A former UBS broker in Puerto Rico was sentenced to a year and a day in prison after he pleaded guilty to criminal bank fraud for pocketing $1 million in commissions in a bond sales scheme, CNBC reports.
According to CNBC, Jose Ramirez will be the first former UBS Puerto Rico employee to serve jail time for a role in the scheme, which centered on sales of the firm’s proprietary closed-end bond funds. In addition to the jail time, the judge also ordered two years of supervised release, a $500 fine and granted Ramirez’s request to voluntarily report to prison.
In 2015, FINRA and the SEC fined UBS Puerto Rico $33.5 million for failing to supervise Ramirez.
From January 2011 through September 2013, Ramirez encouraged clients to invest in UBS Puerto Rico closed-end funds using money the clients borrowed from a UBS Puerto Rico-affiliated bank — UBS Bank USA.
UBS Puerto Rico and the bank prohibited using such loans to purchase securities, and the practice exposed investors to losses while producing profits for Ramirez.
The sales generated approximately $1.2 million in commissions.
Investment Advisor’s COO Fraudulently Caused Overbilling: SEC
The Securities and Exchange Commission filed charges against the former chief operating officer of a SEC-registered investment advisor for aiding and abetting the advisory firm’s actions to overbill its clients as part of a fraudulent scheme to improperly inflate his own pay.
According to the SEC’s complaint, between 2011 and December 2018, former COO Richard Diver, a resident of Spring Lake, New Jersey, engaged in an illicit scheme to steal approximately $6 million from his employer, which, according to LinkedIn was M&R Capital Management Inc.
Diver, whose duties included managing the advisory firm’s payroll and client billing functions, allegedly inflated his salary by hundreds of thousands of dollars per year. As part of this scheme, Diver defrauded investors by causing the investment advisor to overbill more than 300 investment advisory client accounts by approximately $750,000, for the purpose of generating additional revenue.
As alleged in the complaint, Diver used this revenue to finance his inflated salary and when confronted by the investment advisor’s CEO in December 2018, Diver confessed to having carried out the scheme.
The SEC is seeking permanent injunctive relief, disgorgement plus prejudgment interest and civil monetary penalties against Diver.
Separately, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Diver.
SEC Charges Investment Advisor With Long-Running Fraud
The SEC charged registered investment advisor Direct Lending Investments with a multi-year fraud that resulted in approximately $11 million in overcharges of management and performance fees to its private funds, as well as the inflation of the private funds’ returns.