CCO Fined and Suspended for Failing to Supervise
The Chief Compliance Officer of a broker-dealer has been fined and suspended for failure to supervise brokers who are alleged to have engaged in churning and unsuitable trades. FINRA alleges that several of the brokers had disciplinary histories and came from firms with significant disciplinary records. FINRA criticized the CCO for assigning front line supervisory responsibilities to branch office managers who were either inexperienced or had disciplinary histories themselves. FINRA also charged the CCO for failing to heed obvious red flags and implement adequate monitoring procedures. FINRA also charged the firm and the COO.
OUR TAKE: This is a reminder to CCOs that they cannot simply offload responsibility to line managers especially where red flags suggest heightened supervision.