What is interesting to note is the department filed the original complaint Feb 2, 2004 according to the NASD OFFICE OF HEARING OFFICERS HEARING PANEL DECISION January 4, 2005.
Digging around I found the following from 2000:
NASD Notice to Members—Disciplinary Actions December 2000
NASD Regulation Sanctions
Asensio & Company; Manuel
Asensio, For Short Selling,
Trade Reporting, And Internet
Advertising Violations
NASD Regulation announced a
settlement in which Asensio &
Company, Inc. and its President,
Chairman, Chief Executive Officer,
and Compliance Officer, Manuel P.
Asensio, were censured and fined
$75,000 for short selling, trade
reporting, and Internet advertising
violations.
NASD Regulation found that, from
August 1, 1998, through July 31,
1999, Asensio & Company failed to
record affirmative determinations in
connection with 306 short sale
transactions for itself or its
customers. In 117 of those
transactions, the firm failed to make
affirmative determinations at all.
A short sale occurs when a
security, not owned by the seller, is
NASD Notice to Members—Disciplinary Actions December 2000
pdf page 18 of 20
sold in anticipation of a decrease in
the stock’s price. NASD rules
require that when a member effects
a short sale for its own account or
accepts a short sale for a customer,
the member must make an
“affirmative determination,” in
writing, that it can borrow the
security or will be able to provide it
for delivery. At a later time, the
seller purchases the stock to
complete the transaction.
NASD Regulation also found that,
from August 1, 1998, through July
31, 1999, Asensio & Company
reported 331 sale transactions to
ACT without indicating that they
were short sales, as required.
In addition, NASD Regulation found
that Asensio & Company’s Web
Site violated NASD’s advertising
rules. Seven research reports on
the firm’s Web Site, which
recommended short selling, failed
to disclose the associated risks.
Also, certain graphs in the Selected
Performances section of the firm’s
Web Site failed to provide a sound
basis for evaluation, omitted
material facts, or made misleading
statements or claims. The Selected
Performances section contained
graphs showing the price
performance over time of different
securities. Each graph contained a
downward facing arrow which
appeared to show the date and the
corresponding price when Asensio
& Company issued its initial
recommendation regarding the
security. In addition, next to each
graph were several sentences
which appeared to be taken from
Asensio & Company’s research
report on the company.
NASD Regulation found that:
• The Selected Performances
section contained one graph of a
security for which Asensio &
Company did not issue a report
and several quotations which did
not come from actual
recommendations. The graph
purported to show that the firm
recommended buying a security
on a specific date. Next to the
graph were two sentences
explaining why the security’s
price would likely rise. In fact,
Asensio & Company never
issued a written recommendation
for that security. With respect to
three other securities, the firm’s
research reports did not contain
the statements which appeared
next to their respective graphs.
• On several of the graphs, the
arrows did not point to correct
prices or dates. Six arrows did
not point to the actual dates
when the firm made its initial
recommendations. For example,
on one graph, the arrow pointed
to approximately January 31,
1997, when the closing price was
$19.50. Asensio & Company,
however, issued its initial “very
strong sell recommendation” on
that company on October 7,
1996, when the closing price was
$15.50. In addition, on six of the
graphs containing strong sell or
short sell recommendations, the
arrow pointed to a price that was
higher than the price of the
security on the date of Asensio &
Company’s actual
recommendation.
• On two of the graphs, after the
time period illustrated on the
charts, the price of the securities
reversed direction.
• NASD rules require that members
must cite all relevant past
recommendations. Nonetheless,
while the Selected Performances
section contained graphs covering
the time period from January
1994 to August 1998, it excluded
one sell and four buy recommendations
made by Asensio & Company
during that same time period.
Those five recommendations
were not included anywhere on
the Web Site.
NASD Regulation further found
that, through Manuel Asensio’s
Internet account, associated
persons of Asensio & Company
posted at least 14 bulletin board
messages which did not disclose
any connection with the firm but,
instead, used unrelated screen
names. One posting stated, in part:
“Asensio & Company’s research is
precise. ... I have no affiliation with,
and have no interest in Asensio or
[the issuer].” Another posting was
entitled: “Asensio stands for the
truth.” Communications posted by
members or their associated
persons on electronic bulletin
boards or message boards are
considered “advertisements” under
NASD rules and, as such, they are
subject to approval, recordkeeping,
filing, and content requirements.
NASD Regulation also found that
Asensio & Company failed to file,
with NASD Regulation’s Advertising
Regulation Department, 43
research reports regarding nine
issuers and a brochure regarding
the firm, all of which were contained
on the Web Site. In addition, the
firm failed to file at least 71
messages which were posted on
bulletin boards run by America
Online and The Motley Fool.
Asensio & Company and Manuel
Asensio also failed to establish,
maintain, and enforce procedures
reasonably designed to achieve
compliance with the advertising
rules, the rules relating to short
selling, and the rules relating to
trade reporting.
In settling this matter, Manuel
Asensio and Asensio & Company
neither admitted nor denied NASD
Regulation’s findings.
NASD Notice to Members—Disciplinary Actions December 2000
pdf page 19 of 20
In addition to a fine and a censure,
Manuel Asensio and Asensio &
Company will remove all
advertisements that are the subject
of the settlement from the firm’s
Internet Web Site and any other
Web Sites under their control.
Before those advertisements may
be used in the future, they must be
filed with the Advertising Regulation
Department of NASD Regulation.
Manuel Asensio must requalify by
examination as a registered
General Securities Principal (Series
24). The firm also agreed to retain
an outside consultant to review and
make recommendations concerning
the firm’s current policies and
procedures as they relate to the
settlement.
This case was brought by NASD
Regulation’s Enforcement
Department with assistance from
NASD Regulation’s Market
Regulation and
Advertising/Investment Companies
Regulation Departments.
pdf page 20 of 20
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