Failure to Supervise Case Stresses E-Mail Reviews
A broker-dealer agreed to pay FINRA an $800,000 fine for inadequate supervision that allowed two traders to hide losses. FINRA charges that the firm’s practice of randomly reviewing one e-mail per trader per day did not constitute sufficient supervision because a more comprehensive review program would have highlighted the traders’ activities. The firm also failed to review daily trade blotters. FINRA charges that the traders tried to hide CLO trading losses by compensating a hedge fund client that purchased the security out of inventory.