FSA fines and bans hedge fund Compliance officer
The Financial Services Authority (FSA) has fined Dr Sandradee Joseph £14,000 and banned her from performing any significant influence function in regulated financial services for breaching Principle 6 of the FSA’s Statements of Principle for Approved Persons.
Joseph was Compliance Officer at Dynamic Decisions Capital Management (DDCM), 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% 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 (the Bond).
Various investors raised concerns that the Bond was of doubtful provenance and legitimacy, 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.
In doing so, 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.
Tracey McDermott, acting director of enforcement and financial crime, said:
”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.”
Joseph agreed to settle during the course of the FSA investigation. She therefore qualifies for a 30% reduction on her financial penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £20,000 on Joseph.