Compliance officers or CCO’s as they are referred to in corporations are assigned the task of making sure all the rules and regulations set forth by the Securities and Exchange Commission are being adhere to by employees and stock owners. Compliance officers walk a fine line between what is acceptable and what is not based on interpretation, according to the National Society of Compliance Professionals. There were only 8,000 enforcement actions taken in the last thirteen years; only five were against Chief Compliance Officers at money management firms.
The fact is very few CCO cross the line and condone or contribute to fraudulent activity that harms investors, according to Helane Morrison, the Chief Compliance Officer for Hall Capital Partners LLC. Morrison is also the managing director of the firm. Helane knows something about the internal operations of the SEC. She was the regional director of the Security and Exchange Commission in Northern California for several years. While she was in that position she was in charge of enforcing SEC policies in five Northwestern states. Helane is also a lawyer and a journalist, but she doesn’t actively use her degree in journalism from Northwestern University.
Morrison believes that SEC enforcement actions should clear. There has to be transparency, cooperation and compliance resources available to CCO’s so they can function effectively. Helane was a partner in the San Francisco law firm Howard, Rice, Nemerovski, Canady, Falk & Rabkin, so she is well aware of what is needed to enforce the regulations that are necessary to keep the CCO’s functioning at the optimum level.
Compliance officers have some concerns about the clarity in some of the compliance rules , according to Morrison and that has been an issue for some CCO’s. One rule that has most CCO’s concerned is Rule 206(4)-7 found in the Investment Advisers Act. That rule requires registered compliance officers to implement and adopt written procedures and policies that are designed to prevent violations. That rule is an example of the lack of clarity that exists in SEC rules.
Most compliance officers want the SEC to provide more direction instead of allowing the enforcement staff to interpret and then create policy changes that are filled with issues that are not what the SEC had in mind when the rules were created. There are too many flaws in the system, and they need to be addressed, or more CCO’s will be held accountable for violations when they shouldn’t be.