Miami Firm, Ultralat Capital Markets, Censured, Fined, Ordered to Pay Restitution to Clients, and Revise WSPs by FINRA

Soreide Law Group, based in South Florida, obtained the following information on FINRA’s website under, “Disciplinary and Other FINRA Actions, May 2017:”
Ultralat Capital Markets, Inc. (CRD #136791, Miami, Florida)
was censured; fined $140,000; required to pay disgorgement of excessive markups in the amount of $48,055.84, plus interest; and required to, within 30 days of the issuance of the AWC, submit a written certification indicating that the firm has reviewed and revised its Written Supervisory Procedures (WSPs) regarding non-market foreign exchange (FX) rates and markups to achieve compliance with FINRA rules.
Without admitting or denying the findings, Ultralat Capital Markets consented to the sanctions and to the entry of findings that the firm, acting through various individuals including its former president and head trader, used non-market FX rates in certain bond swap transactions for retail clients, most of whom were referred to the firm by its owner, a member of the Colombia Stock Exchange, without disclosing to those clients that the trades were executed with FX rates away from the current market rate.
FINRA’s findings stated that referred clients engaged in bond swap transactions involving foreign currency denominated bonds, particularly bonds denominated in the Brazilian Real (BRL). However, for certain of these bond swap transactions, after the referred clients placed the orders with the firm’s owner, the firm’s former president and head trader and others, in consultation with employees of Ultralat Capital Markets’ owner, adjusted the FX rate for each buy and sell in the bond swap by manually inputting into the firm’s trade execution system a FX rate for the transactions that was a non-market rate away from the current spot rate. As a result, the firm typically overpaid the clients in these transactions for the bonds they sold, reducing any realized losses in their accounts. On the purchase side of the bond swap, the firm offset the overpayment by using a non-market FX rate to sell the bonds to the clients.
FINRA’s findings also stated that Ultralat Capital Markets did not disclose to the referred clients involved in these transactions that it used non-market FX rates away from the spot rate to value client bond transactions or disclose its impact on the valuation of the transactions to the referred clients.
Also, FINRA’s findings included that in three instances, the net effect of the bond swap transactions resulted in the referred clients being charged excessive markups on the bonds they purchased, which generated excessive charges totaling $48,055.84.
FINRA found that Ultralat Capital Markets failed to establish, maintain, and enforce a supervisory system and WSPs that were reasonably designed to achieve compliance with all applicable securities laws and regulations, including supervision of FX rates used on transactions in foreign currency denominated bonds and of markups, and were reasonably designed to identify and prevent the use of non-market FX rates and excessive markups.
Ultralat Capital Markets’ supervisory systems did not verify that the FX rates used on clients’ transactions were reasonable in relation to the prevailing spot market rate. As a result, the firm’s supervisory system did not detect its former president and head trader’s and others’ use of FX rates that were away from the market. The firm’s supervisory systems also showed a markup for foreign currency denominated bonds based on the bond price in U.S. dollars, and not the total proceeds of the trade when factoring in the FX rate. As a result, the firm’s system did not reflect the full markup charged to the customers in the bond swap transactions. The firm’s supervisory system therefore was not able to fully detect whether its trading desk executed client transactions in foreign currency denominated bonds with a fair and reasonable markup.
(FINRA Case #2013035313903)
If you suffered financial losses due to the actions, recommendations, or lack of supervision at the Miami firm, Ultralat Capital Markets, call Soreide Law Group, conveniently based in South Florida, and speak to a securities lawyer regarding the possible recovery of your investment losses through a FINRA arbitration at: 888-760-6552.
Soreide Law Group represents clients nationwide before FINRA and we operate on a contingency fee basis.  Let our experience work for you.