BD/IA Hit With $850,000 Fine for Failing to Enforce Information and Trading Policies
An investment bank agreed to pay an $850,000 penalty and appoint an independent consultant for failing to establish, maintain, and enforce policies and procedures to prevent use of material nonpublic information. The SEC alleges that the respondent, in contravention of its own policies, allowed un-chaperoned communications between research and investment banking functions and failed to enforce email firewalls between the two functions. The SEC alleges that the firm also failed to monitor personal trading of securities on a Watch List primarily because the firm allowed employees to maintain personal trading accounts away from the firm. The SEC charged violations of Section 15(g) (formerly 15(f)) of the Exchange Act.
OUR TAKE: The SEC is showing that it will take seriously violations of compliance policies even where it has not alleged any underlying client harm. Also, firms should consider this case before allowing personal trading accounts outside the firm’s supervisory capabilities.