According to FINRA, Jose Luis Centeno was fined $10,000 and suspended from association with any FINRA member in all capacities for 12 months for entering false information in member firm records to reflect that he had reviewed exception reports when he had not actually reviewed them.

This matter was decided by FINRA's National Adjudicatory Council (NAC) and has been appealed to the SEC.

Centeno frequently failed to review exception reports when they became available. He often went weeks to months without marking any such reports as reviewed. Later, he would mark reports as reviewed in batches, often at the same time or within minutes of each other.

By falsely marking reports as reviewed, Centeno incorrectly represented to his firm that he had evaluated thousands of transactions for possible manipulative trading or other violations of securities laws.

During a hearing, Centeno admitted that he falsely marked as reviewed many of the exception reports at issue and may have only reviewed a couple of them. He also admitted to previously testifying under oath that he did not review those reports, contradicting his hearing testimony.

Exception reports are a critical compliance tool used to identify potentially problematic transactions requiring supervisory review. When supervisors falsely indicate they have reviewed these reports, potential misconduct goes undetected and investors may be harmed.

The sanctions are not currently in effect pending SEC review of Centeno's appeal.

For investors, this case illustrates the importance of supervisory systems in protecting against misconduct. When supervisors fail to perform their responsibilities, violations may go undetected and uncorrected. Strong compliance cultures depend on supervisors actually performing required reviews rather than merely documenting that reviews occurred.