SEC Commissioner Gallagher Discusses the Role of Compliance Professionals

At a presentation on the evolving role of compliance, SEC Commissioner Daniel Gallagher delivered introductory remarks in which he discussed the challenges facing today's compliance professionals and how the SEC can help to encourage an effective compliance function at its regulated entities.

Commissioner Gallagher stated that today's compliance personnel must address an ever-broadening and complicated array of financial products, new trading and communication technologies, and diverse market venues. However, he noted, while demands faced by compliance officers have increased dramatically, compliance budgets have only increased incrementally.

It is therefore important, according to Commissioner Gallagher, that the SEC support the active participation of compliance personnel by providing additional certainty on topics, such as the "failure to supervise" liability. Commissioner Gallagher explained that the SEC must make certain that rules establishing failure to supervise liability do not act as a deterrent to in-house legal and compliance officers, "discouraging them from departing from their clearly delineated roles."

He went on to emphasize that the SEC must be as clear as possible on its position regarding supervisory liability for legal and compliance personnel, and praised the Division of Trading and Markets' FAQs on the topic issued last September.

See: Commissioner Gallagher's Speech. See also: FAQs about Liability of Compliance and Legal Personnel at Broker-Dealers under Sections 15(b)(4) and 15(b)(6) of the Exchange Act.