In my time at the Commission and in private practice, I have come to appreciate that the state of a firm’s compliance function says a lot about the firm’s likelihood of engaging in misconduct and facing sanctions. Let me start by speaking first about a line of cases that sometimes gets lost in the discussion of compliance-related enforcement actions - those cases demonstrating our support for the compliance function and its resource needs. Enforcement’s Efforts to Protect the Compliance Function In my view, a complete understanding of these cases should provide comfort that we are exercising our judgment appropriately to recommend actions only when the conduct crossed a clear line. The concern I have heard relates to the small number of cases where we have charged CCOs with causing violations, i.e., where the CCOs exhibited wholesale failures in carrying out responsibilities that were clearly assigned to them. I haven’t heard any concern about those cases. The overwhelming majority of the cases we bring involve CCOs who crossed a clear line by engaging in affirmative misconduct or obstructing regulators, or who wore multiple hats.
We look hard at the facts and fairness concerns in each case. I want to emphasize that we and the Commission carefully weigh recommending and bringing actions against CCOs. The Commission’s adoption of Rule 206(4)-7 empowered compliance personnel to improve compliance procedures, but also placed important responsibilities on the firm to adopt written policies and procedures reasonably designed to ensure compliance with the Advisers Act and the regulations thereunder.įinally, I want to address the rare instances in which the Commission has charged CCOs in an enforcement action. As you know, the Rule creates certain requirements for SEC-registered investment advisers.
Second, I will discuss Rule 206(4)-7 under the Investment Advisers Act, which is a key provision underpinning the responsibilities of investment advisers towards their clients. These cases show that the Commission is in your corner when your work is hindered by uncooperative or obstructionist business personnel, and that a number of our actions have sent the clear message that you must be provided with the resources and support necessary to succeed. My plan is first to discuss recent cases that emphasize the importance we place on compliance personnel receiving the resources, cooperation, and transparency from the firm’s business personnel they need to do their job. But I will primarily be focused on the duties and responsibilities of compliance personnel of investment advisers and the cases we have brought in that area. Some of what I will say has relevance to broker-dealers, and indeed in this day and age of dual registrants, some of these lines have blurred. I should note at the outset that my remarks today are largely going to be focused on the investment adviser space because that is where the recent actions I referenced arose and where I think much of the concern lies. I am hopeful that, after you hear my remarks, you will understand that these actions punish misconduct that falls outside the bounds of the work that nearly all of you do on a daily basis do not involve the exercise of good faith judgments and are consistent with the partnership we have developed to foster compliance with the laws. I have heard, both from the leaders of your organization and others, that certain recent enforcement actions by the Commission against compliance personnel in the investment adviser space have caused concern in the compliance community. Today I want to address Enforcement’s perspective on compliance officers and how we approach enforcement cases that touch compliance personnel. We thank you for your diligence and commend and support your work. The Commission and its staff hold compliance professionals in high regard and consider you key partners in our efforts to serve and protect investors.
You work to ensure that your firms have robust compliance programs and to provide sound advice and guidance to business line personnel. You have a challenging and difficult job and play a critical role in fostering compliance with the federal securities laws. It is a pleasure to join you at your annual meeting, and to applaud your hard work and dedication as compliance professionals in the financial services industry. Before I begin my remarks, let me give the necessary disclaimer that the views I express here today are my own and do not necessarily represent the views of the Commission or its staff. Thank you for inviting me to speak to you today.
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