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Senior Execs and Firm Charged with Compliance Failures

The SEC has commenced enforcement proceedings against a large broker-dealer and two senior executives for failing to implement required compliance procedures for its sponsored access business.  The SEC alleges that the firm allowed unfettered market access to foreign trading firms without the required compliance controls relating to naked short sales, wash trades, manipulative layering, and money laundering.   The SEC says that the two executives responsible for the unit had responsibility for implementing the required compliance controls.  The SEC also alleges that the firm and the executives had adequate notice of the deficiencies after several regulatory actions against the firm’s clients, an SEC exam deficiency letter, and meetings with SEC staff.
OUR TAKE: The SEC is holding senior executives, rather than compliance staff, accountable for failure to implement required compliance procedures.  The SEC notes that the two senior executives gained financially by the business unit’s success.  In our view, the SEC is placing responsibility where it belongs i.e. with the senior executives that run the firm rather than compliance officers without a financial stake in wrongdoing.

http://www.sec.gov/litigation/admin/2014/34-72340.pdf

One comment

  1. Ian Walsh says:

    The Cipperman blog entries and your ‘take’ on why SEC proceedings are initiated are always spot-on. I’ve been reading them for several months to improve my financial compliance knowledge.

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