Understanding the Evolving Landscape of CCO Liability

With the new year underway, it's crucial for compliance professionals to stay abreast of the latest developments in our field. A recent article in Compliance Week highlighted a significant shift in the regulatory landscape, particularly concerning the liability of Chief Compliance Officers (CCOs). This shift marks a crucial moment for our industry, underscoring the need for a more nuanced understanding of CCO liability. We highly encourage you to read the full article. 

The CFTC's Stance on CCO Liability
The Commodity Futures Trading Commission (CFTC) has set a precedent that could reshape the role of CCOs in financial institutions. CFTC Commissioner Caroline Pham's remarks indicate an increased focus on individual liability for CCOs, especially in cases of egregious conduct. This was exemplified by the landmark charges against the former CCO of Binance, marking the first instance of the CFTC charging a CCO with individual liability.

NSCP's Perspective on the Emerging Scenario
At the National Society of Compliance Professionals (NSCP), we view these developments with a balanced perspective. While recognizing the necessity of holding individuals accountable in cases of serious misconduct, we also emphasize the need for a more holistic approach to assessing CCO liability. Our framework, submitted to the SEC, calls for a consideration of the compliance culture within a firm, the support and empowerment of the compliance function by management, and the adequacy of resources allocated to compliance.

Key Concerns and Recommendations
Our January 2022 survey revealed that over half of our members are concerned about liability being imposed in cases where compliance acted negligently rather than recklessly. This highlights the need for regulatory bodies to differentiate between honest mistakes and willful misconduct. The framework we proposed offers guidance on these issues, urging regulators to consider several nonbinding factors before charging a CCO.

Moving Forward
As we navigate these changes, it's crucial for compliance professionals to stay informed and engaged. The evolving regulatory landscape calls for a renewed focus on ensuring robust compliance programs, adequately resourced and supported by the firm's management.

At NSCP, we are committed to advocating for our members and providing resources to help navigate these complexities. We will continue to engage with regulatory bodies to promote a fair and effective approach to CCO liability, ensuring that our profession can continue to thrive in a challenging regulatory environment.