CEO and GC/CCO Fined and Censured for Failure to Supervise
The SEC censured and fined a broker-dealer, its CEO, and its GC/CCO for failing to supervise a broker that engaged in multiple illegal trading schemes. The SEC alleges that the CEO, who had direct and ultimate supervisory responsibility, unreasonable delegated supervisory responsibility to the GC/CCO because he never followed up to determine if proper supervision occurred. The delegation by the GC/CCO to a compliance manager was determined to be unreasonable because he failed to ensure proper supervision including the daily review of e-mails. The SEC also charged that the firm did not provide adequate resources to upgrade the compliance staff to supervise the broker’s retail business activities. The SEC claims the respondents ignored several “red flags” including customer complaints and unauthorized trading that violated the firm’s WSPs.
OUR TAKE: Notable is the SEC’s assertion that adequate supervision includes following up on any delegation of supervisory authority and ensuring that the compliance function is adequately resourced.