The president and chief compliance officer of a Miami-based advisory firm allegedly helped concoct a cherry-picking scheme with her lover, sending profitable trades to his parents while leaving other investors stuck with $5 million in losses, according to the Securities and Exchange Commission.
The charges against Lina Maria Garcia come months after her state-registered firm, UCB Financial Advisers, and investment advisor Ramiro Jose Sugranes, were charged for their own roles in the same scheme. According to the complaint, Garcia and Sugranes are romantic partners and have lived together for the past several years.
According to the SEC, Garcia worked with Sugranes through UCB to direct profitable trades into accounts that were held by Sugranes’ parents, leaving other investors to bear the brunt of a given day’s less successful trades. In all, the schemes brought in about $4.6 million in profitable trades with about $5 million in clients’ losses over the course of several years.
To direct trades, Garcia and Sugranes shared log-in information for an affiliated broker/dealer, with Garcia asserting that UCB Advisers would “provide best execution” when using the platform.
Beginning in about September 2015, Garcia and Sugranes began fraudulently allocating trades into certain accounts depending on the securities’ performance. To carry out the scheme, Sugranes would use Garcia’s log-in credentials to the b/d to open a stock or option position. If that position increased in value during the day, the position was typically sold or closed, locking in the profits, which were directed into accounts that were held by Sugranes’ parents. If the position resulted in losses on the day, it would be steered toward another investor’s account, the commission claimed.
According to the SEC, Sugranes did this all “with Garcia’s knowledge and permission,” with Garcia confirming each trade allocation at the end of a trading day. Over the course of the scheme, Garcia and Sugranes directed more than 1,600 stock trades into the parents’ preferred accounts, with first-day profitability of 95%, while directing more than 1,400 trades into nonpreferred accounts, with only 32% generating first-day profits.
The duo also made about 1,500 options trades during the course of the alleged scheme, with 92% first-day profitability for trades directed into the preferred accounts, while only 43% of options trades directed to nonpreferred accounts saw first-day profits. According to the commission, the odds that this kind of divergence between preferred and nonpreferred accounts could be random chance was “less than one in a billion.”
The SEC originally charged Sugranes and UCB Financial Advisers (and its affiliate, UCB Financial Services) in June this year for taking part in the scheme, with Sugranes’ parents named as relief defendants. As with the earlier charges, the commission is seeking a permanent injunction against Garcia, as well as disgorgement, prejudgment interest and civil penalties.
