By Ann C. Logue
At most brokerage firms, the compliance folks are buzzkills. They re-write analyst reports to make them boring, break trades that everyone knows were fine, and send out boring memos reminding people of their continuing education obligations. The culture at the compliance office of the Goldman Sachs office in Warsaw, Poland, was allegedly a bit different. This week, the SEC charged Jose Luis Casero Sanchez, a compliance analyst in that office, with insider trading. As part of his job, Casero Sanchez received information about corporate finance transactions so that he could monitor trades by other employees. He allegedly used that information to place trades in US-based brokerage accounts held in the names of his parents, earning $471,000 between September 2020 and May 2021.
Goldman Sachs remains in business. Another trader charged this week, Keith Wakefield, bankrupted his employer. While he was at IFS Securities in Atlanta, Wakefield made unauthorized trades in US Treasury securities. He might have gotten away with it if they were winning trades, but they were not. Instead, the trades generated millions in losses that ruined the firm. Wakefield generated $820,000 in commissions at the same time. Wakefield has disgorged those gains.
TCA Fund Management, a registered investment advisory, was also in the news. In January of 2020, three employees filed whistleblower suits with the SEC, claiming that the firm had overstated its assets and performance. An investigation showed that the whistleblowers were on to something, and the firm is now in receivership. This week, the SEC charged the firm’s former CEO, Robert Press, and its chief portfolio manager, Donna Silverman, with fraud. This seems to be the final step in the case.
Filing a whistleblower suit is probably the best way for a compliance staffer to make money, although it is not easy. If a firm had robust compliance, this would be impossible, but if the CEO and chief portfolio manager are in on the fraud, the compliance department probably has trouble doing its work. The worst way is to engage in insider trading; the SEC will happily step in if the compliance department needs help. As annoying as the memos may be, good compliance will keep a firm in business.