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White: SEC Not Seeking to Second Guess CCOs

SEC Chair Mary Jo White said in a speech this week that “it is not [the SEC’s] intention to use our enforcement program to target compliance professionals.” Addressing the audience at the annual broker-dealer compliance outreach program, White said ”[y]ou have a tough job in a complex industry where the stakes are extremely high.” She further sought to draw a line between “second guessing compliance officers’ good faith judgments” which the Commission would not pursue and “significant misconduct or failures” where “actions or inactions cross a clear line that deserve sanction.” She noted that “[b]eing a CCO obviously does not provide immunity from liability, but neither should our enforcement actions be seen by conscientious and diligent compliance professionals as a threat.”

She argued that the SEC’s enforcement program “emphasizes the importance of a strong compliance program.” It does this by highlighting in orders successful compliance programs that were effective in identifying misconduct, bringing compliance-related actions where “programs have failed,” and by pursuing independent consultants where appropriate to “ensure that compliance policies are crafted to guard against misconduct recurring.”

White’s comments come after a back-and-forth between Commissioners Gallagher and Aguilar on the effect of recent SEC actions on the compliance community. Gallagher had called for “the Commission to tread carefully when bringing enforcement actions against compliance personnel” and argued that recent actions against CCOs may actually “disincentivize a vigorous compliance function.” Aguilar pushed back and suggested that the cases “involved compliance personnel who affirmatively participated in the misconduct, misled regulators, or failed entirely to carry out their compliance responsibilities.”

In her speech, White also indicated that current examination priorities include “fee structures; suitability; order routing conflicts; recidivist representatives; microcap activity; excessive trading; and transfer agent activity,” along with retirement savings issues. She identified as key priority areas “cybersecurity; anti-money laundering; and firm and branch office supervision and sales practices.”