SEC Chair White Delivers Speech Regarding the Importance of Compliance

SEC Chair Mary Jo White spoke at the National Membership meeting for the National Society of Compliance Professionals, focusing on the importance of disclosure and transparency from both the SEC and industry professionals in compliance.

Chair White stated that the SEC is far more interested in helping compliance professionals succeed before an examination than catching a firm in a violation in the course of an examination. She noted that compliance officers should not be the only line of defense to protect firms against violations. Chair White also said that it is the job of managers, internal auditors, CEOs and the senior executive team to create an environment of openness and a comprehensive compliance processes.

Additionally, Chair White explained the SEC's engagement with firms to help identify compliance risks. The SEC engages with senior management through in-person meetings to assess the standing authority and resources of the compliance personnel. She noted that through these meetings and examination programs, the SEC produces risk alerts to inform firms of instances of noncompliance. She explained a new initiative, the Risk Analysis Examination ("RAE Initative"), which uses quantitative analysis to examine clearing firms and large broker-dealers by downloading all transactions cleared by the firms over the prior year or two and subjecting the data to a broad range of queries designed to identify problematic behavior. A recent RAE examination found a wide range of problematic behavior, including unsuitable recommendations, misrepresentations, churning, and "reverse churning", i.e., when a client who trades infrequently is placed in a fee-based account. Chair White explained that the SEC examination team works closely with the enforcement team to trade information and data to help build a comprehensive regulatory profile.

In closing, Chair White said that the SEC will do everything in its power to help compliance professionals perform more effectively, and give the markets a level playing field.

See: Chair White's Speech.