The SEC has imposed a cease-and-desist order against Ronald S. Rollins, former chief compliance officer of a Parsippany, N.J.-based firm for failing to supervise broker Timothy Roth who defrauded clients of over $16 million.
Rollins, 62, of Plainfield, N.J., has been suspended from associating with any investment advisory firm for a period of 12 months. The SEC charges that Rollins failed to reasonably implement Comprehensive Capital Management’s (CCM) policy requiring daily review of transactions that could have detected Roth’s fraud. Rollins settled the charges against him without admitting or denying the SEC's findings.
In October of 2011, Roth, of Stonington, Ill., pled guilty to mail fraud and money laundering and has been sentenced to 151 months in prison and ordered to pay $16,151,964 in restitution.
While a serving as a registered representative with a Champaign County, Ill., broker-dealer affiliated with CCM, Roth formed KeyOp Exercises Inc.
The firm’s only purpose was to serve as the custodial broker-dealer Roth used to pass-through distributions from deferred compensation plans that he advised. Roth controlled the company and its accounts at all time.
The SEC charges that had Rollins supervised Roth and the KeyOp account, he would have known that Roth used a rubber stamp signature of the friend he transferred KeyOp ownership to after Rollins advised him that his ownership of the firm was in violation of CCM policy. Roth eventually transferred ownership of KeyOp to his adult children, which was unknown to Rollins and also in violation of CCM policies.
Rollins also permitted Roth to use non-CCM e-mail accounts, the SEC says. As a result, CCM could not monitor Roth’s correspondence with clients. In addition, compliance audits of Roth’s office were perfunctory and not designed to prevent or detect fraud, according to the charges.