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FSA bans and fines compliance officer £14k

The FSA has fined a compliance officer £14,000 and banned her from performing any significant influence function in regulated financial services for failing to properly investigate investors’ concerns.

Dr Sandradee Joseph was a compliance officer at Dynamic Decisions Capital Management, a hedge fund management company based in London and Milan.  

In the wake of the collapse of Lehman Brothers, the investment strategy adopted by DDCM for the fund it managed resulted in losses totalling approximately 85 per cent of the fund’s total assets under management. To conceal the losses, in late 2008, a senior employee at DDCM entered into a number of contracts, on behalf of investment funds managed by DDCM, for the purchase and resale of a bond.  

Various investors raised concerns that the bond was not legitimate, and DDCM’s prime broker resigned as a result of its concerns. Joseph failed to consider the reasons for the prime broker resigning and despite being aware of the investors’ concerns about the bond she failed to properly investigate those concerns or act upon the information.

The FSA says Joseph did not engage with her responsibilities as compliance officer and therefore failed to act with due skill and care. She relied wrongly on another employee of DDCM, and on her belief that external lawyers were instructed and would have acted on concerns as appropriate.  

FSA acting director of enforcement and financial crime Tracey McDermott says: “Joseph’s failure, as compliance officer, to challenge a colleague, investigate and act on the information she received, resulted in DDCM and the FSA being unable to take appropriate action.

“Joseph took far too narrow a view of her role as a compliance officer. She failed to understand the importance of her role and the wider regulatory obligations it brings. The FSA is committed to driving up standards across the industry and will take robust action against those who do not meet our standards.”  

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Joe Egerton - Justice in Financial Services 22nd November 2011 at 11:12 am

    The FSA is right to require high standards and a fine and ban is what IMRO would have imposed. But it is quite nauseating to see an individual from a small firm treated like this while Capita and i9ts people get off scot free over Arch cru. IMRO fined MGAM over teh Peter Young scandal despite it being part of the mighty Deutsche Bank group – and banned compliance officers. FSA is showing itself to be the playground bully.

  2. If she had presided over the rampant mis selling of PPI, or investments – say to the tune of £3billion – then she wouldn’t have even been troubled by the FSA.

    The lesson?

    If you’re going to do it – do it big and to it in a bank!

  3. Where are the bans for the big boys? banning one individual compliance officer is only a start as far as I am concerned.

    The FSA really need to start looking at senior managers and how they use junior managers and compliance officers as scape goats. If a senior compliance officer is involved in this type of thing then surely the board members and the directors of the company should also be held responsible as they are the ones that gave the authorisation to market these products and to hide details from the regulator. The compliance officer is but a puppet

  4. Jo, Chris & Peter. bang on. If this was a Bank employee there would be no censure.

  5. Personally I find the stance of the regulator scary. Having fulfilled the role of Compliance oversight for a large IFA I find it terrifying that the FSA can levy fines and ban people. In larger fims fulfilling any senior position is always very difficult, because the balance is always tipped towards commerciality as aposed to regulatory/compliance. In the past I have raised concerns and been over-ruled – whilst I have always made sure this was minuted, one wonders whether the FSA would expect the compliance oversight to ‘blow the whistle’. Now I’m not talking about illegal activities, just firms seeking to advise in higher risk area perhaps. The FSA need to realise that most compliance personnel earn significantly less than other senior staff and yet it appears now are liable to face industry bans for simply doing their job. As I said I’ve held the position and felt I was being asked to approve things I was not entirely happy with, my personal choice was that I had to resign – is this really what I’m going to faced with for the next 30 years?

  6. Dear Rob,

    There are couple of things that need to be raised in your comments above:

    First the role of the compliance officer is to make sure that the firm is abiding to the rules laid down by the FSA and if the firm is not complying with these rules then it is the responsibility of the compliance officer to inform the Board that they are in breach of these rules and if the board takes no action then to inform the FSA.

    The compliance officer should keep accurate records in respects to their recommendations to the board or senior management of the firm, if the board or senior management overruled the compliance officer then that officer needs to consider whether they need to inform the FSA or document their reservations.

    This article shows up that many senior management and board members of larger firms use compliance officers as scapegoats, this of course is unacceptable and is something that the FSA needs to take into consideration.

    In respects to remuneration it’s up to the industry to start recognising that senior compliance officers of their to put the brakes on the risk takers who often get their organisations in trouble. I would say that a senior compliance officer should be remunerated at a reasonable level to illustrate the level of risk that they are personally taking.

    If you don’t have banning orders and finds then I’m afraid to say the industry is doomed to repeat the mistakes of the past. After all sometimes the threat of punishment can be a positive driver future mentality.

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