Is NASD Corrupt? Part 2
In Part One, we reported on a reader's complaint to the New York Attorney General. It alleged that Asensio fraudulently obtained his broker-dealer license by concealing the jury verdict against him in the Norman Murphy case.
The reader filed the same complaint with SEC Chairman William Donaldson. He, too, forwarded the complaint to NASD District 10. But District 10 did not ignore this one. It wrote to our reader saying it would investigate the matter.
Ten months later—in January 2004—our reader noticed that the name of Asensio's business had been changed to Integral Securities. Suspecting that this might be related to his complaint, he called the District 10 investigator to ask who owns Integral. The investigator refused to tell him.
What District 10 won't tell you, we will. But first, some background.
Our understanding has always been that the penalty for a false or misleading statement on a membership application is disqualification—revocation of the license in question, and in the case of an individual, a bar on NASD members associating with him in any capacity. It certainly looks to us like District 10 found a problem with Asensio's broker-dealer application. But it didn't initiate anything remotely resembling a disqualification proceeding.
What NASD apparently did was to allow Asensio to transfer ownership of his firm. We're not sure why this was permitted as an alternative. But since it was, the next question is obvious. Was this an arms-length transaction? One that freed Integral Securities from Asensio's control?
Who's the Boss?
The new owners of Integral are the Alta Mar Trust and Owen Christopher Hernandez.
Alta Mar is described only as a private, foreign trust. Which means that for all we know Asensio or other members of his family could be among its beneficiaries. As for Owen Hernandez, his work history reveals that he is not exactly an experienced businessman brought in by NASD to reign in a wayward Wall Street operative 21 years his senior. Hernandez, 28, passed his stockbroker exams only seven days before supposedly taking control of Asensio's business. But he is no stranger to Asensio.
Owen is the son of Abilio E. Hernandez. Abilio E. was a director of Asset Trading Company (ATC), a short-lived shell corporation Asensio created in 1989 to sue Benihana. Abilio E.'s father is Abilio A. Hernandez. Asensio obviously knows him, too. The address of Abilio A.'s former Miami home is on a second open warrant for Asensio's arrest issued in 1981.
This always looked like a family relationship to us, but only recently were we able to confirm it. Abilio A. Hernandez is the uncle with whom Asensio fled Cuba as a young boy. Asensio and Owen Hernandez are second cousins.
So how meaningful is this transfer of ownership? We can't say. We can report that our reader called Integral and asked if this was simply a name change. Asensio's assistant said it was and that Asensio is still in charge. We doubt NASD would concede this much, but it obviously understands that Integral and Asensio are still joined at the hip. Integral's NASD file has all of Asensio's regulatory baggage in it—including the charges filed by NASD's Division of Enforcement in 2004.
Discipline, District 10 Style
We would have expected District 10 to pursue this matter as a disciplinary action. But it did not. NASD's monthly disciplinary reports have not said anything about it. There is not a word about the matter in Asensio's NASD file—not even the comprehensive version reserved for regulators. It looks like District 10 had no intention of ever informing anyone of what its investigation found. Not Mr. Spitzer, not the investing public, not the news media—which you'd think would want to know if there is something in Asensio's record relevant to his truthfulness.
Nor does the story end with NASD's secrecy. As best we can determine, not a penny in fines has been imposed for what appears to be 10 years of ill-gotten gains.
We
haven't a clue how District 10 reconciles its handling of this with its by-laws,
federal law, or its constantly ballyhooed commitment to "investor protection and
market integrity." The way we see it, the so-called "tough cops patrolling the beat" of District 10 have mugged retail investors.
And where are the "tough cops" from the NASD leadership in Washington? Our reader tells us that he appealed to them to do
something about District 10's shenanigans three months ago. Yet, it still seems
to be business as usual.
Retail investors may not be the only ones who have been mugged here. The NASD
rank and file probably has been, too. Asensio's broker-dealer
application was a sworn document submitted to NASD, the U.S. government, and the New York
Attorney General. Contrast the kid glove treatment he received with what District 10
doled out to entry-level members who failed to disclose material facts on
routine documents submitted only to NASD. They were
fined and suspended from their ability to work! NASD doesn't say what these
individuals failed to disclose. But the chance that it was as material to the securities
business as a quarter-million dollar verdict for defrauding a former
brokerage client is probably slim to none.
Does District 10 pick on its "little people" and let its well-heeled walk? The NASD leadership had better find out if this is a pattern before it has a real scandal on its hands. If it doesn't have one already.
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Update: NASD
(January 2006)
We have confirmed that
ownership of
Integral Securities) has been returned to Asensio's name. (although Owen Hernandez also
has a tiny share.) This is just extraordinary. A hearing panel has
barred Asensio from the securities industry. All that stands between him
and expulsion his appeal (the ruling is stayed until the appeals panel
rules).
Yet NASD still sees him as fit to own a brokerage? In other words, NASD finds his record consistent with the ability to observe "high standards of commercial honor and just and equitable principles of trade."
We're extending an open invitation to Mary Schapiro, president of NASD Regulation, to explain what an individual would have to do in order to be considered incapable of following NASD rules and observing high standards of commercial honor and just and equitable principles of trade.
We
can't imagine. We just can't.
Actually, we're quite sure that this is against the rules. But as we've learned,
at NASD, rules are meant to be broken.
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Mary Schapiro, President of NASD Regulation
on the Importance of Disclosure
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Page created 05/03/04 ● Updated 07/29/05 ● Updated 1/20/06