Commissioner Aguilar Discusses Role of Chief Compliance Officer (with Lofchie Comment)
SEC Commissioner Luis A. Aguilar discussed the role of chief compliance officers ("CCOs") in maintaining integrity in the securities industry.
Commissioner Aguilar expressed concern that recent "public dialogue" has created an impression that the SEC is taking a harsh enforcement stance against CCOs and that they are "under siege from the SEC." Commissioner Aguilar emphasized that this impression is not only incorrect, but also can "discourage honest and competent CCOs from doing their work." Commissioner Aguilar stressed that CCOs who do their jobs "competently, diligently, and in good faith" should not "fear the SEC."
Commissioner Aguilar acknowledged that the majority of enforcement actions brought against CCOs involve CCOs who wear "more than one hat," and that many of the CCOs' activities veer outside their traditional work. In making the determination of whether to bring an action against a CCO, Commissioner Aguilar explained, the SEC evaluates the facts and circumstances of each case cautiously and considers many factors.
According to Commissioner Aguilar, compliance is a shared responsibility. He emphasized that an effective compliance program stems from a firm's senior leadership, which should consist of strong advocates for a robust and enduring culture of compliance.
Lofchie Comment: Most enforcement actions brought against CCOs are for egregious failures. It only takes one aggressive enforcement action against a CCO to put the fright into the CCO community and to make senior officers reluctant to assume the CCO title. It is not unfair to say that an aggressive enforcement action, brought against an individual CCO who was not guilty of an egregious failure and did not act out of any bad motive, may deter a person thinking of becoming a CCO (See e.g., SEC's enforcement action against the CCO of Blackrock).