SEC Bans/Fines CCO for Recklessly Failing to Act
The SEC upheld the decision of an Administrative Law Judge imposing a supervisory ban and fine on the CCO of a broker-dealer for aiding and abetting record retention violations. The underlying facts involved a rogue broker who, the SEC alleged, used a personal e-mail account as part of a stock manipulation scheme. The SEC alleged that the CCO knew of the personal account but failed to halt use of the account, ensure record retention, or impose discipline. The SEC emphasized that a failure to act may serve as a basis for an aiding and abetting claim where a respondent “has a clear duty to act and the failure to act itself constitutes the underlying primary violation.” The SEC also opined that a demonstration of recklessness and not “actual knowledge” was sufficient to prove the requisite intent. In this case, the SEC determined that a CCO with knowledge of the underlying violations was sufficiently reckless to establish intent.