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Director of Compliance Charged with Using House Account to Funnel Funds 

Director of Compliance Charged with Using House Account to Funnel Funds 

The SEC charged a BD’s Director of Compliance with using his position to help defraud investors and misappropriate funds.  The SEC alleges that the respondent opened an unmonitored house account for deposit of illegally obtained funds solicited by his brothers who purportedly sold shares in fictitious securities and funds.  The SEC asserts that the respondent was the person responsible for monitoring house accounts, suspicious transfers, and AML activity so that nobody in the firm checked his activities.

OUR TAKE: Firms need to implement an independence check on all activities involving client funds.  No money should ever move without two signatures.  Additionally, we recommend a periodic third party review of all compliance and operational activities.  This is the kind of case that supports the SEC’s move toward requiring third party compliance reviews.

http://www.sec.gov/litigation/admin/2015/33-9794.pdf

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