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Day: February 1, 2018

Broker Ignored Compliance Training and Churned Accounts

 

The SEC barred a broker from the industry for recommending an unsuitable in-and-out trading strategy that generated significant commissions.  The SEC asserts that, given the costs, returns, and customers, the defendant had no reasonable basis to determine that a high volume trading strategy was suitable.  According to the SEC, the broker should have known better because he attended firm-wide compliance training that addressed the importance of reasonable basis suitability.

OUR TAKE: Compli-pros should take comfort that the compliance training helped insulate the firm from liability against the rogue actions of this employee.  Also, firm leaders should note that the SEC will prosecute individuals that violate the securities laws as part of its effort to root out bad actors.

https://www.sec.gov/litigation/complaints/2017/comp-pr2017-223.pdf