Asensio Charged Again
In November, 2000, Asensio accepted a censure and paid a
$75,000 fine to settle charges filed against him by the National Association of Securities
Dealers (NASD). That was the fifth time that NASD had charged him with
rule violations. Now, NASD has made it six. In the last days of
March, Asensio's broker file was updated to reflect a complaint that NASD filed
against him on February 2, 2004.
The summary lists five charges related to Asensio's research reports. NASD alleges that the reports:
• made statements that were unwarranted or misleading
• failed to make clear and comprehensive disclosures of stock ownership• failed to define the meanings of the ratings used
• failed to incorporate a line graph price chart showing price changes in relation to the dates of his commentaries
• failed to disclose the percentage of buy, hold/neutral, or sell ratings
There is an additional charge. It is that Asensio "failed to respond
to NASD requests for documents and information."
This is not only a potentially serious charge, but one that couldn't be more ironic for
the man who for so long has billed himself as Wall Street's greatest
fraud-buster. You have to wonder on what basis he considered himself
exempt when asked for documents and information relevant to the
cleanliness of his own house.
Some Perspective
What kind of penalty is Asensio facing here? Obviously, these charges are going to cost him money. NASD policy calls for escalating fines when a member is a repeat offender, and Asensio certainly fits the description. But the real question is whether these charges will mean not just fines for Asensio but adverse action against his broker-dealer license.
NASD's compliance manual provides for anything from a fine to suspension or expulsion when a member fails to cooperate with an investigation. However, the association has cut him so much slack on certain matters over the years that we'd be surprised if it expelled his firm over his lack of cooperation. Especially when you consider that the very nature of the charges suggests that NASD has once again honed in on some wrist-slap issues and ignored the most pressing ones.
That's what strikes us as the real story here. The simple fact is that Asensio
may have made millions of dollars with a license obtained with answers on
a sworn document that were, to use his
favorite term, highly questionable. So what
has NASD done? Worked itself into a lather over issues such as his failure to adequately define
his terms and include a graph in his research reports. Granted, those
are violations. But given the questions surrounding his license (not to mention
certain conduct he's engaged in over the years), it is mystifying
that NASD
can bother with such details while ignoring the
overarching questions:
• Did Asensio commit perjury on his broker-dealer application in 1993 when he denied having any unpaid judgments or investment-related court verdicts against him?
• How about on his sworn 2003 Form BD--where he denied the 2002 fraud verdict against him in the South Carolina case?• What about the report Asensio filed with NASD in 1989 claiming his dispute with Norman Murphy was in litigation when he knew that a jury had heard the case eight months earlier--and returned a verdict against him of $248,250 that he never disclosed to NASD? This filing was not a sworn document. However, under federal law and the NASD by-laws, making a false statement on such a report or in a membership application disqualifies a person from membership in the industry.
Surely NASD ought to care a lot more about these questions than whether Asensio's research reports could earn a passing grade in Finance 101.
Are NASD's priorities as bizarre as they seem? Or is there a method to its madness? Check with us again at the end of April. We hope to have more on this truly strange saga by then.
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Update 5/10/04
Whether action can still be taken against the broker-dealer license is unclear. The reason is that Asensio may no longer hold it. As explained elsewhere, the District 10 office of NASD dealt with a complaint that Asensio fraudulently obtained the license by allowing it to be transferred to two new owners. One is an offshore trust. The other appears to be a relative or close friend.
We cannot determine who owns the trust. But if NASD knows Asensio to be among the owners, we would expect that the license could still be an issue. If Asensio is not an owner, then the point is moot--even though, unofficially, he may still be running the brokerage firm.
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Update 3/10/05
As best we can determine, the
broker-dealer license is not at risk now that NASD's District 10 has cleverly
allowed
it to be transferred to an off-shore trust and Asensio's relative/longtime family
friend. Integral Securities--the name in which the broker-dealer license
is now held-- is co-charged with Asensio on some of the violations because it
inherited the baggage of Asensio Brokerage Services. However, the one
truly serious charge--failing to cooperate with an investigation applies only to
Asensio himself.
Though Integral faces only minimal charges, the fact remains that it has made Form BD
filings falsely stating that no one there has ever been found
by a court to have violated an investment-related statute. As explained
elsewhere, this is not true because Asensio is now listed as a
control affiliate of Integral Securities. Form BD also asks if NASD has ever found any control affiliate of Integral to
have made a false statement. None of Integral's filings disclose NASD's
apparent finding that Asensio made false statements on his 1993 Form BD.
NASD by-laws prohibit it from continuing the membership of anyone who has made a false statement of a material fact on a membership application. Anyone care to place odds on the likelihood that Integral's membership will be continued? And that NASD brass will continue to insist that their enforcement is tough, even-handed, and marked by high principles of commercial honor?
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Update 3/20/05
A
hearing panel of NASD has ruled on the charges. See
Asensio Barred from Industry for details.
Page created 4/04/04 ● Updated 3/10/05 ● Updated 3/20/05