Posted by Brian Monroe - firstname.lastname@example.org 06/04/2021
If you want to charge CCOs in ‘wholesale’ compliance failures, parse out level of resources, participation, cooperation, obstruction: NYC Bar Association says in proposed enforcement framework
CCOs on the hotseat: How should a company’s top compliance backstop be graded when a failure becomes ‘wholesale?’
- AFFIRMATIVE FACTORS
- General Factor
- Does the CCO Conduct Charge help fulfill the SEC’s regulatory goals?
- “Wholesale Failure” Factors
- Did the CCO not make a good faith effort to fulfill his or her responsibilities?
- Did the Wholesale Failure relate to a fundamental or central aspect of a well-run compliance program at the registrant?
iii. Did the Wholesale Failure persist over time and/or did the CCO have multiple opportunities to cure the lapse?
- Did the Wholesale Failure relate to a discrete, specified obligation under the securities laws or the compliance program at the registrant?
- Did the SEC issue rules or guidance on point to the substantive area of compliance to which the Wholesale Failure relates?
- Did an aggravating factor add to the seriousness of the CCO’s conduct?
- Active Participation in Fraud
- The SEC should demonstrate that the CCO’s conduct “added value” in some way to the fraud committed by the firm or the other individuals charged
- Obstruction Factors
- Were the acts of obstruction or false statements repeated?
- Was the obstruction denied when confronted or did the CCO not immediately reverse course and cooperate?
iii. Did the obstruction relate to a necessary or highly relevant part of the examination or investigation?
- Did evidence show other indicia of intent to deceive or disregard for cooperation with the SEC’s regulatory mission?
- MITIGATING FACTORS
- Did structural or resource challenges hinder the CCO’s performance?
- Did the CCO at issue voluntarily disclose and actively cooperate?
- Were policies and procedures proposed, enacted or implemented in good faith?
III. OTHER PROPOSALS
- Increased detail regarding enforcement actions
- Creation of a Compliance Advisory Committee or other formal ongoing communication mechanism
See What Certified Financial Crime Specialists Are Saying
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Director, Global Risk
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FTI Consulting, Los Angeles