Late last year the Securities and Exchange Commission (SEC) released an opinion affirming a FINRA decision to fine a CCO for “failure to enforce WSP” (written supervisory procedures). The firm, Ocean Cross had approximately 15 associated persons and two principals in two offices between September 8, 2011 and April 30, 2012—the relevant period in this case.
There really is not much for me to add to this story. The following portions of the Opinion follow.
- “North’s failure to review the firm’s electronic communications at all over a three-month period—let alone perform the daily review that the WSPs required—establishes his liability.”
- “North’s conduct represents an unreasonable departure from the WSPs and is a sufficient basis for his liability.”
- “For example, absent unusual mitigating circumstances, when a CCO engages in wrongdoing, attempts to cover up wrongdoing, crosses a clearly established line, or fails meaningfully to implement compliance programs, policies, and procedures for which he or she has direct responsibility, we would expect liability to attach.”
- “Here, North operated in nearly complete non-compliance with the WSPs he established and that rendered him responsible for reviewing emails.”
- “FINRA’s Sanction Guidelines recommend a fine of $5,000 to $73,000 and a suspension in all principal capacities for up to 30 business days for failing to establish and maintain reasonable supervisory procedures and, in egregious cases, recommend imposing a longer suspension in all capacities or a bar.”
“We also agree with the NAC that, “[n]onetheless, the quality of North’s enforcement of the WSPs related to electronic correspondence was insufficient and reflects his inattention to his responsibilities in this regard.” The $5,000 fine imposed for North’s misconduct here will protect the public by encouraging North to take his responsibility for the tasks he is required to perform more seriously in the future. Under the facts and circumstances of this case, we find that FINRA’s imposition of a $5,000 fine is a remedial sanction and is neither excessive nor oppressive.”
The camel’s nose is in the tent.