NSCP Currents Live – Navigating the Waters of CCO Liability: A Guide for Compliance Officers Amid Regulatory Scrutiny
The spotlight on Chief Compliance Officers (CCOs) has intensified, prompting questions about their potential liability in the face of regulatory infractions. Recent discussions have centered around whether compliance officers are being unfairly targeted, particularly in instances where they've found themselves entangled in misconduct unrelated to their compliance duties.
The SEC's enforcement actions shed light on the contours of this issue. Notably, enforcement targets instances where compliance personnel actively participate in misconduct, mislead regulators, or fail to carry out their compliance responsibilities effectively. This heightened scrutiny underscores the critical importance of vigilance and adherence to regulatory standards.
To provide clarity amidst this evolving landscape, NSCP has proposed a Firm and CCO Liability Framework. This framework aims to guide regulators, CCOs, and firms in evaluating potential CCO liability, offering a structured approach to assessing compliance failures and determining appropriate courses of action.
For regulators, the framework serves as a tool to evaluate failures identified during examinations or investigations, facilitating informed decisions regarding enforcement actions or charges against CCOs. CCOs themselves can leverage this framework to communicate their roles and authority within their firms, ensuring alignment with compliance objectives and responsibilities. Firms, regardless of size or structure, can empower their CCOs by embracing the framework's principles, thereby reinforcing the importance of robust compliance programs and effective risk management.
Central to the NSCP Framework is a set of key questions aimed at evaluating potential CCO liability. These questions serve as a litmus test, helping regulators and firms determine the extent to which CCOs have fulfilled their responsibilities and exercised due diligence in their roles.
In navigating this intricate landscape, compliance officers face myriad challenges, from the onslaught of regulations to the complexities of disparate regulatory regimes. The need for vigilance, diligence, and proactive risk management has never been more pronounced.
By embracing the NSCP Framework and adhering to best practices, compliance officers can navigate the complexities of regulatory compliance with confidence and integrity. Applying the NSCP Framework offers a structured approach to evaluating CCO liability, ensuring accountability, and fostering a culture of compliance within firms.
This information comes from Brian Rubin, Partner, Co-Head of Securities, Enforcement Practices, Eversheds Sutherland, Patrick Hayes, Chair, Investment Management, Calfee, Halter & Griswold LLP and Rosa Licea-Mailloux, CCO MFS Funds and Head of Compliance Americas, MFS Investment Management who appeared in a Currents Live Webinar - "How to Avoid CCO Liability" on January 24, 2024.
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