COMPLY: Heading up a branch office seen as risky game

(Repeats item from Dec 2)

* Two managers settle FINRA failure to supervise cases

* Managers often on the hook for employees' misdeeds

* Think about risks before running the show

By Suzanne Barlyn

Dec 2 (Reuters) - When a rogue employee steals client money, brokerage supervisors might be completely in the dark about the activity, but that won't spare them from living under a cloud of questions and potentially large fines.

The Financial Industry Regulatory Authority settled disciplinary actions on Wednesday with two former managers of a Citigroup (C.N) unit for failing to supervise a rogue sales assistant who stole $750,000 from client accounts.

The incident highlights the risks and responsibilities financial advisers take on when they become managers.

In FINRA settlements this week, Brandon Thompson, a former branch office manager for Citigroup Global Markets Inc in Palo Alto, California, and Patricia Collantes, a former operations manager, both agreed to short-term suspensions and fines. The settlements, related to the criminal acts of a former registered sales assistant, Tamara Lanz Moon, 44, will be permanently etched on their public disclosure records along with certain details about Moon's misdeeds.

Managing a branch office is a "Herculean task," said Thomas Lewis, a lawyer at Stark & Stark in Lawrenceville, N.J. who advises brokers on employment issues.

Branch managers effectively sign up to be responsible for "every action of every employee, all day long," he said. Advisers considering a management career should weigh that risk against the financial incentives a firm offers, he said.

CRIMINAL "ASSISTANCE"

The Tamara Moon case has been an embarrassment for Citigroup, which agreed to a $500,000 fine in August to settle failure to supervise allegations by FINRA, according to regulatory documents.

FINRA barred Moon permanently from the securities business in 2009 for the scheme in which she misappropriated funds from 22 clients over eight years by falsifying records, along with other tactics. Moon pleaded guilty to mail fraud in October and faces up to 20 years in prison, according to court records.

Citigroup took "immediate steps" after Moon admitted to the scheme in 2008, including notifying authorities and reimbursing clients, a Citigroup spokeswoman said in a statement.

FINRA on Wednesday signed off on a $10,000 fine and 15-day suspension for Thompson. The regulator said Thompson held some of the blame for not spot-checking another manager's review of certain documents, among other things. Collantes, who FINRA said did not "respond adequately" to red-flags that hinted at problems, agreed to an $8,000 fine and a four-month suspension from working as a principal, according to her settlement.

Neither Thompson or Collante admitted or denied FINRA's findings and neither were charged with criminal wrongdoing.

Both are now trying to move on. Collantes "is relieved to finally put this matter behind her," said her lawyer, Susan Resley of Orrick, Herrington & Sutcliffe LLP in Menlo Park, California.

Thompson became caught up in the scandal because of his alleged failure to supervise Collantes, said his lawyer, Abe Lampart, who heads The Law Offices of Abe Lampart, PC in San Francisco. But Lampart told Reuters that such delegation was necessary because the branch was large. "He did things in accordance with Citigroup policy," Lampart said.

MANAGEMENT RISK

Financial advisers considering a management position should first decide whether they're ready for the supervisory responsibilities, say lawyers. Industry rules require brokerages to supervise their employees -- and managers are often the linchpin in that task.

Supervisors should anticipate that something could go wrong, said Marc Dobin, a lawyer in Jupiter, Florida who represents brokers. "Assume that at least one person in the office is thinking about pulling down the bathing suit of another," he said.

Good supervisors should also be able to strike a balance between delegating tasks, such as reviewing client correspondence, and spot-checking that work to make sure it's done correctly, he said. Even then, a supervisor can miss things. A branch manager sits at the top of the heap and should recognize -- at all times -- that he or she is ultimately responsible for the work they've delegated to other supervisors, he said.

Regulators are watching. FINRA charged brokerages and managers with failing to supervise employees 785 times in 2011.

Those risks are one reason a branch manager typically earns between eight percent and 12 percent of net profits at an office. That could mean compensation of $1 million or more at a busy branch in a lucrative area, Dobin said.

Other supervisory roles may not be as lucrative and might only come with stipends of $10,000 to $50,000 per year, said Lewis of Stark & Stark.

"Financially, it's typically not worth it," he said. "Instead of producing revenue, the adviser is solving problems," he said.

(Reporting by Suzanne Barlyn; Editing by Jennifer Merritt)