Compliance officers are in the Securities and Exchange Commission’s crosshairs. The SEC’s Director of Enforcement, Andrew Ceresney, said in a keynote speech during the Compliance Week 2014 conference, ‘‘I need to be clear that we have brought – and will continue to bring – actions against legal and compliance officers when appropriate.’’1 The troubling aspect of those comments is not that the SEC will continue to bring enforcement actions against compliance officers —the SEC historically has targeted compliance officers who actively engage in wrongdoing. Rather, it is the undefined and amorphous ‘‘when appropriate’’ standard that is giving compliance officers consternation. As Commissioner Stein recognized at the same conference, the SEC has not defined what the ‘‘right behavior’’ is for compliance officers or when the SEC will deem it ‘‘appropriate’’ to bring enforcement actions against compliance officers.2 Commissioner Stein acknowledged that this lack of guidance ‘‘creates uncertainty, which I believe is at the heart of the concerns that I’ve heard about CCO liability.’’3 Addressing this void would provide much needed clarity to compliance officers and their employers.
The SEC’s stated intention to increase the number of enforcement actions against compliance officers while also recognizing that it has not defined the ‘‘right behavior’’ for compliance officers justifiably causes concern. It is like playing a game in which one player can make up the rules as the game is played. In the absence of rules, one can only attempt to discern what the SEC considers to be the ‘‘right behavior’’ by analyzing situations where the SEC has identified the ‘‘wrong behavior.’’ This is not an effective way to implement governing principles for compliance officers.
Source: Bloomberg BNA