Being a CCO is a very demanding job. CCOs have to balance being the bad guy with remaining open so that people feel comfortable interacting with them. They have to keep the lines of communication open while maintaining control. It’s like a high wire act at the circus, one misstep and you better have a safety net. And with the Dodd-Frank Act and the ever changing regulatory environment, the CCOs balancing act is even more precarious.
Being able to read a regulators mind would be a very useful ability for a Chief Compliance Officer to possess. But absent that ability, reviewing the cases brought by regulators against firms can give you a pretty good idea of what’s on their mind. When I look at the cases brought by the SEC in May, I wonder if Chief Compliance Officers realize they are in the regulators crosshairs. CCOs may be the police for the industry but the regulators are internal affairs.
Monday, June 27, 2011
Monday, June 13, 2011
SEC Alleges Former Employee of Investment Adviser Aided and Abetted the Violation of SEC Rule 204-2 (Books & Records Requirements)
On June 6, 2011, the U.S. Securities and Exchange Commission ("SEC") charged a long time employee at Bernard L. Madoff Investment Securities LLC ("BMIS") with "aiding and abetting violations of Section 204 and Rule 204-2 of the Investment Advisers Act of 1940 (the Adviser Books and Records Violations)."
The SEC alleges that BMIS, "failed to make, maintain on its premises, or keep accurate, certain books and records required by law." The SEC noted several examples where the firm failed to maintain accurate cash receipts, disbursement records, accurate ledgers, and failed to keep true and accurate bank statements, cancelled checks and cash reconciliations. This is a violation of the Books and Records requirements. The SEC alleges that as an employee in investment advisory operations, the BMIS employee assisted in falsifying documents, making repeated material misrepresentations, and generated fictitious account statements; thus, violating the Investment Advisers Act of 1940, Rule 204-2 and perpetuating the firm's violations. One has to wonder how many more BMIS employees have yet to be charged?
The SEC alleges that BMIS, "failed to make, maintain on its premises, or keep accurate, certain books and records required by law." The SEC noted several examples where the firm failed to maintain accurate cash receipts, disbursement records, accurate ledgers, and failed to keep true and accurate bank statements, cancelled checks and cash reconciliations. This is a violation of the Books and Records requirements. The SEC alleges that as an employee in investment advisory operations, the BMIS employee assisted in falsifying documents, making repeated material misrepresentations, and generated fictitious account statements; thus, violating the Investment Advisers Act of 1940, Rule 204-2 and perpetuating the firm's violations. One has to wonder how many more BMIS employees have yet to be charged?
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