SEC officials seek clarity on compliance officers’ liability
Two prominent figures at the SEC called upon the agency to clarify whether CCOs can be held liable for the misdeeds of other employees. In a survey by Reuters 53% of CCOs expect their liability to increase in 2014. CCOs fear that with the heavy amount of rules flowing from regulators, they will soon be held to the same legal standard as managers at their firms. If they are found to be more liable, CCOs will find themselves being scrutinized for “failure to supervise” if an employee violates securities laws. The issue at the moment only pertains to CCOs at B/Ds, not RIA firms.
SEC says ex-broker bilked investors after losing license
A broker who had been stripped of his license back in 2009 was recently caught conning investors again. Scott Valente, who was booted from the industry in 2009 for falsifying client confirmations was caught stealing nearly $3 million in client funds. Despite being barred, Valente was able to raise close to $8 million by guaranteeing returns and distributing client statements that reflected non-existent positive returns. His firm had actually lost money and he spent a chunk of client money on a lavish lifestyle. During his licensed days, Valente racked up 20 complaints in 20 years.
Compliance is the seat of power & responsibility
In an era of escalating regulations, compliance officers must recognize the responsibility they have, and the consequences that arise if they fail to satisfy that responsibility. Compliance officers have been uneasy since FINRA fined Brown Brothers Harriman $8 million and handed their compliance officer Harold Crawford a one month suspension along with a $25,000 fine for his failure to comply. This particular event gave many compliance officers the impression that as their power increases with regulation, so does their liability.
Brokers dodge customer complaints with bankruptcy
Brokers with multiple customer complaints are now using a loophole that freezes litigation against them if they file for bankruptcy. The loophole exists in Section 362 of Bankruptcy code, which halts litigation against those in financial dire straits. The article highlights the history of complaints against a broker whose firm was expelled last year. These complaints could have potentially cost him millions of dollars and his license if not for the bankruptcy he recently filed. Victims of the brokers will have to wait years for action and will be left with little restitution if any at all.