Former SEC Official Says that SEC Should Not Prosecute CCOs
In an “open letter” to new SEC Chairman Mary Jo White, John Walsh urges Ms. White to refrain from prosecuting chief compliance officers, utilize alternative enforcement tools, and avoid efforts to set new enforcement records. Mr. Walsh says that the SEC should encourage compliance professionals and not prosecute them for the conduct of others. He asserts that compliance professionals “are not adjunct to the agency” but instead comprise “a private sector profession dedicated to raising business standards.” He argues, “If the current trend continues and compliance professionals become regulatory guarantors of their firms, the future of the profession may be at risk.” Mr. Walsh also believes the SEC should use multiple remedies including private conversations, speeches, informal actions such as deficiency letters, disclosures, training, and other creative remedies. Mr. Walsh urges Ms. White to de-couple enforcement from examinations. Mr. Walsh also argues that setting new enforcement records ultimately undermines the SEC’s credibility. Mr. Walsh, currently a partner at Sutherland, Asbill & Brennan, served for over 20 years at the SEC and is generally credited with creating the Office of Compliance Inspections and Examinations.
OUR TAKE: These are very thoughtful and provocative comments from an industry veteran with significant credibility. We agree with his recommendations and hope the SEC considers them.