According to FINRA, Martin erred because:

The registered representative was able to accomplish and maintain his scheme because Martin reviewed his activity on a daily basis rather than in a manner that would evidence trading patterns over time and expose the firm’s losses and risk.

I suspect that FINRA wanted to say -- meant to say -- something a bit different than how this came out.  If you take the statement as written, the Supervisor is being chastized for doing a daily review of his subordinate's trading.  And that's wrong, why?  If FINRA suggests that the daily review was improper, then the regulator owes its members a far more cogent explanation (if not warning), than to merely note that the the review should have been undertaken "in a manner that would evidence trading patterns over time and expose the firm's losses and risk."  Just exactly what is the regulator suggesting would have been preferable -- and not just for the sake of debate but for the pointed reason of eliminating Martin's liability for failing to review prop trading activity over a given period of time. Moreover, assuming that Martin was victimized by the fraud of the subject trader (which FINRA oddly doesn't note pro or con), is there any proof that a different frame of review would have elicited the patterns that, in hindsight, FINRA now concludes are so apparent?