Introduction

“I would never act that way.”

“Such conduct couldn’t happen at my firm.”

“I certainly am not a supervisor. I’m in compliance.”

Time and again, we have heard these comments when discussing disciplinary actions taken against chief compliance officers (CCOs). Everyone’s sure that he or she could never be disciplined. Yet, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regularly bring disciplinary actions against compliance officers and other non-business line supervisors (such as attorneys). Therefore, we are writing this column on disciplinary actions as a regular feature in this journal, with the hope that compliance officers (and management) may be able to learn from the “mistakes” of others.

From August through mid-November 2010, the SEC and FINRA brought disciplinary actions against CCOs and, in one attention getting case, a general counsel for alleged misconduct that included failing to supervise, aiding and abetting their firms’ underlying violations (deficient recordkeeping and inadequate written policies and procedures), permitting an unregistered individual to act as a principal, and failing to report customer complaints.