BD Owner/Principal Barred for Compliance Failures
FINRA fined and barred from the industry the owner/principal of a broker-dealer for failing to properly delegate and implement an effective compliance program. FINRA faults the respondent, who was also the firm’s named Chief Compliance Officer, for failing to appropriately delegate compliance responsibility to ensure adequate compliance and supervision. Although he hired a compliance supervisor, FINRA asserts that she had limited industry experience, no background in the firm’s business, and “no authority to affect procedural or personnel changes.” Moreover, FINRA says the respondent took insufficient steps to ensure that she was properly executing her responsibilities. FINRA states that the failure to properly implement the compliance program resulted in several regulatory failures including AML surveillance obligations, supervisory failures, and books and records deficiencies.
OUR TAKE: It is simply a huge mistake for a non-regulatory firm principal to assume the CCO function. Lack of focus and relevant knowledge and experience can lead to this type of enforcement action, which ultimately sinks the firm when the principal is inevitably barred from the industry. Also, just hiring somebody isn’t enough to defend against charges of insufficient compliance or supervision. You need to hire the right person with sufficient knowledge and authority to get the job done right. “We gotta person who does that” will not convince the regulators that you have an adequate compliance program.