Category Archives: FINRA

“The Big Chill”: Personal Liability and the Targeting of Financial Sector Compliance Officers

by Court E. Golumbic


Prominent law enforcement and regulatory officials have referred to financial sector compliance officers, as “essential partners”[1] in ensuring compliance with relevant laws and regulations, whose “difficult job[s]” merit “appreciat[ion] and respect.”[2] Officials have noted the critical role these professionals play in shaping the culture of financial institutions, as well as the industry more generally.[3] However, a series of recent enforcement actions in which financial sector compliance officers have been personally sanctioned[4] has strained this partnership, fueling concerns among financial sector compliance officers that they are being unfairly targeted.[5]

Law enforcement and regulatory officials have responded to these concerns with assurances that both the ethos of a partnership and their even-handed enforcement approach remain intact.[6] Officials have stressed that in the rare instances in which financial sector compliance officers have been held personally accountable, the majority had engaged in affirmative misconduct.[7] Rarer still, they contend, are cases where compliance officers were found to have exhibited “wholesale” or “broad-based” failures in carrying out responsibilities assigned to them.[8] In these particular cases, officials have stressed that the enforcement actions proceed only when, after carefully weighing the evidence, the facts indicate that the compliance officers “crossed a clear line.”[9] Continue reading

Compliance Personnel: The “Architects and Engineers” of Automated Compliance Systems

by Onnig H. Dombalagian

As algorithms have increasingly come to dominate trading in financial markets and the delivery of financial services, regulators have responded by increasing reliance on high-tech surveillance. The SEC’s new quantitative tools—such as MIDAS, NEAT, and the Accounting Quality Model—not only monitor markets for fraudulent, unfair and unethical conduct, but reinforce the SEC’s ambition to extract, structure, disseminate and analyze more financial and trading information from issuers, markets, and intermediaries. The SEC is not alone: FINRA’s aborted CARDS initiative would have imposed significant record-keeping requirements on firms so that its automated analytics could identify problematic sales practices and trigger appropriate enforcement action. Continue reading