It was an expensive lesson for chief compliance officer Eugene Mason of SFX Financial Advisory, and according to Bryan Cave attorney Scott Killingsworth in the Compliance and Ethics Blog, it could be an ominous bellwether for compliance professionals.
Mason paid $25,000 to settle charges from the U.S. Securities and Exchange Commission for failure to “effectively implement” the company’s compliance policy, which the commission found to be a “willful violation” of the Investment Advisers Act. But Killingsworth says Mason’s conduct in the situation was more akin to poor performance than bad behavior. SFX’s president embezzled $675,000 from three customers’ accounts over five years and could do this because he had signature authority on the accounts and no one else was reviewing his work. When the CCO was alerted, he performed an internal investigation and reported the crime to the authorities—all proper procedure.
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