The Securities and Exchange Commission Division of Trading and Markets has issued Frequently Asked Questions (FAQs) that provide guidance regarding potential supervisory liability of compliance and legal personnel at broker-dealers under Sections 15(b)(4) and 15(b)(6) of the Securities Exchange Act of 1934, as amended (the Exchange Act).
The FAQs clarify that compliance or legal personnel, including a chief compliance officer, are not deemed supervisors of broker-dealer employees for purposes of Sections 15(b)(4) and 15(b)(6) of the Exchange Act solely by virtue of their compliance or legal position. The FAQs further clarify that compliance and legal personnel do not become supervisors solely because they (i) have provided advice or counsel concerning compliance or legal issues to business line personnel, or assisted in the remediation of an issue; (ii) participate in, provide advice to, or consult with a management or other committee; or (iii) provide advice to, or consult with, senior management. The FAQs provide that the determination of whether a particular person is a supervisor depends on the facts and circumstances of a particular case and whether that person has the requisite degree of responsibility, ability or authority to affect the conduct of the broker-dealer employee whose behavior is at issue. The FAQs provide guidance on factors to consider when making this determination, including, among other things, whether a person has been given or assumed clear supervisory authority (through the broker-dealer’s policies and procedures or otherwise) and whether a person has the ability to hire, reward or punish the employee or otherwise has the authority to prevent the violation from continuing (e.g., firing or demoting the employee).
Click here to read the Frequently Asked Questions.