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Compliance pictureIn my recent interview with Daniel Sheehan of GRC Professional Magazine, I discuss the growing trend of the SEC holding compliance officers personally liable for those they supervise, and what actions they can take to protect themselves.

The SEC is increasingly targeting compliance officers who take missteps in their job, holding them liable for not doing their job properly.  There are cases where a compliance officer doesn’t focus as intently on a problem as they should, so in addition to prosecuting the person who did the misdeed, the SEC is also prosecuting the compli­ance officer and holding them liable.

Following the criticism directed at the SEC for failing to notice problems, they started to take a much harder look at compa­nies than they had in the past. They started to take another look at who in the companies were respon­sible for these breaches, and the compliance officers were in that category.  There are more investigations, more actions and higher penalties. As a consequence, the chances of a compliance officer who does not notify of a problem being caught up in a case is high.

What compliance officers must do to protect themselves:

  • When a problem, or potential problem, is identified, get out in front of it.  Investigate problems aggressively and thoroughly.  Ask questions and follow up on those questions.
  • Document every step of the investigation.  The government will look for evidence that the problem has been thoroughly investigated. For the sake of all involved, evidence is absolutely necessary.  It will need to be proven that the matter has been thoroughly and properly investigated.

If you have any questions about compliance issues, please feel free to contact me.

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Foster Garvey’s International practice group comprises a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. A number of attorneys have been actively practicing in the international arena since the early 1970s.
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