According to FINRA, Corinthian Partners, L.L.C. was censured and fined $10,000 for failing to establish, maintain, and enforce a supervisory system reasonably designed to prohibit firm principals from supervising their own trading.

The firm allowed its chief executive officer (CEO) and chief compliance officer (CCO) to supervise their own trading in accounts they jointly managed, with commissions split equally between them. For two trades, the CEO both entered and approved the trades. For the remaining trades, the firm could not distinguish who entered the trades and therefore could not ensure they were not self-supervising.

The firm also failed to perform the required analysis and create the required documentation needed to qualify for the exception allowing for self-supervision of trades in certain limited circumstances. The firm's written supervisory procedures did not identify the individual responsible for trading reviews by name or title and did not assign the CEO's or CCO's trades to a different principal, even though other principals were available.

Furthermore, the firm's procedures failed to reflect the firm's use of automated surveillance and electronic review of trades by a firm principal. Instead, the procedures contained outdated references to discontinued manual reviews of trade blotters.

This case demonstrates the fundamental principle that no one should supervise their own trading activities. Self-supervision creates an obvious conflict of interest and undermines the integrity of a firm's supervisory system. Even small firms with limited personnel must ensure that trades are reviewed by someone other than the person who entered them. Additionally, firms must keep their written procedures current to accurately reflect their actual supervisory practices. Investors rely on firms having proper checks and balances to prevent misconduct and ensure compliance with securities laws.