did not take effect on February 20, 2005.  Nor did the hearing panel specify a date when it would take effect.  It is now only two weeks before February 20, 2006.  NASD still has not said a word about  Asensio's appeal, and there is no predicting when it will.  In the meantime, NASD officials have made a mockery of what was said to the SEC by putting ownership of Integral Securities in Asensio's name despite the supposed "bar."   

Our reader emailed Barry Goldsmith, NASD Executive Vice-President for Enforcement, and asked him to resolve the conflicting information provided by McGuire and other sources.  Goldsmith* acknowledged the email but did not answer. 

What to make of this?  Looks like someone at NASD lied to the SEC, conveying a message that NASD had put an end to Asensio's involvement in the securities industry when this was not so.  The question is who. 

Prediction:  the last thing on NASD's to-do list will be finding out who misled the SEC.  Mark our words.

* Goldsmith will leave NASD next month to become a partner at the Washington, D.C. office of the Gibson, Dunn and Crutcher law firm.
                                                                                                                                                                                            
 2/7/06
 

Duping Eliot Spitzer

When we launched this site, we never imagined we'd be writing about NASD giving false information to the SEC.  Or about how NASD refused to cooperate with Eliot Spitzer's office and duped his staff.   

As previously reported, District 10 convinced Spitzer's office that Asensio left the industry on September 11, 2003 due to "action by the NASD."  Spitzer's staff felt his license fraud was therefore moot and declined to pursue it further.  But we believed the staff had been duped.  Oddly enough, the hearing panel report provides support for both positions. 

At first, the report appears to stand firmly behind District 10's claim. On page 6 it says: 

In September 2003, Asensio ended his formal association with Asensio Brokerage. The amended Form BD the Firm filed on September 12, 2003, reported that OH [Owen Hernandez] had assumed the role as the Firm’s "registered principal." 

Of course, the claim is false. The September 2003 filing did not show that Asensio ended his association with the brokerage. It merely reported the transfer of a tiny share of it (<5%) to Hernandez, his cousin. Asensio kept the rest but tried to conceal this by not mentioning his ownership on the form.  This clever but dishonest tactic should have been evident to the panel.  He also took back the 5% transferred to Hernandez only a few weeks later, but the panel acts as though this never happened.

The brokerage did report Hernandez as sole owner in November 2003, but this lasted only a few months.   Moreover, none of this meant that Asensio wasn't around.  The filings always listed him as a control affiliate, NASD lingo for officer.  So how could the panel, which admits having all of these filings, claim that Asensio's affiliation ended in September 2003? 

There's actually no mystery here.  The panel's statements about Asensio's departure are footnoted to information provided by NASD's Department of Enforcement.  The panel must have accepted the Department's word rather than insure no liberties were taken with the truth.  It's not news that reports are often written this way.  However, considering that this one is likely headed to the SEC and maybe an appeals court after that, you'd think NASD would make sure it tells a consistent story. 

That's the last thing it does. Because after dutifully parroting the official story, the panelists tell us what they really think:

In conclusion, all of the reliable evidence points in one direction: . . . Asensio ran the two companies [Asensio Brokerage aka Integral and Asensio & Co] and they functioned as one. Asensio Brokerage paid the rent on the office space and the employees’ salaries. Asensio & Co. had no independent revenue; it relied on Asensio Brokerage to support its operations. Moreover, Asensio made all of the decisions at both companies, and he was the only person authorized to deal with the Firm’s clients. The absurdity of Asensio’s contention that he turned the reigns [sic] of the Firm over to his nephew is amply demonstrated by the fact that Asensio did not consider OH [Owen Hernandez] competent to open new accounts and answer clients’ questions.

A footnote provides Asensio's actual words. He said he did not allow his cousin to open new accounts or answer client questions because Hernandez would "only embarrass himself and the firm" if he tried to advise clients.

Yet NASD asks us to believe that Asensio walked out of his brokerage in September 2003 and left it with Hernandez. The paper trail shows that he didn't. Common sense tells you that he didn't.  NASD's Department of Enforcement managed to have the hearing panel repeat the canard that he did, only to have the panelists acknowledge how absurd this story truly is.   

Now that we know what Asensio admitted to the hearing panel, it's more obvious than ever that NASD's District 10 duped Spitzer's staff in 2004.  Asensio never left the brokerage.  District 10 claimed that he had to create the appearance that the license fraud complaint had been addressed.  By preventing Spitzer's office from pursuing it further, District 10 denied the investing public the opportunity to have a real regulator, as opposed to an imposter like NASD, get to the bottom of this issue.

Was this obstruction of justice by NASD?  We have no idea.  All we know is that more than three years have passed since District 10 received a complaint that Asensio's broker-dealer license was fraudulently obtained.  During this time, we have seen little but deceit, shenanigans, and apathy from District 10 and NASD headquarters on this issue. The result is that Asensio still controls the broker-dealer license—in violation of the law and every lofty principle that NASD claims to embrace. 

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Note:  The Hearing Panel refers to Owen Hernandez as Asensio's nephew throughout its report.  They are cousins.
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2/22/06