The Financial Industry Regulatory Authority (FINRA) has
imposed sanctions against StateTrust Investments, Inc. and its head trader,
Jose Luis Turnes, for charging customers unfair prices in corporate fixed
income transactions. According to
FINRA’s June 26, 2013, news release, StateTrust changed excessive markups and
markdowns as much as 23 percent above the prevailing market rate in a total of
563 transactions, which FINRA determined operated as a fraud and decit against
its customers.
FINRA accused StateTrust of charging the excessive rates
while engaged in two types of transactions.
In some cases, it bought bonds from a bank or insurance affiliate and
then sold the bonds to customers at a price more than 8 percent away from the
prevailing market price. In other cases,
StateTrust bought bonds from its customers at prices more than 8 percent below
the prevailing market, and turned around to sell them to its affiliate at a
slight markup. Throughout these
transactions, Turnes was not only the head trader at StateTrust, he was also
chairman and largest indirect shareholder of the affiliated bank and insurance
company. FINRA determined that Turnes
was personally involved in at least 85 of these transactions.
While neither StateTrust nor Turnes admitted or denied the
charges, they accepted FINRA’s sanctions that included fines exceeding $1.1
million fine, restitution to customers of at lest $353,000, and suspension of Turnes
for six months. FINRA describes the
sanctions as part of its ongoing effort “to aggressively pursue firms and
individuals who charge customers excessive markups and markdowns.”
Brokerage firms are required to charged reasonable markups
and markdowns in its transactions with customers, and charging excessive rates
does work a fraud and decit against investors. Investors who have questions about their StateTrust
brokerage accounts, or are concerned about the markups and markdowns their
brokers are charging, should contact the securities fraud attorneys at Block & Landsman for a free, confidential consultation.
