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BCU filed a criminal complaint for "eventual" sara goldring crime

The Board of Directors of the Central Bank of Uruguay (BCU) solved this friday displace the statutory authorities of Custodia de Valores Mobiliarios (CVM) Corredor de Bolsa SA and of United Brokers SA Agent of Securities after the accusations of fraud.

Likewise, decided to inform the Prosecutor’s Office of the facts verified “before the eventual consummation of conduct typified as a crime.”

And the Montevideo Stock Exchange SA is maintained “as the controller of both entities and -therefore- as the only one authorized to exercise the powers that statutorily correspond to the corporate bodies,” the bank reported in a statement.

at the beginning of july the BCU had decided to intervene preventively by suspending the activities of the stock brokerage company, which was denounced for fraud and misappropriation by some clients. He had done the same with United Broker SA Agent for Securities. Now the regulatory authority has gone a step further.

According to the BCU, on July 25, 2022 CVM Corredor de Bolsa stated that “since its inception, the profits generated from the operations of putt sale they were distributed among the clients that made up the freely managed portfolio, in such a way that they all obtained a similar percentage return. This was done by Sara Goldring, attributing the operations to her different accounts. In essence, the members of the global account made up of the investors in the self-administered portfolio with an aggressive investment profile received the returns on the puts for years in accordance with a mechanism equivalent to that of an investment fund”.

To carry out operations on behalf of their clients, the two companies had an account in their name at financial entities abroad, where the custody of the clients’ funds and securities is located. In operational practice it is called “bus account”.

What did the BCU argue?

In one of the points of the resolution, the Central indicated that of the actions carried out after the intervention it was found that, “contrary” As indicated by CVM, “in the account statements of the clients between June 30, 2021 and April 30, 2022, the investments made, their profits and their losses were assigned individually to each client; but what “customer returns were not similar but varied significantly.”

It was also “verified” that CVM “did not record operations carried out on behalf of clients with a free administration mandate and an aggressive profile after April 30, 2022, in the individual accounts of each one, for which the statements of accounts after that date did not reflect the true situation of the clients”.

In addition, the BCU stated that although in its note dated June 17, 2022, the CVM indicates that the computer tool used for the individual accounting of customer accounts did not allow losses to be allocatedin the actions carried out it was found that there was no such impediment, but rather that the CVM management “opted to allocate the losses, globally, to an account called Pending Allocation Items (PPI)”, which in turn contains other operations pending allocation. “Therefore, the losses were not assigned to individualized clients as they would have corresponded, reflecting in their case negative positions,” says the resolution.

“Puts” and count “omnibus”

Elsewhere, the BCU establishes that it was also found that CVM and United Brokers SA Agent of Securities they did not require those clients who carried out put sales operations in the “omnibus account” to constitute the guarantee required by the custodian banks to be able to carry out this type of operation.

In this sense, it explains that when the puts were executed, several clients were left with negative positions because the funds or securities they had in their account were insufficient to pay the corresponding consideration to the counterparty and in order to cover said positions, “The intermediary affected values ​​of other clients that were in the omnibus account.” “The statutory authorities of the intervened companies tried to continue operating in this way, even after the intervention, proposing it to the intervener”, says the BCU.

This “It involved exposing the other clients included in the omnibus account to an undue risk that exceeds the mandate of free administration, because these clients did not participate in or know about such operations.meaning significant losses for the latter since their positions in cash and securities were affected when the custodian banks made the option conferred effective and executed the puts”, says the resolution of the Board of Directors.

“Salvage” and “concealment of information”

In addition, the BCU pointed out that the alleged The “rescue of the investments” that Sara Goldring claims to have carried out had as a consequence “the concealment from the clients of her true position and the true situation of CVM since it prevented clients from knowing the losses they were suffering from their investments and eventually being able to make timely and duly informed decisions.”

For the Central, the two companies involved “intentionally provided erroneous information to their clients about their positions in the account statements and hid highly relevant information from them.”

The resolution adds that the authorities of these companies rthey made “an arbitrary use of the free administration mandate, exceeding its scope, insofar as they did not always act in accordance with the purpose of obtaining the best benefit for the clients and therefore failed to comply with the current legislation and regulations on the matter.”

Lastly, the BCU Board noted that the use of global accounts in the name of the intermediary -omnibus accounts- for the administration of client securities and funds, “in no way legitimizes the intermediary to ignore the participation that in said securities and funds corresponds to each clientwhich must be scrupulously respected and determines that at all times the client’s account statement must accurately, truthfully and completely reflect their individual position in the set of securities and funds that the intermediary has in its own name but on behalf of another” .

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