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SEC Files Enforcement Action Against Former Insigneo Securities Financial Advisor Lina Maria Garcia After Allegations Regarding A CherryCherry Picking Picking Scheme

Lina Maria Garcia (CRD#: 4447599) is a registered Investment Advisor and previously registered Broker.

 

Broker’s Background

 

She entered the securities industry in 2002 and previously worked for Insigneo Securities, LLC; Global Investor Services, L.C.; Colonial Brokerage, Inc.; and Goldman, Sachs & Co.

 

Current And Past Allegations Of Conduct Leading To Investment Loss

 

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in November 2021, a civil action is pending against Lina Maria Garcia. The complaint states, “Plaintiff Securities and Exchange Commission (“SEC”) hereby files its Amended Complaint against Defendants Ramiro Jose Sugranes (“Sugranes”), Lina Maria Garcia (“Garcia”), UCB Financial Advisers, Inc. (“UCB Advisers”), and UCB Financial Services, Limited (“UCB Services”) (collectively, the “Defendants”) and Relief Defendants Ramiro Sugranes Hernandez and Thelma Lanzas De Sugranes (collectively, the “Relief Defendants”), and alleges that Defendants Sugranes and Garcia, through UCB Advisers and UCB Services (collectively, the “UCB Entities”), engaged in a long-running fraudulent trade allocation scheme – commonly referred to as “cherry picking.” Defendants allocated thousands of profitable trades worth more than $4 million in stocks and options on securities (“Options”) to two preferred accounts held at the UCB Entities in the name of the Relief Defendants Ramiro Sugranes Hernandez and Thelma Lanzas De Sugranes, who are Sugranes’ parents (collectively, “Preferred Accounts”). Sugranes and Garcia also allocated millions of dollars of unprofitable trades to other investment advisory client accounts with the UCB Entities. The SEC brought this enforcement action to stop this fraud and return the ill-gotten gains to the harmed investors. Sugranes and Garcia carried out the cherry-picking scheme through UCB Services and UCB Advisers, an investment advisory firm of which they are partial owners, by using an average price trading account used by the UCB Entities to purchase stocks and Options on behalf of numerous client accounts. Sugranes and Garcia then allocated those trades to specific accounts, typically later that same day. If the position increased in value during that day, the position was usually closed out, thereby locking in the same-day profit, and the opening and closing trades and the corresponding profits were allocated to one of the Preferred Accounts. If the value of the trades decreased during that day, the position (which was worth less at the time of allocation than it was at the time of purchase and thereby had a first day loss) was usually allocated to the account(s) of one or more of the UCB Entities’ other clients (the “Non-Preferred Accounts”). This cherry-picking scheme funneled approximately $4.6 million in illicit profits to the Preferred Accounts, and negatively impacted at least 75 Non-Preferred Accounts that suffered first day losses. In total, the Non-Preferred Accounts were allocated more than $5.5 million of first day losses with 16 of the Non-Preferred Accounts sustaining more than $25,000 in first day losses, and two other Non-Preferred Accounts sustaining more than $1 million in first day losses. From this fraud, the Defendants received ill-gotten gains and benefits and the Relief Defendants received illicit proceeds from the Defendants’ fraud to which they have no legitimate claim. As a result of the conduct described in this Complaint, Garcia violated, and aided and abetted the other Defendants’ violations of, Sections 17(a)(1) and 17(a)(3) of the Securities Act, Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder, and Sections 206(1) and 206(2) of the Advisers Act.”

 

This is referred to as a “cherry picking” scheme, which occurs when a broker allocates profitable trades to certain accounts and losing trades to other accounts.  Often times, brokers engage in this strategy to please clients with larger accounts at the expense with clients with smaller accounts.  Either way, it is illegal.

 

For a copy of the civil complaint, click here.

 

In addition, Lina Maria Garcia has been the subject of one disclosure, including the following:

 

  • September 2021–“The Securities and Exchange Commission issued a Wells Notice indicating that it has made a preliminary determination to recommend that the Commission file an enforcement action against Ms. Garcia in connection with allegations of violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940.” The action was initiated by the United States Securities and Exchange Commission.

 

For a copy of Lina Maria Garcia’s FINRA BrokerCheck, click here.

 

We Help Investors Recover Investment Losses

 

Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

 

Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.

 

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.

 

Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

 

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.

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