Enforcement Update: Recent SEC Actions Against Investment Advisers to Private Funds, Registered Funds, and Retail Clients | Insights

Chief Compliance Officers

The SEC brought charges against two CCOs consistent with the SEC’s messaging around CCO liability — that is, the SEC will charge CCOs where their conduct rises to the level of a wholesale failure of their compliance responsibilities or they make efforts to obstruct SEC matters or are involved in the underlying violative conduct. Often such charges are against individuals who wear multiple hats and the conduct was not in their capacity as CCO. SEC officials continue to alert the industry that CCOs who exercise their responsibilities in good faith are not in the line of fire.

  • The SEC charged the CCO of an investment adviser for aiding and abetting and causing the firm’s violations of the federal securities laws. The firm was also charged for primary violations. The SEC found that the CCO knew, or should have known, that the compliance program was inadequately implemented but failed to make sufficient changes to its design or implementation where the CCO was aware or on notice of numerous instances of noncompliance with the firm’s policies and procedures relating to outside business activities.1 Commissioner Hester M. Peirce issued a statement in which she stated, “the CCO had the opportunity to improve the compliance program, but did not do so despite frequently recurring reminders that the program was not working effectively.”2 To settle the matter, the CCO agreed to a bar from acting in a supervisory or compliance capacity and to a $15,000 civil monetary penalty, and the adviser agreed to a $150,000 civil penalty.
  • The SEC filed charges against the CCO, chief risk officer, and head of operations of a private fund adviser that was separately charged with fraudulent fund valuations. The SEC alleged that the respondent ignored red flags with respect to the CEO’s alleged scheme to overvalue fund assets by more than $1 billion, negligently made misrepresentations to investors, helped submit misleading documents to the SEC staff,…

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