A Purloined Letter Challenges Wall Street To Adapt

February 18, 2015

It would be nice if, in fact, our best-laid plans were fool-proof; alas, there is an abundance of fools that simply overwhelm us. When someone finds a way around our attempts to protect investors, Wall Street is forced to re-think (or, so we would hope) its policies and procedures. The industry needs to be ever-vigilant in adapting and implementing better detection and deterrence.  Optimally, the Street has two lines of defense: first, in-house compliance; and, second, the regulatory community. A recent case involving an altered letter should prompt Compliance Departments to review their own policies and to implement better procedures.

Case In Point

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Pablo Fernandez-Pena submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Pablo Fernandez-Pena, Respondent (AWC  #2013038244901, February 3, 2015).

In April 2012, Fernandez-Pena first became registered with FINRA member firm Robeco Securities, LLC. The AWC asserts that he had no prior relevant disciplinary history with the SEC, FINRA, any other self-regulatory organization or any state securities regulator.

The Certificate Letter

The AWC asserts that among Fernandez-Pena's duties at Robeco, he introduced securities products to institution customers with the ultimate goal of sales to offshore retail investors.
On March 27, 2013, Fernandez-Pena requested a "certificate letter" from Robeco's Legal Department that would describe an offshore mutual fund for a pension fund located in Colombia. On May 14, 2013, the Legal Department sent the certificate letter to Fernandez-Pena for transmittal to the Colombia pension fund.

10% Solution

Instead of forwarding the letter, however, the AWC alleges that Fernandez-Pena added false information to the communication. Pointedly, the AWC asserts that he added the disclaimer that no investor held over 10% of the fund's offshore mutual fund's assets, when, in fact, he purportedly knew this representation to be false. As noted in the AWC, Fernandez-Pena purportedly believed that the Colombia pension fund was only in interested in investing in funds where no investor owned over 10% of the assets. The AWC alleges that Robeco had previously denied Fernandez-Pena's request to include that statement because one shareholder held over 10% of the assets.

A New, Improved Version?

In addition, of the alleged disclosure fraud, the AWC asserts that Fernandez-Pena affixed without authorization onto the certificate letter the  signature of a Robeco employee. In May 2013, Fernandez-Pena sent the falsified letter with the forged signature to the Colombia pension fund via his personal email account, which seems to have been an intentional circumvention of his Robeco email address. No copies were sent to any Robeco email address.

All That For Nothing

The Colombia fund did not purchase the offshore mutual fund and sometime around August 2013, Fernandez-Pena purportedly deleted the email from his personal account.

Damage Control

According to online FINRA BrokerCheck records as of February 18, 2015, Robeco Institutional Asset Management "Discharged" Fernandez-Pena on September 10, 2013, based upon allegations:


FINRA deemed the conduct above to constitute violations of FINRA Rule 2010 and 4511. In accordance with the terms of the AWC, FINRA imposed upon Fernandez-Pena a Bar from association, in any and all capacities, with any FINRA member firm.

Bill Singer's Comment

Compliments to FINRA on a succinct AWC that explores a fascinating chink in the compliance armor of many firms.  

An interesting exercise is to consider what policies/procedures could be implemented to try to avoid a recurrence of the cited misconduct. For starters, it might be a better practice not to issue a certificate letter from Legal to anyone other than the party relying upon the representation.  Another possible option would be to ensure that someone in Legal timely communicates directly with the intended recipient of the certificate letter to verify that what was transmitted was what was received.