The SEC has said it doesn’t feel that anything has changed in terms of how they view compliance officers at money firms, but certain groups don’t agree. They feel at risk and are preparing for further enforcement going forward for 2016.
To elaborate, in 2015 the SEC charged BLK (BlackRock Advisers LLC) compliance officers with not disclosing an outside business interest of the firm’s portfolio manager to the investors and board of directors. There were also no policies in place to address the activities of the employees responsible for these activities. BlackRock ended up settling and paid a penalty totaling $12 million. The CCO (Chief Compliance Officer) had to pay $60,000.
In June of 2015, the SEC received over $35,000 from SFX Financial Advisory Management Enterprises Inc. The charge was that the compliance officer did not implement policies that were designed to prevent the mishandling of assets under ownership of the client. The charges also stated that there were no annual reviews conducted.
The issue is that the SEC is holding compliance officers responsible for issues that may not have been necessarily foreseeable. The SEC disagrees with this position, however. This hindsight liability poses risks to CCO’s who want to do their best to keep the best interests of the law and of their firms in mind.
Certain people, like Todd Cipperman, think that major investors could end up suing their CCO in the wake of the current SEC actions. When these officials of the SEC claim that a Chief Compliance Officer’s job is to protect the investors, then it means that the CCO needs to uphold that responsibility. They must also balance the law. It will be interesting to see how things turn out in 2016 if the SEC completes its work on a new program.
Helane L. Morrison is General Counsel and Managing Director, as well as Chief Compliance Officer at Hall Capital. Morrison put forth strong efforts to promote fairness and compliance previously as well in her role in the SEC from 1999 to 2007. She represented the legal interests of the SEC in San Francisco.
Practicing law previously allowed her to build her strong experience in commerce. She investigated corporations, using her public and private industry experience. In addition, she is a member of The Regional Parks Foundation board.