Washington (Aug. 26, 2003) -- UBS PaineWebber Inc. agreed to pay the Securities and Exchange Commission a civil penalty of $500,000 for failing to supervise a former registered representative who defrauded his clients of tens of millions of dollars.
The firm didn’t admit or deny the commission's findings. According to the SEC order, Enrique E. Perusquia, a senior vice president and registered representative at PaineWebber from 1994 to 1998, invested large portions of his clients' funds in a small group of highly speculative gold mining firms while simultaneously receiving secret payments from the mining companies. He also misappropriated client funds and engaged in unauthorized margin trading. The subsequent collapse of the gold mining firms, combined with Perusquia's other misconduct, caused his clients to lose tens of millions of dollars, the SEC said.
Perusquia has previously been subject to civil and criminal charges and is currently serving a sentence of 78 months in prison.
In its order, the SEC said that PaineWebber didn’t have a procedure to ensure that Perusquia's supervisors knew basic information about the clients whose assets Perusquia was trading, such as their identities, their asset bases, their investment objectives or the suitability of the trades placed on their behalf. The SEC also said the firm did not establish a procedure to ensure that Perusquia's supervisors received and reviewed account statements or other trading summaries for the clients.
"Brokerage firms have a duty to adopt procedures reasonably designed to prevent fraudulent conduct by their employees," said Helane L. Morrison, district administrator for the SEC's San Francisco District Office. "PaineWebber's failure to adopt such procedures made it easier for Perusquia to carry out his fraud."
-- WebCPA staff
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