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Screenshot of a breaking news alert e-mail from Q2 2017
U.S. Securities industry regulator Financial Industry Regulatory Authority (FINRA) announced today that it has barred former Morgan Stanley Smith Barney registered representative John Batista Bocchino for concealing approximately $190 million in Venezuelan bond trades from the firm, which had restricted such trading due to the regulatory, anti-money laundering and reputational risks it posed. Instead, Bocchino continued to trade in Venezuelan bonds on behalf of his customers, but hid the trades from the firm by using several nominee accounts in the names of well-known U.S. financial institutions, and directing the trades through those accounts. Unbeknownst to these financial institutions, Bocchino executed approximately 300 Venezuelan bond trades in the accounts opened in their names. To further conceal his customers’ trading, Bocchino created hundreds of firm documents, including new account forms and trade tickets, that contained false information.
Susan Schroeder, FINRA Acting Head of Enforcement, said,
Mr. Bocchino concealed his customers’ identities in order to engage in trading his firm prohibited. FINRA will always pursue misconduct such as Mr. Bocchino’s, who evaded the appropriate scrutiny of his firm’s AML and compliance departments by falsely creating the appearance of compliance.
FINRA found that Bocchino was able to execute Venezuelan bond trades in violation of Morgan Stanley’s policies while at the same time concealing from the firm the true identities of the underlying customers. Since Bocchino concealed these customers and trades from Morgan Stanley (NYSE:MS), the firm was unable to conduct appropriate suitability and anti-money laundering reviews of the activity. In fact, several of the underlying customers presented regulatory concerns, at least three 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.
In a related matter, FINRA also announced that registered representative Rafael Barela Jacinto, Bocchino’s sales assistant at Morgan Stanley, was suspended for one year and fined $10,000 for creating firm documents that contained false information.
In settling this matter, Bocchino and Barela neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.