In 2003, the Nasdaq and industry regulator FINRA issued rules on internal supervision and controls for member firms like broker-dealers. Those rules—referred to as NASD Rules 3012 and 3013—required a firm's C-suite to sign off on annual reports saying processes for the proper supervision had been in place.
Perhaps more notable is Section 404 of Sarbanes-Oxley, which requires a C-level executive to sign off on an assessment of a company's books at the end of each fiscal year.
While this hasn't seen an upswing in executives jailed for wrongdoing, it has singled out officers by name and prohibited them from working in the industry. Just this week, the Securities and Exchange Commission announced a $6.6 million settlement with Fifth Third that fingered former Chief Financial Officer Daniel Poston for improper accounting of commercial real estate loans.
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While not directly responsible for the loan practices targeted by the SEC, Poston was "familiar" with the them, according to the SEC, and it was his signature on the statements.
Neither Poston nor Fifth Third admitted or denied wrongdoing in agreeing to the settlement.
"We're pleased to bring this matter to a final conclusion and to put it behind us," said Stephanie Honan, a spokesperson at Fifth Third, who declined to comment further.
By singling out management, regulators would have more options to prosecute—or levy multimillion-dollar fines—on the figurehead of a company should it be found to make trades that go against the law.
Much debate has surrounded a giant, complex trade at JPMorgan Chase that ballooned in 2012 and lost the bank $6 billion. The bank, the largest in the country by assets, paid some $1 billion to regulators to settle charges of failed oversight and market manipulation.
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In 2007, Morgan Stanley trader Howie Hubler wrought a $9 billion loss on the firm, after placing an outsized trade in the mortgage-backed securities market. That stands as the largest-ever single trading loss for a financial firm.
The Volcker Rule, by prohibiting such "proprietary" trades as Hubler's, aims to prevent these losses by placing strict rules on what banks can do with their own money; they can still trade on behalf of clients.
—By CNBC's Kayla Tausche, with additional reporting by Mary Thompson. Follow Tausche on Twitter @KaylaTausche.