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Director of the SEC’s Division of Enforcement Highlights Compliance Issues

Director of the SEC’s Division of Enforcement, Andrew Ceresney, recently gave a speech outlining the Enforcement Division’s accomplishments over the past year as well as what lies ahead for the Division. He highlighted compliance issues, noting that the companies that have avoided regulatory issues have made legal and compliance priorities.  He stated,

I have found that you can predict a lot about the likelihood of an enforcement action by asking a few simple questions about the role of the company’s legal and compliance departments at the firm.  Are legal and compliance personnel included in critical meetings?  Are their views typically sought and followed?  Do legal and compliance officers report to the CEO and have significant visibility with the board?  Are the legal and compliance departments viewed as an important partner in the business and not simply as support functions or a cost center?

He expressed a desire to use his current role to promote “a strong, empowered legal and compliance presence at firms . . .”  He assured compliance personnel that if they “perform their responsibilities diligently, in good faith, and in compliance with the law,” they had no reason to fear enforcement action.  However, he was clear that the Division would hold legal and compliance officers accountable in appropriate circumstances including where they participate in the misconduct, when they mislead regulators, or when they fail to carry out their responsibility to implement compliance programs or policies.  He described the Division’s joint effort with the Office of Compliance Inspections and Examinations designed “to identify and bring actions against investment advisers that fail to adopt or implement adequate compliance programs after being notified repeatedly of deficiencies by examination staff.”  He noted that the initiative had thus far resulted in ten actions, including charges against compliance personnel.