Large RIA/BD Pays $22.5 Million Because IT Systems Caused Compliance Failures
A large RIA/BD agreed to pay $20 Million and voluntarily disgorge another $2.5 Million for failing to implement compliance policies and procedures. The SEC charges that IT issues caused the firm to violate its own procedures, thereby allowing the firm to engage in unlawful principal transactions with clients and trade while in possession of material nonpublic information. According to the SEC, the firm sought to prohibit proprietary trading with clients through an affiliated trading desk acquired in a merger but certain reports reviewed by clients omitted a wide range of trades. Additionally, the firm’s restricted list omitted a large number of trades, which made the compliance reviews inadequate.
OUR TAKE: Firms need to connect IT and Compliance so that the firm’s systems that assist compliance are fully integrated with regulatory requirements.