SEC aggression to increase against compliance officers

The crackdown is a continuance of legislation established in the U.S. in 2010 that requires hedge funds of certain sizes to register with the SEC

The changes that financial institutions underwent after the U.S. financial crisis and the Dodd-Frank legislation signed by President Barack Obama in 2010 had been unprecedented in modern times as significant regulation went into effect for banks and investment firms. And subsequent rulings have followed up on the regulatory mentality over financial institutions including the Securities and Exchange Commission (SEC) cracking down on compliance officers that work in hedge funds. 

The Volcker Rule -- an add-on to the Dodd-Frank legislation by President Obama in 2010 -- required hedge funds of a certain size to register with the SEC and maintain chief compliance officers. The Wall Street Journal reports that the SEC will now seek to hold compliance officers personally reliable for their companies' failures in a newly aggressive change of tack.  

The WSJ cites Marc Elovitz, a partner at Schulte Roth & Zabel LLP in New York, as detailing the level of severity with which the SEC is about to hold compliance officers, despite there having been specific levels of accountability in past years: 

“The SEC is being much more aggressive in charging compliance officers when there’s a compliance failure. It puts the compliance officers in hedge funds in the hot seat and puts huge pressure on these firms and their officers to have much better compliance.”

While better compliance will likely always be a good thing, the new crackdown could cause worry for some compliance workers as the SEC's tactics have been to make examples of even small violations. SEC Chairwoman Mary Jo White has been active in applying penalties to any in violation of SEC legislation -- creating a culture of the most aggressive government financial regulation since the Great Depression. And compliance officers have no choice but to, well, comply.


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Contributing Author

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Juliana Kenny

Juliana Kenny is a contributor to, covering a range of topics including patent litigation, conflict mineral laws, executive compensation, and antitrust regulation. Juliana earned B.A.s...

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