Earlier this month the National Society of Compliance Professionals, a nonprofit membership organization that supports compliance personnel and programs in the financial services industry, published a report entitled “Firm and CCO Liability Framework.” The report is designed as an aid to compliance professionals and as a proposal to regulators, including the Securities and Exchange Commission, to determine situations in which liability of Chief Compliance Officers should be mitigated.
The SEC has provided its own guidance regarding when CCOs may be held liable, some of which we have highlighted in a previous post. Additionally, the New York City Bar Association’s Compliance Committee released a comprehensive report last year that contains a description of the history of regulatory comments and guidance provided on the issue of CCO liability and proposes its own framework of liability.
The NSCP report was motivated in part by a widespread belief among compliance professionals that financial services regulators have expanded the situations in which CCOs will face liability for firm compliance failures. According to a survey contained in the report, 72% of compliance professionals share that belief. Additional survey results contained in the report include: that 35% of compliance professionals claim to have insufficient resources to adequately carry out the obligation to provide firm training on compliance issues; that 20% claim to have insufficient authority either to enforce or to develop compliance policies and procedures; and that 25% claim to be unable to meaningfully raise compliance concerns to the firm’s senior management.