BD President Sanctioned for Failing to Supervise Inexperienced CCO
The President of a broker-dealer was fined and barred for failing to supervise an inexperienced and ineffective Chief Compliance Officer. The CCO failed to properly monitor and halt excessive mutual fund trading by a registered rep. The CCO had difficulty analyzing the firm’s trade blotter and mutual fund reports even after a compliance consulting firm was hired to assist. FINRA faults the President for failing to recognize the CCO’s failures and take the necessary action to implement an adequate supervisory system. FINRA blames the President because he “was ultimately responsible for supervision.”
OUR TAKE: Do you know if your CCO is competent? Firm leaders do not satisfy their obligations to implement a compliance and supervisory system by merely calling somebody the Chief Compliance Officer. A CCO must be competent, have the necessary resources, effectively implement policies and procedures and test them. Then, firm management must monitor the CCO to ensure that the CCO adequately performs the role.