Regulator Bars Ex-Morgan Stanley Broker--Update

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Wall Street's self-regulatory body has barred a former broker at Morgan Stanley from the industry over claims that he concealed $190 million in Venezuelan bond trades.

John Batista Bocchino agreed to the discipline without admitting or denying the conduct, the Financial Industry Regulatory Authority said Thursday. Mr. Bocchino masked the 300 trades using other accounts because Morgan Stanley had restricted purchases or sales of Venezuelan bonds due to regulatory, anti-money-laundering and reputational risks, Finra said.

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Mr. Bocchino routed the trades through the accounts of five other financial institutions and brokerages without those firms' knowledge, Finra said. That made it appear to Morgan Stanley as if he were in compliance with its restrictions on such trades.

The ultimate customers included a foreign bank based in Venezuela, a regional investment bank based in Lima, Peru, and several brokerage firms that have previously been sanctioned for anti-money-laundering violations, Finra said in a settlement order.

Write to Dave Michaels at dave.michaels@wsj.com

WASHINGTON -- Wall Street's self-regulatory body has barred a former broker at Morgan Stanley from the industry over claims that he concealed $190 million in Venezuelan bond trades.

John Batista Bocchino agreed to the discipline without admitting or denying the conduct, the Financial Industry Regulatory Authority said Thursday. Finra said he executed the trades despite Morgan Stanley's restrictions on purchases or sales of Venezuelan bonds over regulatory, antimoney laundering and reputational risks, Finra said.

Mr. Bocchino made the 300 trades in 2011 and 2012 through the accounts of five customers who didn't know about the transactions, which made it appear they were willing counterparties. The actual beneficiaries were other customers whose identities he concealed, including a foreign bank based in Venezuela, a regional investment bank based in Lima, Peru, and several brokerage firms that were previously sanctioned for anti-money-laundering violations, Finra said in a settlement order.

Morgan Stanley in a statement said it "terminated Bocchino in March 2012, reported his conduct to the relevant regulators, and has been cooperating in FINRA's investigation since its inception."

An attorney for Mr. Bocchino didn't immediately respond to a request seeking comment. Mr. Bocchino couldn't be reached for comment.

Mr. Bocchino worked for Morgan Stanley from 2009 to 2012 in its Madison Avenue branch in New York, where he was one of its highest-producing brokers, according to Finra. The regulator said he earned gross compensation of $2.3 million in 2011 and $2.26 million in the first quarter of 2012.

He was fired by Morgan Stanley in 2012 over claims that he traded for clients in accounts they didn't own. He responded that he did so under customers' instructions, according to his Finra disciplinary record. Mr. Bocchino almost immediately found work with UBS Financial Services Inc. He resigned from UBS in September 2016 after Finra filed a complaint against him over the Venezuelan bond trades.

"Mr. Bocchino concealed his customers' identities in order to engage in trading his firm prohibited," Finra enforcement director Susan Schroeder said. "Finra will always pursue misconduct such as Mr. Bocchino's, who evaded the appropriate scrutiny of his firm's AML and compliance departments by falsely creating the appearance of compliance."

Morgan Stanley restricted purchases and sales of Venezuelan bonds in 2010 after its compliance department found the transactions created big regulatory risks, Finra said. The money-laundering concerns stemmed from the fact that bondholders could purchase the debt in Venezuelan bolivars, then sell them through a U.S. broker-dealer and earn dollars, according to Finra.

Finra didn't name the customers who benefited from Mr. Bocchino's alleged misconduct. Finra said three of the firms weren't authorized to trade through Morgan Stanley. Mr. Bocchino typically communicated with them and set the terms of the trades using the messaging feature on Bloomberg terminals, Finra said.

Finra's order said Mr. Bocchino also falsified documents that made it appear he was in compliance with Morgan Stanley's procedures.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

June 01, 2017 13:32 ET (17:32 GMT)