70 Journal of Regulatory Compliance Issue II
and commissions as a direct result.184 Initially, Feltl’s advisory business was
only a fraction of the total company.185 The CCO186 spent 95% of his time
on compliance issues for the brokerage side and only 5% on the advisory side
through 2010.187 In December 2010, a deficiency letter was issued from the
SEC stating the compliance program was severely lacking from the advisory
side.188 Feltl violated several rules, was fined, and censured, and the SEC
ordered several remedial programs for the company’s compliance
This case is another example of the sort of enforcements that should be
happening. The company was caught being noncompliant, had to pay back
any money gained from violation of the SEC rules, and had to create a strong
program to stop any further violations.190 A key takeaway here is that the
CCO was not held personally liable for not dividing up his time better,
implementing policies to catch the violations, and doing the necessary
revamp of the compliance program. The CCO was focusing on what had
been deemed important for the company, and the SEC did not penalize him
for this. Other cases will be reviewed later in this paper seem very similar
facts, but have very different outcomes for the CCOs involved.
C. Christine Cantone
In 2011, a disciplinary action was filed by FINRA against Cantone
Research Inc. (“CRI”) and Christine Cantone (“Cantone”).191 Both the
company and Cantone were charged with violating NASD Conduct Rules
3010 and 2110 and FINRA Rule 2010.192 Cantone, as the vice president,
chief compliance officer and financial and operations principal, owned less
than five percent of the company.193 Cantone was held liable for not
supervising a registered representative, Smith, who sold fictitious stock to the
company’s customers and stole $1.6 million for himself.194 The company did
not have a strong system to monitor representatives’ outside brokerage
185. Id. at 2–3.
186. The CCO was unnamed in Feltl. See id. at 1–13.
187. Feltl, supra note 181, at 3.
188. Id. at 4.
189. Id. at 10–12.
191. CRI, supra note 3, at 1.