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Paper Compares Compliance, Legal Officer Roles and Sees Broader Reach for CCO

A recent academic paper from Tamar Frankel, Professor of Law Emerita at Boston University,  explores the roles of the compliance officer and legal officer in the corporation. The paper while it does not specifically focus on registered fund CCOs, presents principles that can be applied to compliance officers generally. Frankel observes that while a firm’s legal officer is required to act in the client’s best interest, the CCO’s role is broader and maybe less clearly defined. The CCO’s duties are “designed to protect investors by ensuring that all funds and advisers have internal programs to enhance compliance with the federal securities laws,” she notes.  Frankel suggests that compliance officers serve a broader constituency than simply the firm and are “required to serve as customer advocates” a responsibility not faced by lawyers of corporations. Frankel sees the distinction as quite significant. She explains that while legal officers “have one client the [compliance officer] may have responsibility to society as well, even though there is no statutory basis for this opinion.” While CCOs have been targeted by regulators for direct and indirect violations of the securities laws, the SEC has repeatedly affirmed its support for the compliance function. In a speech to compliance professionals in 2013, former SEC Chair Mary Jo White said: [A]t the SEC, we see you as a critical line of defense against violations of the securities laws and regulations, inadequate policies, procedures and systems, and inadvertent errors – all of which may harm investors or your firms. But you are not and should not be the only line of defense.”  Frankel’s paper notes the increasing prominence and independence of the compliance officer role and sees potential areas for conflict with the firm legal officer, including who should have the final say when the facts are unclear or controversial, and the confidentiality and privilege issues raised by dual-hatted CCOs/legal officers.

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