CCO Censured for Misleading Form BD About Foreign Control Relationship
The Chief Compliance Officer of a broker-dealer agreed to a 3-month ban, a fine, and cooperation with the SEC in connection with a foreign control party’s solicitation of US investors. The SEC alleges that a foreign broker-dealer that controlled the US broker-dealer solicited US investors to purchase Russian securities. The SEC claims that personnel of the US broker-dealer, including the CCO, referred US investors that showed interest in purchasing Russian securities to the foreign entity, which, according to the SEC, controlled the US BD through management and budget. The CCO was also responsible for marketing and solicitation activities. The SEC argues that the foreign BD did not qualify for exemption under Rule 15a-6. The SEC claims that the CCO aided and abetted the securities laws violations by failing to describe the foreign firm’s control relationship on the Form BD.
OUR TAKE: The SEC will act against a CCO that actively participates in a securities law violation and fails to take his/her compliance responsibilities seriously. Ignorance of the Form BD requirements is no excuse for someone who assumes the Chief Compliance Officer title.