CCO’s Boss Overrode Market Timing Surveillance
The SEC announced last week that Columbia Fundsí adviser and distributor have agreed to pay $140 million ($70 million in disgorgement, $70 million in penalties) to settle SEC market timing charges. Five former Columbia Fund executives also were charged. Among them: the firmís former chief operating officer, Joseph Palombo. The SEC alleged that Palombo ignored indications of improper trading and failed to take appropriate action when presented with concerns about market timing. One of Palomboís direct reports was the firmís CCO, who was not charged with any misconduct.
Palombo allegedly allowed executives at the fundís distributor and adviser to override efforts by surveillance personnel to block market trading. "It appears that the surveillance system did detect improper market timing trades, but certain management individuals overrode those controls and had the authority to permit market timers to continue," said Walter Ricciardi, district administrator for the SECí Boston District Office. If a compliance officer realizes his boss is overriding the compliance function, the officer "ought to bring the misconduct to the attention of the general counsel or the board," Ricciardi said.