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Behind the SEC's Recent Crackdown on Compliance Officials

By H. David Kotz
August 02, 2015

Recent comments by Securities and Exchange Commission (SEC) Commissioner Daniel Gallagher were noteworthy for both their candor and the subject he raised. On June 18, 2015, Gallagher wrote in a statement placed on the SEC website (http://tinyurl.com/nnatjpw) that the SEC was sending a “troubling message”: Chief compliance officers (CCOs) should not take ownership of their firm's compliance policies and procedures, lest they be held accountable for conduct that is not really their responsibility. He explained his dissents in two recent Enforcement actions brought by the SEC against CCOs and derided as not a “model of clarity” an SEC rule that requires investment advisers to adopt and implement written policies and procedures reasonably designed to prevent violations of laws and regulations. He also expressed concern that the SEC's current approach would actually disincentivize a vigorous compliance function at investment advisers.

The Two Recent SEC Cases Referenced by Gallagher

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