A recent SEC settlement with affiliates of a large insurance and asset management firm highlights how an employee, charged with criminal offenses outside the office, can negatively impact their employer during an SEC investigation. During its review of faulty research models relied on by certain investment products offered, the SEC cited the models’ numerous errors as directly related to their development by an inexperienced quantitative analyst and portfolio manager, who it turns out, was previously charged with sexual misconduct and assault. Amy Lynch, Founder and President of FrontLine Compliance, explains that firms need to decide what employee wayward behavior will cross the line and violate its code of ethics, plus create potential reputational damage for the firm, and then take appropriate action. Ms. Lynch further comments that firms are beginning to realize that one-time, point-of-hire background checks are not enough. See IGNITES (subscription required), “Aegon PM Who Created Faulty Models Has Arrest Record.”
