Alejandro Falla, of Coral Cables, Florida, a stockbroker with BAC Florida Investments, was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that Falla had fraudulently charged mark-ups to customers. Department of Market Regulation v. Falla, No. 20160500923-01 (Sept. 26, 2016).

According to the Complaint, Falla worked in the capacity of BAC’s chief executive officer, and additionally served as head trader. The Complaint stated that GAL and BAC were in agreement for BAC to advise customers of BAC in the State of Florida.

With regard to transactions regarding investments in fixed income, Falla effected sixty-one markdowns and markups which had not been disclosed to customers. Particularly, the Complaint indicated that BAC and GAL made arrangements that customers would not be charged in excess of fifteen basis points in connection with markdowns and markups. However, FINRA stated that Falla did not abide by the arrangement. The Complaint reported that Falla made secretive arrangements with broker-dealer TC in order to give customers the impression that BAC Florida and Falla were abiding by the aforementioned agreement.

Apparently, in order to effect the pre-arranged dealing with TC, Falla purchased bonds from a customer at a lower pre-arranged price with TC, reduced by the fifteen percent markdown. The Complaint stated that this Street transaction price led customers to pay markdowns much greater than fifteen percent. The Complaint reported that Falla subsequently re-purchased the bonds from TC, in which TC received a price which exceeded what TC initially paid.

The Complaint stated that in one case, on August 20, 2013, in order to effect a sale order from a customer, two-hundred bonds were sold by Falla within Falla’s firm account to the Street, at a price point of 83.5. Instead of the bonds being purchased at 83.35 (reflecting the fifteen percent markdown agreement), Falla sold such bonds to TC at a price of 82. The Complaint stated that Falla would inform customers that he was purchasing the 200 bonds at 81.85. In reality, Falla purchased the bonds for one-hundred and sixty-five points lower than Street’s price of 83.5.

The Complaint stated that in the course of executing transactions for customers, Falla misrepresented to customers the true costs of bond acquisitions and sales which he bought or sold to them. Additionally, customers were withheld knowledge about the secret arrangement that Falla had with TC concerning trades which were already arranged. FINRA stated that customers did not become apprised that Falla was actually charging in excess of fifteen percent.

The scheme was reportedly further orchestrated by Falla by concealing his acquisition costs to his firm. Falla’s conduct of arranging transactions with the other broker is alleged by FINRA to be deliberate, in that Falla’s aim was for unknowing customers to be charged greater fees by him.

The Complaint stated that unbeknownst to BAC Florida customers, they were paying significantly higher than fifteen percent in connection with the transactions, and that the firm was making significantly more money in the process. FINRA alleged that the affected customers effectively overpaid $99,543.21. As such, FINRA found that Falla’s conduct was violative of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, as well as FINRA Rules 2010, 5310(a), and 2020.

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