Boots Asensio's Brokerage
(click for details)
R.I.P. Integral Securities
All the details have not been made public. But we'll share what we've been able to find—and what we think it means.
What We Know
Although NASD illicitly permitted him to own the brokerage from 2003 to 2006 even though he lacked the necessary registration during those years, this time things were different. According to his CPA's report:
As a result of [being barred, Asensio] was required to dispose of his ownership interest [in the brokerage] and resign from any further involvement with [its] operations ...Because of this significant change in ownership, the Company was required to submit to NASD an application for continuing membership.... review [of the application] is continuing as of the date of this report.
The above conditions raise serious doubt as to whether the Company can continue as an NASD member firm. [Asensio] also intends to pursue reinstatement, but the outcome of such reinstatement effort presently cannot be determined.
That was the state of the brokerage as of March, 2007. But only two months later, Integral withdrew from the industry. At least one reason is clear: it had not paid the $26K fine for its rule violations.
NASD is now known as FINRA. In August, 2007, FINRA placed the following in Integral's file:
IN ACCORDANCE WITH NASD RULE 8320, INTEGRAL SECURITIES. INC. IS EXPELLED FROM FINRA MEMBERSHIP FOR FAILURE TO PAY FINES AND COSTS.
Reading Between the Lines
We can think of only three reasons for Integral failing to pay its fine. The first is that it wanted to close and therefore saw no reason to honor its debt to NASD. We can almost certainly rule this out. Integral had filed for permission to continue its business only a few months before closing.
The next possibility is that Integral lacked funds to pay the fine. Despite the bravado intended to convey an aura of spectacular wealth, the truth is that Asensio has had several liens placed against him for trivial amounts of money. (See here, here, here, and here). It's therefore conceivable that he could have run into financial trouble.
Nonetheless, we really doubt this was why Integral didn't pay. If funds were short, money could have been borrowed. The failure to make even a partial payment from the time the fine came due in August 2006 until Integral withdrew in May 2007 tells us that its failure to pay must have been deliberate.
The last possibility is that Integral withdrew because NASD denied its application to continue as a member firm. We believe this is the only explanation that makes sense—and suspect this is what happened.
Who's the Fraud?
The story of Integral's demise is incomplete without a few words about how Asensio falsely portrayed the brokerage. It's a perfect example of the kind of hype—no, make that fraud—of which he made a career of accusing others.
In 1998, his website boasted of a "brokerage client roster that includes the world's finest institutional investors and money managers." A few years later, the website described the brokerage's clients as "primarily institutional with at least $250 million under management."
The truth? A former SEC accountant audited the brokerage's trading in 1998. His report revealed that its only accounts were its own, and those of an employee and a few of Asensio's personal acquaintances. Asensio did (and probably still does) serve as hedge fund flak for a few clients who manage at least $250 million in assets. But their securities have always been held by other brokerages—never his.
What Asensio never let on was that he was not a full-service broker. Rather, he was an introducing broker-dealer. You can think of it as "brokerage lite." Such firms cannot have custody of client funds or securities. There is nothing wrong with this lesser status ... unless you try to bamboozle people into believing that you hold and manage billions of institutional dollars when you don't.
How big a brokerage was Integral? In its last report, filed two months before closing its doors, it reported net capital of $271,000.
Man Without a Brokerage
Moreover, now that he and Integral have been expelled from the brokerage industry, none of his business activities are subject to NASD rules. So this cloud over his career was not without a silver lining.
Although we expect Asensio to claim his expulsion is a "badge of honor," he's kidding himself if he thinks anyone will believe him. Clearly, it's an embarrassment that will haunt him for years. Still, it's a sweet deal compared to what might have been: expulsion for fraudulently obtaining the brokerage license in the first place.