Philadelphia partner Mary Hansen spoke with Corporate Counsel about a recent enforcement case brought by the U.S. Commodity Futures Trading Commission (CFTC) which held the chief compliance officer (CCO) of Phy Capital Investments accountable for allegedly engaging in fraud upon customers and lying to the National Futures Association, a self-regulating agency.
Hansen told the publication that while the CCO’s misconduct warranted enforcement attention regardless, “his decision to try to cover by lying to the National Futures Association and providing them with false documents undoubtedly made the situation much worse.”
Hansen said making misrepresentations to examiners “is never worth it. It’s better to deal with the violations than try to ‘make it better.’ With the National Futures Association, candor is of utmost importance.” She said it was an interesting case because the CFTC has a rule against lying to regulators, while the Securities and Exchange Commission does not.
She said the action served as a warning shot to CCOs, showing they are in the sights of the regulatory agencies. “In the last couple years, we’ve seen more compliance officers charged,” she added, “and that’s not going away.”
Hansen said the case was especially interesting because it showed the agency’s willingness to reach across international borders into Brazil for the CCO.