Why you don’t outsource compliance

John Derek Lane, president and CEO of Lane Capital Markets, has been sanctioned by the Financial Industry of Regulatory Authority (FINRA) for delegating all of his compliance related duties to his CCO from May 2009 to March 2010.

While delegating duties is not prohibited, and in fact happens often at smaller firms where the compliance workload may not require a full time compliance officer, Lane’s CCO was only a part-time employee. Furthermore, the CCO was simultaneously serving as a compliance officer and part-time financial and operations principal at other FINRA firms.

Lane was aware of these outside responsibilities, and also of the fact his CCO was failing at supervising the Greenwich, Connecticut branch where two key brokers had troubled histories. To make matters worse, he failed to prepare an annual certification of his firm’s processes for two years running.

FINRA deemed such failures to constitute violations of several NASD Conduct Rules, and Lane has been fined $20,000 and suspended.

Read the full summary of the case written by Wall Street blogger Bill Singer, and find out his thoughts on why FINRA took so long to apprehend John Lane.

Read: Warning, sleaze and bad regulation ahead