The Securities and Exchange Commission has charged a Miami advisor and two registered investment advisor firms with engaging in a long-running "cherry picking" scheme in which they channeled nearly $5 million in trading profits to family members’ accounts while dumping the losing trades in client accounts.
The defendants, Ramiro Jose Sugranes, 57; UCB Financial Advisers Inc.; and UCB Financial Services Limited, allegedly diverted profitable trades to two accounts believed to be held by Sugranes' parents, while saddling other clients with losing trades, according to the SEC's complaint, which was filed under seal in U.S. District Court in the Southern District of Florida.
“The preferred family clients, who are named as relief defendants, received approximately $4.6 million from profitable trades while other clients sustained more than $5 million in first day losses,” the SEC said.
In 2005, Sugranes was suspended by the NASD (Finra’s predecessor) for 30 days, censured, fined $7,500 and permitted to resign for exercising discretion in a family member’s account without obtaining firm permission. In 1993, he was fined $10,000 over a violation that is not described, according to his BrokerCheck record. He has been active in the investment industry for 20 years at six different firms.
The court granted the SEC's request for emergency relief, including an asset freeze, accounting and expedited discovery on June 14 after reviewing evidence that the alleged fraud was ongoing.
To aid their scam, Sugranes and the two firms used a single account to place trades without specifying the intended recipients of the securities at the time they placed the trades, according to the complaint.
Once a trade was made, if the price of the securities went up during the trading day, the defendants usually closed out the position and allocated the profitable trades to their preferred accounts, the SEC said.
Conversely, the complaint alleges that if the price of the securities decreased during the trading day, the defendants usually allocated the unprofitable trades to non-preferred client accounts.
Sugranes and the two UCB RIAs he was part owner of are charged with violating the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The SEC is also seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties.
The SEC is also seeking to recover unlawful gains and prejudgment interest from Sugranes alleged family members, Ramiro Sugranes Hernandez, 83, and Thelma Lanzas De Sugranes, 79, both residents of Leon, Nicaragua, who have been named as relief defendants and are believed to be Sugranes parents.
“The SEC's investigation, which is ongoing, stems from the SEC Market Abuse Unit's Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns, including improbably successful trading,” the agency said.