CCO Fined and Barred for Failure to Supervise
The CCO of a BD and RIA was ordered to pay a $65,000 fine and was barred from association in a supervisory capacity by order of an SEC Administrative Law Judge in connection with failure to supervise charges. The SEC had charged the CCO with failing to properly supervise several brokers who the SEC alleges made unsuitable variable annuity recommendations to elderly customers. The SEC alleges that the CCO failed to take appropriate action after certain red flags were raised. The ALJ opined that a CCO can be held liable for failure to supervise where the CCO is “shown to have the responsibility, ability, and authority to affect the conduct of an employee who has violated the securities laws.” The ALJ wrote that the CCO “could counsel registered representatives, require training, issue training letters, and issue small fines” and could pursue larger fines and fire employees following consultation with the firm’s president.