Your role as chief compliance officer (CCO) is becoming increasingly important in the financial industry, where regulatory scrutiny is high, and non-compliance can result in significant financial and reputational damage for your firm – and with such significant increase in regulatory requirements and responsibility has come an increase in CCO liability.
CCO liability refers to the potential legal responsibility you may face for regulatory violations that occur at your firm. CCOs who are employed at firms registered with the Securities and Exchange Commission (SEC) face a certain level of liability for the program’s management and ongoing compliance. The SEC expects you to establish and maintain an effective compliance program and promptly report any violations.
While level of risk can vary depending on several factors, such as the size and complexity of the organization, the types of services provided, the regulatory requirements applicable to the organization and the overall culture of compliance within the organization, you might be at particular risk if you are at an investment firm. That’s because, at investment firms where investment advisers are managing significant assets and providing complex investment strategies, CCOs may face greater CCO liability if they fail to adequately oversee these operations and ensure compliance with applicable regulations.
That means that as a CCO at an investment firm, you have your work cut out for you, but we’ve made it a easier for you. Here are some key points to remember about CCO liability.
What does a chief compliance officer need to know about CCO liability?
A lot! Fortunately, much of what a CCO has to know about CCO liability already falls within the scope of responsibilities of running an effective compliance program. This should make it less daunting to adapt this knowledge into your day-to-day tasks.
Some key takeaways about CCO liability are:
- The importance of establishing policies and procedures at your firm.
While the SEC hasn’t specifically outlined a framework related to CCO liability, it is understood that a CCO would not be deemed to have fallen short of expectations under certain circumstances. It’s understood that the CCO won’t be considered at fault if they have put in place reasonable procedures and a system to prevent and detect any violations that others may commit, and if training has been administered and responsibilities have been delegated. Essentially, the CCO must have a thorough and effective compliance program in place. In addition to creating policies and procedures, they may:
- Establish a means of formally delegating/accepting tasks of responsibility within the compliance team and among other members of the organization.
- Document and maintain records of training and attestation.
- Perform ongoing assessments and evaluations of the compliance program.
- The importance of communication and collaboration at your firm.
CCOs need to work closely with other departments, such as legal, risk management and human resources, to ensure the company is operating in compliance with all applicable laws and regulations. This requires a deep understanding of the business and its operations, as well as the ability to build strong relationships with colleagues across the organization.
- The need for CCOs to stay up-to-date with the latest regulatory developments and emerging risks.
This includes attending conferences and seminars, networking with other compliance professionals and staying abreast of relevant news and publications. The regulatory landscape is constantly changing, so CCOs must be aware of what regulations or emerging risks might apply to their firms in order to prepare their firms appropriately. It might be helpful to bring in a compliance consultant to help keep your compliance team up-to-date and address gaps in your compliance program.
Ultimately, learning about CCO liability is essential for any CCO. By providing a comprehensive overview of the legal and regulatory landscape, as well as best practices for risk management and compliance, a CCO liability course or webinar can help CCOs stay ahead of the curve and ensure that their organization remains compliant and ethical. It also underscores the importance of collaboration, communication and continuous learning in the ever-evolving world of corporate compliance.
NRS’ International Association of Chief Compliance Officers (IACCP) program covers Increasing CCO liability. Not only that, but on May 13, 2023, from 3:15 to 5:15 EDT, NRS will be hosting a webinar about CCO liability.
During the session, you will have the opportunity to review recent industry reports, regulatory cases and speeches, and discuss what strategies may work and what may not work for your compliance program. The session will bring together industry experts and your peers to provide a practical, real-world assessment of the areas in your firm that may include liability risks to you. All of this is to help you ensure that your firm is operating in compliance with relevant laws and regulations.
Don’t miss this opportunity to learn from experts and connect with your peers in the industry. Register now for our upcoming NRS webinar.
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