Supervisor Ignored Compliance Red-Flags and Supervisory Procedures
The SEC filed a settled enforcement action against the Vice Chairman of a BD who had ultimately responsibility for supervising a broker who violated several securities laws. The SEC alleged that the Respondent ignored several memos from compliance personnel recommending termination of the broker. Instead, the Respondent assumed direct supervisory responsibility, and, in such capacity, failed to follow the firm’s supervisory procedures. Several investors eventually filed civil lawsuits against the firm.
OUR TAKE: Once the compliance department documents wrongdoing and recommends disciplinary action, senior management must take significant action. Defending the broker against the compliance staff and assuming direct supervision may endanger both the supervisor and the firm.