Although SEC Commissioners and staff members have issued informal guidance on when a CCO can be held personally liable for a compliance failure, considerable uncertainty remains, compounded by the often-limited information provided in SEC settlement orders. A recently settled enforcement proceeding against an investment adviser and its CCO involved what appears to be a relatively egregious case of a CCO who allegedly repeatedly failed to enforce the firm’s compliance policies with respect to its representatives’ outside business activities. The proceeding prompted a statement from Commissioner Hester M. Peirce, who parsed the settlement order through the lens of the CCO liability framework proposed by the Compliance Committee of the New York City Bar Association. This article reviews the alleged compliance failures, the terms of the resolution and Peirce’s observations, with additional commentary from Morgan Lewis partners. See “FINRA Clarifies Stance on CCO Supervisory Liability
” (May 25, 2022).