October 2, 2022

Volume XII, Number 275

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September 30, 2022

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SEC Chair Attempts to Reassure Compliance Officers That They Will Not Be Targeted

Demonstrating the effect recent enforcement efforts have had on the industry, in remarks given in Washington, DC at a Compliance Outreach Program for broker-dealers, Securities and Exchange Commission Chairman Mary Jo White tried to assure compliance officers that the SEC does not intend to use its enforcement program to target compliance professionals.

However, despite this attempted assuaging, Ms. White took the opportunity to caution the collected compliance officers that their occupation “does not provide immunity from liability.” Instead, she stated that SEC enforcement actions should not “be seen by conscientious and diligent compliance professionals as a threat . . . we do not bring cases based on second guessing compliance officers’ good faith judgments, but rather when their actions or inactions cross a clear line that deserve sanction.”

Ms. White is only the most recent SEC official to weigh in on the Commission’s enforcement actions brought against chief compliance officers, and that she felt compelled to make her remarks may reflect an attempt to bridge conflicting comments made by two other commissioners. In June, Commissioner Daniel Gallagher issued a public statement to expand upon his vote against two settled SEC enforcement actions that involved alleged violations of the Investment Advisers Act of 1940 by chief compliance officers. He noted that he had “long called on the Commission to tread carefully when bringing enforcement actions against compliance personnel.” He urged exercising restraint and discretion beginning at the investigation stage.

In a statement titled “The Role of Chief Compliance Officers Must Be Supported,” issued by Commissioner Luis Aguilar two weeks later, Mr. Aguilar responded to Mr. Gallagher to rebut the presumption that the SEC was taking too harsh of an enforcement stance against chief compliance officers. Mr. Aguilar emphasized that the facts of the cases in which the SEC issued an enforcement action against a chief compliance officer demonstrated “egregious misconduct.” He ended by stating, “the Commission works to support [chief compliance officers] who strive to do their jobs competently, diligently, and in good faith—and these [chief compliance officers] should have nothing to fear from the SEC.” Ms. White attempted to parrot these sentiments, but pairing them with statements about compliance officers’ lack of immunity may have had the opposite effect.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume V, Number 205
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About this Author

Michael Rosensaft, white collar criminal litigator, Katten, New York Law Firm
Partner

Michael M. Rosensaft focuses his litigation practice on representing individuals and businesses in white collar criminal matters, regulatory enforcement matters, corporate internal investigations, insurance and health care fraud and complex civil litigation.

Prior to joining Katten, he served as an Assistant US Attorney for the Southern District of New York. In that capacity, Michael oversaw the investigation and prosecution of numerous criminal cases involving terrorism, international money laundering, export violations, bribery of foreign...

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