Is SEC Monday Morning Quarterbacking, By Targeting Compliance Officers?

Chief compliance officers at broker-dealers, investment advisors and registered funds should be alarmed at a recent SEC enforcement trend, according to a post from law firm Perkins Coie. The issue is the SEC’s use of a negligence standard in these cases, which some critics have characterized as a kind of second-guessing, or liability by hindsight. In a recent dissent, SEC Commissioner Daniel Gallagher wrote that SEC actions are sending a troubling message that CCOs “should opt for less comprehensive policies and procedures with fewer specified compliance duties and responsibilities to avoid liability when the government plays Monday morning quarterback.” However, SEC Commissioner Luis Aguilar pushed back sharply at this notion, maintaining that when CCOs are charged it’s usually for egregious misconduct. In any case, says this post, this is a good time for CCOs to review their policies and procedures, and it recaps a recent speech by an SEC official that detailed what they should keep in mind when they do it.