While You Were Complying: SEC and FINRA Disciplinary



This column on disciplinary actions will be a regular feature in this journal. The articles will analyze Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) actions so that compliance officers (and others) may be able to learn from the “mistakes” of others.

From April through July 2010, the SEC and FINRA brought disciplinary actions against Chief Compliance Officers (CCOs) for conduct including failing to supervise, aiding and abetting recordkeeping violations, and acting as a CCO without proper qualifications.

Failing to Supervise

Compliance officers are generally not subject to supervisory liability. Where, however, they are deemed to have sufficient “responsibility, ability, or authority” to affect an employee’s conduct, they may be considered supervisors.1 For those compliance officers who are acting in supervisory roles, recent cases caution against taking half measures in the exercise of their supervisory responsibilities.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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