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Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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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.