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Stories of Interest
- Latham & Watkins Chair Bill Voge Resigns Over Sexual Messages
- Jefferies Equity Trading Slips Even as Volatility Increases
- Can Jes Staley Fix Barclays Fast Enough?
- Deutsche Bank Slides 6.2% After Warning of $550Mn Q1 Headwind
- UBS to Pay $230Mn to N.Y. in Mortgage Securities Probe
- With At Least 190 Cryptocurrency Exchanges, Here's How to Pick Right One
- Mark Zuckerberg Lost $9Bn in Wealth Over Past 48 Hours
- Keynote Address, ICI 2018 Mutual Funds & Investment Management Conference
- SEC Announces Largest-Ever Whistleblower Awards
- From a $126Mn Bonus to Jail: Fall of a Star Trader
- Barclays Shares Surge as Activist Takes 5.2% Stake
- Standard Chartered Puts Compliance Head Neil Barry on Leave
- Goldman Sachs Pays Women in U.K. 56% Less Than Male Colleagues
- Deutsche Bank Leads Bulls with Higher Trading Revenue Forecast
- SocGen Cuts Traders' Bonus Pool by a Quarter
- Point72's Haynes Resigns as Cohen Seeks a New Type of Leader
- Steve Eisman, Who Called the 'Big Short' During Financial Crisis, Sleeping Easy Now
- Bitcoin's ‘Death Cross’ Looms as Strategist Eyes $2,800 Level - From Current Price of $8,120
- U.K. Brokerage Firm, Investment Manager, CEO Manipulated Trading in U.S. Microcap Stocks - SEC
- Billionaire Investor John Paulson's Hedge Fund Is 'Rightsizing', And a Bunch of Senior Staff are Leaving
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NEWSLETTERS & ALERTS
Financialish Take Aways: Holding CCOs Responsible for Inadequate WSPs
When reading cases where FINRA sanctions a firm for failing to establish, maintain, and enforce a reasonable supervisory system designed to ensure the review of ( ….. ), my first inclination is to question whether that firm’s Chief Compliance Officer, or CCO, was responsible. My suspicions grow stronger when, further into the case, FINRA contends in its findings that “the firm did not have written procedures reasonably tailored to address” the inherent risks of the specific product(s) and/or behavior central to the case.
Such was the scenario in Monday’s case study involving Capital City Securities (“CCS”). FINRA fined CCS for its failure to adequately supervise as many as half its registered reps who, over a 3-year period, sold unsuitable Non-Traditional ETFs to firm customers. What made these transactions particularly troublesome was the fact that many of the firm’s customers held these highly volatile products for long periods of time. Such longer holding periods run counter to industry standards, which is that retail investors should typically not hold these products for more than one trading session. [See FINRA RegNote 09-31 - “Non-Traditional ETFs.]
And throughout the Relevant Period in this case - from July 2011 through November 2014 – while CCS registered reps were buying and holding these Non-Traditional ETFs for their customers, one individual served as the firm’s president and CCO - Todd Crawford. Mr. Crawford began serving in those positions in October 2007, and continues to hold the positions to this day - according to FINRA CRD records. Yet, Mr. Crawford was never disciplined for any related failures or alleged violations.
► As CCO, was Mr. Crawford responsible for “establishing, maintaining and enforcing” reasonable and adequate supervisory procedures related to Non-Traditional ETFs?
► As president, was Mr. Crawford responsible for certifying the firm’s internal controls and supervisory procedures?
► And, if Mr. Crawford was not responsible, then then was or should have been?
Without intending to be mean-spirited, and without bearing any ill-will toward Mr. Crawford, I simply am trying to identify the stakeholders in such cases. And while I seek answers to these questions, I also wonder how and if FINRA will revise its disciplinary process - so as to assign appropriate responsibility while ensuring that imposed penalties or sanctions are not all-too-severe.
After all, FINRA seeks to partner with its member firms and their associated persons, and not disenfranchise them. Thank you, FINRA CEO Robert Cook.