SEC’s Compliance Initiative Results in Actions against 3 Firms
Three registered investment advisers and their principals agreed to significant penalties and undertakings for failing to implement an adequate compliance program. The SEC brought all 3 cases as part of its “Compliance Program Initiative,” which “targets firms that have been previously warned by SEC examiners about compliance deficiencies but failed to effectively act upon those warnings.” The SEC staff, during prior examinations, had warned the firms about various compliance issues including the failure to conduct an annual compliance review, implement sufficient compliance policies and procedures, and appoint a knowledgeable compliance officer. In addition to fines and disgorgement, the firms agreed to notify clients of the Enforcement Order, appoint an independent consultant, undergo compliance training, and hire a competent CCO. The SEC charged the principals because they failed to ensure an effective compliance program. In one of the cases, the SEC charged the CCO who also served as the firm’s COO.
OUR TAKE: The SEC is looking at past exam results to see where the staff cited compliance deficiencies and then going back out to those firms for follow-up. We suggest you do the same. The SEC is also making clear that senior management owns responsibility for implementing an effective compliance program.