The head of a Miami-based financial advisory firm has been accused of helping her romantic and business partner carry out a cherry-picking scheme that funneled millions of dollars into accounts owned by his parents.
The SEC charged Lina Maria Garcia, president and chief compliance officer of UCB Financial Advisers, for her alleged role in the long-running con that led to earlier
In June, the SEC announced charges against Ramiro Jose Sugranes, UCB Financial Advisers and its affiliate UCB Financial Services for violating the antifraud provisions of portions of the Securities Act of 1933; the Securities Exchange Act of 1934 and Rules; and the Investment Advisers Act. Sugranes and Garcia are partial owners of the UCB entities.
The SEC's amended complaint, filed last week in the U.S. District Court for the Southern District of Florida, alleges that Garcia and Sugranes used a single account to place trades without specifying the intended recipients of the securities.
If the price of the securities increased during the trading day, the defendants usually allegedly closed out the position and sent the profitable trades to accounts held by Sugranes's parents. If the price of the securities decreased during the trading day, the duo would allocate the unprofitable trades to other client accounts.
According to the complaint, the scheme that started in 2015 funneled approximately $4.6 million in illicit profits to the preferred accounts, while the non-preferred accounts were allocated more than $5.5 million in losses.
The complaint said UCB placed trades for about 100 clients in the United States, Chile, Columbia and Nicaragua.
The amended complaint also states that Garcia and Sugranes are a couple that has been living together for several years. Since at least 2018, Sugranes has given Garcia roughly $200,000 in cash and a half-interest in an $800,000 investment in a local business owned by Garcia’s friends.
After the defendants learned of the charges and asset freeze entered by the court earlier this year, Sugranes moved $264,000 from one of his bank accounts to a bank account jointly controlled by Sugranes and Garcia. The funds were then moved to one of Garcia’s personal bank accounts.
The SEC complaint states that at least $2.24 million of the skimmed funds have already been withdrawn by Sugranes’ parents. Since at least 2016, Sugranes has received about $1.85 million from his parents.
Garcia has been charged with multiple violations of the Securities Act and Rules, as well as aiding and abetting the other defendants' violations of the provisions. The SEC is seeking a permanent injunction, disgorgement, prejudgment interest and civil penalties.
Sugranes’ 83-year-old father and 79-year-old mother, who live in Nicaragua, have been charged as relief defendants.
Attempts to reach Garcia for comment were unsuccessful.
University of Nevada, Las Vegas law professor Ben Edwards said this kind of case is particularly upsetting because of the damage it does to the entire industry. When large-scale betrayals of trust take place, they push more clients to think they should go it alone or seek advice from the wrong sources.
“You don't want people getting asset management advice from social media,” he said. “It's important that people have access to high-quality financial advice, and the industry really depends and runs on trust, and the more of this you have, the harder it is for people to trust advisors with their assets. There's this risk that if we don't do a good enough job getting these guys out of the industry, then a lot of people aren't going to be willing to work with a financial advisor.”
Edwards said that these kinds of schemes are fairly common but difficult to detect without clients going the extra mile to monitor the actions of their advisors. With small amounts being skimmed over a long period of time, the dips are often not severe enough for a client to call an advisor to the table and demand an explanation.
He added that he would not be surprised if other frauds like this were taking place right now because “it's the sort of thing that's been done so many times.
“Sometimes it is the market. And sometimes the financial advisor has parked your retirement in front of a train,” Edwards said. “You can't really know that without doing a little more due diligence.”
