The UK Financial Services Authority has fined Sandradee Joseph £14,000 (just under $22,000) and banned her from performing any significant influence function in regulated financial services. She was compliance officer at Dynamic Decisions Capital Management, a hedge fund management company based in London and Milan.

To conceal huge losses, in late 2008, a senior employee at DDCM entered into a number of contracts, on behalf of investment funds managed by DDCM, for the purchase and resale of a bond. Various investors raised concerns that the bond was of doubtful provenance and legitimacy, and DDCM’s prime broker resigned as a result of its concerns.

Joseph failed to consider the reasons for the resignation and, despite being aware of the concerns, failed to properly investigate or act on the information. She relied wrongly on another employee of DDCM and on her belief that external lawyers were instructed and would have acted on concerns as appropriate.

“Joseph took far too narrow a view of her role as a compliance officer. She failed to understand the importance of her role and the wider regulatory obligations it brings,” said Tracey McDermott, acting director of enforcement and financial crime at the FSA.

Jerome Lussan, chief executive of Laven Partners, a firm specialising in alternative assets, said: “This demonstrates FSA’s continuing desire to raise compliance and corporate governance standards. Improving standards across the industry is certainly welcomed by investors and we have seen clients raise more assets as a consequence of improving their compliance infrastructure.”

“The FSA is clearly signalling that compliance officers cannot place too much reliance on other employees or external counsel. Compliance officers are expected to conduct their own investigation into any concerns raised by investors or fund service providers and reliance on the views of another employee is no defence. The compliance function does not afford the luxury of being able to “take a back seat” as suggested by Dr Joseph," he said.