Bad compliance is expensive unless you’ve got $1 million to throw away

Are Financial advisors really less trustworthy than Uber drivers?
March 23, 2016
Technology is key to CCOs keeping a seat at the management table
April 6, 2016

 

Ooooooh. This story has a painful ending…

 

Great Point Capital LLC and Michael Scott Olson, its President and Chief Compliance Officer, submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured and fined $1,100,000 (of which $50,000 is joint and several with Olson).

 

Money + third-party supervision

In addition to the $1.1 million, the cherry on top is that Great Point Capital also must retain an independent consultant to conduct a comprehensive review of the adequacy of the firm’s policies, systems, controls, procedures (written and otherwise).

 

Great Point Capital members will receive training relating to potentially manipulative trading activity which includes trading in connection with the Nasdaq opening and closing cross, layering and spoofing activity, retention and supervision of electronic communications, and short sale orders and transactions. The firm also is prohibited from trading in the Nasdaq Continuous Book while simultaneously trading in the same security on the opposite side of the market during the Nasdaq Opening or Closing Cross process. In fact, Great Point Capital cannot do such trades until it submits proof that it has implemented the recommendations of the independent consultant with respect to its supervisory deficiencies.

 

As for Mr. Olson…well, he is barred from association with any FINRA member in any principal capacity. Ouch.

 

Poor WSPs and doc retention will “bite you…”

Without admitting or denying any engagement in unethical business conduct, the firm and Olson agreed to settle the FINRA charges that the firm and Olson failed to establish, maintain and enforce reasonable written supervisory procedures (WSPs) with respect to its suspect trading activity. FINRA also noted that no one was responsible for the firm’s retention of electronic communications  and failed to retain trader-to-trader electronic communications.

 

Moreover, except for a suspension period resulting from a Previous FINRA disciplinary action (See Patrina’s Blog – Are Financial Advisors Less Trustworthy than Uber Drivers), Olson was responsible for establishing and enforcing the firm’s supervisory system and procedures with respect to electronic communications, including the firm’s email retention policy. Which he did not. Nor did he ensure that any other supervisor(s) with delegated authority do so.

 

Compliance would have been cheaper

Really. It’s less costly to do the right thing and to be safe, secure and compliant. Because no one is immune from the regulators. No one. Compliance is a fact of life. And plenty of “bad actors” do get caught. Don’t be that company. Unless you’ve got an extra $1 million lying around.

 

Let’s talk instead. Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.

 

Let’s talk (212- 233-1155).

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