Another CCO Personally Liable For Fabricating Records
Quick SEC Enforcement Update
Another day—another CCO held personally liable. This level of personal accountability didn’t use to be so common.
Full order: SEC.gov - IA-6896 (PDF)
Summary:
Suzanne Ballek, then Chief Compliance Officer of a now deregistered SEC-registered investment adviser, altered and fabricated compliance records prior to submitting them to SEC examination staff. Specifically, she modified dates and filled in missing information on over 170 pre-clearance forms, many of which were created after the trades had already occurred. In some cases, where no form existed at all, she fabricated one and affixed the trader’s signature without their knowledge or consent.
Outcome:
$40,000 civil penalty
Three-year bar from acting in any compliance role across a wide range of regulated financial entities, including investment advisers, brokers, and registered investment companies.
Key Lessons and Implications
Personal Accountability: This case underscores an increasing trend of holding compliance officers personally liable for failures involving integrity and recordkeeping.
Integrity of Compliance Records: Regulatory agencies view the accuracy and integrity of compliance documentation as non-negotiable. Falsifying or retroactively inventing records cannot be justified, regardless of pressure or perceived necessity.
Bottom Line: If documentation does not exist, fabricating it constitutes a major violation, subjecting individuals to significant penalties and industry bars.
Lesson:
As I wrote yesterday: when it comes to SEC exams and compliance records, accuracy and integrity are non-negotiable. This enforcement action serves as a clear reminder to compliance professionals that maintaining truthful and contemporaneous records is essential.