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NEWSLETTERS & ALERTS
FINRA Bars Ex-Morgan Stanley Brokers Who Concealed $190Mn in Venezuelan Bond Trades
by Howard Haykin
John Bocchino, a registered rep, agreed to be barred from the industry to settle FINRA charges that he concealed approximately $190 million in Venezuelan bond trades from the firm, which had restricted such trading due to the regulatory, AML and reputational risks it posed.
Rafael Jacinto, his sales assistant, agreed to a $10K fine and a one-year suspension to settle FINRA charges that he created firm documents that contained false information in connection with the transactions effected by Bocchino.
BACKGROUNDS. John Bocchino entered the securities industry in 1998, and began his association with Citigroup Global Markets in February 2001. In June 2009, when Citigroup and Morgan Stanley entered into a joint venture, Bocchino became associated with Morgan Stanley.
Rafael Jacinto entered the securities industry in 1999, and began his association with Citigroup Global Markets in February 2004. Similar to Bocchino, Jacinto became associated with Morgan Stanley in June 2009.
Both Bocchino and Jacinto were U5’d by Morgan Stanley in 2012.
- Bocchino was terminated “because he was found to have been ‘engaging in securities transactions for clients within accounts other than their own’.”
- Jacinto was terminated “because he was found to have been ‘facilitating securities transactions for clients within accounts other than their own’.”
- Both subsequently hooked up with another broker-dealer until 2016. Neither is currently associated with any FINRA member firm.
FINRA FINDINGS. From at least May 2011 through March 2012, Bocchino circumvented Morgan Stanley’s policies restricting trading in Venezuelan bonds. In order to evade Firm policy and the Firm’s supervision, Bocchino used nominee accounts in the names of well-known U.S. financial institutions, booked some 300 unauthorized trades in the nominee accounts – totaling approximately $190 million in Venezuelan bonds.
To further conceal his customers’ trading, Bocchino created hundreds of firm documents, including new account forms and trade tickets, that contained false information. Bocchino also had his sales assistant, Jacinto, create Firm documents that contained false information.
Since Bocchino concealed these customers and trades from Morgan Stanley, the firm was unable to conduct appropriate suitability and AML reviews of the activity. In fact, several of the underlying customers presented regulatory concerns, at least 3 were not customers of Morgan Stanley and were not approved to trade through the firm, and one previously had its account frozen by the firm.