German Nino Allegedly Stole $5.8 Million from Investors’ Discretionary Accounts
The SEC alleged that German Nino stole approximately $5.8 million from a long-standing advisory client between May 2014 and February 2020. The client was a high-net-worth couple who had invested approximately $11 million through UBS using Nino’s services. German Nino had discretionary authority over several of their accounts.
Discretionary accounts allow the stockbroker to execute trades without authorization from the customer, but stockbrokers and financial advisors still have an obligation to execute trades that fit an agreed-upon trading strategy, or at the very least fit the investor’s financial goals. Firms must review accounts approved for discretionary trading and should flag trading patterns that indicate fraud or misconduct.
This case highlights the dangers of a discretionary account: Without the need for investors to carefully review each transaction, some stockbrokers feel free to do whatever they want with their client’s money.
How Did German Nino Allegedly Defraud His Clients?
In May 2014, German Nino allegedly began making unauthorized wire transfers from his clients’ accounts, occasionally liquidating securities at about the same time. For transfers of $100,000 or more, Nino sent UBS fraudulent letters of authorization with forged client signatures. He transferred the money to his own accounts.
Nino also allegedly altered UBS’s records relating to one of the client’s accounts to ensure that the client did not receive email notification of the wire transfers from that account. He also allegedly prepared and provided a client with false account statements that inflated the balances in two of the affected accounts.
Obviously, forgery violates FINRA rules and SEC regulations. Kurta Law encourages investors to regularly review account statements to catch unauthorized transactions. Ask your firm if you can review signed agreements—firms sometimes unwittingly accept forged documents.
How Did German Nino Get Caught?
It was not until the investors’ son reviewed the accounts that he noticed a discrepancy in their accounts. He confronted German Nino, and Nino allegedly confessed the theft. The SEC complaint states that Nino then promised the son he would repay the stolen money, plus the signing bonus he had received from UBS.
This attempt to avoid consequences did not produce the desired result, and the client informed UBS of Nino’s deception. UBS requested Nino to submit for an interview as part of its investigation. Rather than face an interview, Nino resigned from UBS.
Always Double-Check Your Broker’s Work
This case should serve as a reminder that a long relationship with a financial professional should not confer total trust. German Nino had regular meetings or discussions with his clients. In these meetings, he did not disclose the unauthorized transfers and misrepresented investment performance and account balances.
What Did German Nino Do with Misappropriated Client Funds?
German Nino allegedly represented that the $5.8 million would go toward investments, but the SEC alleged that $4.6. million actually went toward personal expenses, including gifts for women with whom Nino had romantic relationships. (Nino deposited the money into accounts separate from his marital accounts.) These gifts included luxury cars, private school, tuition, and an apartment in Columbia. The SEC further alleged that the remaining $1.2 million went toward repaying a previous client.
This Ponzi-like payment specifically violates FINRA Rule 2150, which prohibits the improper use of customers’ securities or funds. It also violates The Securities Act of 1933, which prohibits the use of deception in the sale of securities.
Can I Sue My Broker?
Luckily, German Nino’s investors were able to settle their dispute and recover their stolen funds. If you believe your broker may have stolen from you, reach out to Kurta Law for assistance. Our securities attorneys can evaluate your case for free.
Investors should know that they most likely will not be able to sue their investor in a civil court—most brokerages require their customers to sign a pre-dispute agreement that states they will settle disputes through FINRA arbitration. FINRA provides arbitration panels to simplify the process of settling disputes. While FINRA arbitration is designed to be faster and easier than civil cases, investors should take advantage of a FINRA lawyer’s expertise. Kurta Law’s FINRA lawyers can guide you through the process and help you win the biggest settlement possible.