Compliance Personnel Cannot Stick Their Head in the Sand

Compliance personnel– especially, chief compliance officers– cannot ignore problems because, as one  SEC ALJ determined, it will lead to censure and fines for ignoring compliance obligations.  See    https://www.sec.gov/alj/aljdec/2020/id1400cff.pdf.

Apparently, for over 10 years, a registered investment advisor hired a series of unskilled CCOs, and ignored compliance and audit requirements.  The RIA tried to claim that it had remedied the problems.  The  ALJ did not issue a cease and desist order or independent compliance monitor because it seemed the RIA was now in compliance, but the ALJ, instead, determined that it was wholly reckless in not educating itself over compliance issues.  Thus, the ALJ found the RIA was subject to censure and fines.

This case exemplifies how important it is to obtain counsel to assist in ensuring the firm follows all of the compliance rules and requirements.  Hiring untrained or unsophisticated personnel, although not prohibited, only heightens the need for counsel to be consulted and involved in the firm’s compliance program.