CCO barred by SEC for not monitoring employee trading


SEC Ban CCO for not Monitoring Trading of Employees

A broker dealer CCO has been banned from a supervisory role due to failing to properly monitor employee trading activity.

The SEC claim had the Chief Compliance Officer carried out his responsibilities and monitored employee trading fraud could have been prevented.

The Facts of the Employee Trading Case

Throughout the relevant period, FTC engaged in a general securities business, transacting in debt and equity securities on behalf of mostly South American institutional customers. The firm was relatively small; it had thirteen employees, twelve of whom were registered, and served as introducing broker for approximately 110 customer accounts, which cleared through BNP Paribas Securities Corporation ("BNP") or Penson Financial Services, Inc.

In April 2008, Citgo and its parent company opened brokerage accounts with FTC, with Clamens as the registered representative on the accounts. Over the next six months, until the fraud came to light, Clamens, with the assistance of Lina Lopez, engaged in tens of millions of dollars of unauthorized trades in Citgo’s accounts, including purchasing millions of dollars worth of bonds issued by an FTC affiliate. Lina Lopez assisted Clamens in carrying out the fraud by communicating to Citgo fabricated rates of return on securities that FTC was not authorized to sell and by creating and emailing to Citgo false account statements showing holdings in certificates of deposit and money market funds – the investments Citgo had authorized FTC to make on its behalf, which FTC had not made – instead of the unauthorized investments.

10. As a result of this conduct, Clamens and Lina Lopez violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted FTC’s violations of Section 15(c) of the Exchange Act.

11. On May 19, 2009, the Commission filed a civil enforcement action against Clamens, Lina Lopez, FTC, and Emerging Markets alleging, among other things, violations of the antifraud provisions of the federal securities laws, based on the fraud on Citgo, Securities and Exchange Commission v. FTC Capital Markets, Inc., et al., Civil Action Number 09 Civ. 4755 (S.D.N.Y.). On August 26, 2010, a final judgment was entered by consent against Clamens and Lopez, that, among other things, permanently enjoined them from violating Section 17(a) of the 4

Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from aiding and abetting violations of Section 15(c) of the Exchange Act.

12. On October 16, 2009, Lina Lopez pleaded guilty to criminal charges arising out of the fraud on Citgo in a case entitled United States v. Nazly Cucunuba Lopez, 09 Cr. 985 (RPP).

Click here for full article