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USA: the one with the insider trader in the compliance department

BIScom Subsection: 
Editorial Staff

The USA's Securities and Exchange Commission has issued proceedings against Jose Luis Casero Sanchez alleging insider trading. That's not the interesting stuff.

Sanchez is a Spanish national and former Senior Compliance Analyst who worked in the Warsaw, Poland office of Goldman Sachs, the bank which is already suffering horrible reputational problems - and stumping up vast penalties and compensation for its failings to adequately manage its senior staff in, amongst other places, Singapore in respect of the 1MBD / Malaysian government scandal.

In this case, the SEC is making not making, at this point in time, allegations against the bank.

Yet, even that is not the most interesting aspect of this case.

Sanchez is a Spanish national that worked in Poland for a US bank. During the course of his employment, he came by information relating to what the SEC calls "at least 45 corporate accounts involving the investment bank's clients."

The civil proceedings have been issued in the US DIstrict Court for the Southern District of New York. That means that there is almost certainly co-operation with the Manhattan District Attorney's Office although the SEC makes no mention of that.

It is alleged that Sanchez opened multiple brokerage accounts in the names of his parents, Jose Luis Casero Abellan and Maria Isabel Sanchez Gonzalez, who live in Spain. It is alleged that he made profits of USD471,000 over an eight month period.

There is irony - as well as considerable cause for concern. According to the SEC "Sanchez had broad access to highly sensitive information regarding mergers and other transactions in which his firm was involved, in connection with his work as a compliance analyst. Sanchez had access to this information so that he could assist the firm’s efforts to ensure that employees kept the information confidential and did not engage in insider trading. "

His parents have been named as defendants in the action: it appears that the SEC does not suspect them of involvement but that it is necessary to name them so as to freeze the money held in their names.

Because this is a civil action, no extradition is possible. If criminal charges were to be brought, it would be possible, if he's still in Poland, under a treaty of 1996. Spain has had a treaty with the US since 1971.

Clichés spring to mind: who's watching the watchers? Out of sight out of mind?

The surprise is not that compliance failures happen outside the central perimeter of supervision but that they don't happen far, far more often.

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