Real life compliance question

Consider the trader who recently committed the billion dollar fraud. Hypothetically, have all his superiors (if they were CFA charterholders) violated the standards on Supervisory responsibilities? What if supervisors had adequate compliance procedures in place that would cover almost all instances of issues, would they still be in violation if something very, very unusual happens? If you are found to have violated the standards, what happens? Is your charter taken from you, never to be given back?

I think violating the CFA standards is the last thing on his and his superiors mind right now. The guy will never be in the industry again.

Never be in the industry!?! He’ll be too busy writing books, giving speeches, touring, etc. etc.

Just like Leeson. There is no justice.

well I think either the supervisors did not have adequate compliance measures in place or the bank just isn’t telling all. I wouldn’t be surprised if his actions were sanctioned by his superiors and he is now just being used as a scapegoat. I dont see how smeone would have leeway to trade with that much money unsupervised!

The guy hacked into the computers. This is an unusual enough event that supervisors may get a pass. It doesn’t seem like massive negligence just because they couldn’t tell the guy was writing code, though I don’t know enough of the nitty gritty details. Basically, you are on the hook as a supervisor if - once learning about something unethical - you do nothing, or that the thing that was being done was easy enough to detect that you should have detected it. If the supervisor was not an operations guy and couldn’t figure out for himself that the guy was balancing his trades in a unique way just to bypass the systems, it is not unreasonable for him to miss it and be off the hook. The question does seem to be how could 7.x billion dollars disappear and go unnoticed. Surely there must have been other signs…

I agree that CFA charters are the least of anyone’s concerns now, but his supervisor has a problem if he is a charterholder. As the wole thing unwinds there will be lawsuits and investigations by regulatory agencies explicitly naming the supervisor. The supervisor will fill out his professional conduct form accordingly and CFAI will initiaite a PCP inquiry. They will send him a letter asking him for all documents relating to the incident. There will be all kinds of restrictions on these documents from his own lawyers, his firm, and courts so he won’t be able to comply with CFAI’s request. CFAI will tell him that they will keep these documents in the strictest confidence. The supervisor fearing jail, financial ruin, and the wrath of people out billions of dollars won’t believe them (professional organization privilege doesn’t exist). So he will send them a letter stating that it is impossible to send them that info or to participate in any such inquiries. His lawyers will then advise him to just jettison the charter and focus on other more important things. And this guy may have done nothing wrong.

Has the CFA ever removed the charter to someone for failing his duties as a supervisor?