EVP Fined and Barred for Failing to Supervise
The senior executive of a large broker-dealer was fined and barred from supervising for at least one year for failing to supervise a branch manager and a registered representative in connection with the sale of unregistered securities. The SEC charges that the respondent, the firm’s Executive Vice President and Head of its Private Client Division, failed to follow-up on red flags suggesting that a customer’s transactions violated the securities laws. Instead, the respondent allegedly granted exemptions from the firm’s policies and procedures to allow the transactions. The SEC says that the respondent reviewed spreadsheets showing a pattern of liquidating penny stocks but did not follow up by requesting additional information. Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement, said that these types of actions “show the SEC’s resolve in holding responsible individuals, including senior managers, when they violate the securities laws.”
OUR TAKE: No longer can senior executives turn a blind eye to potentially unlawful activity conducted by their minions. The SEC will seek liability up the corporate ladder.