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The role of the compliance officer elevates

The SEC's crackdown on compliance failures has made the role of the chief compliance officer ever more important

The Securities and Exchange Commission is rumored to be cracking down on compliance officers of hedge funds and other financial institutions of a certain size, and, in response, companies are seeking to give compliance officers greater and more direct access to CEOs.

Recent reports described the SEC's aggression as a byproduct of the Volcker Rule enacted as part of the Dodd-Frank legislation of 2010 that required hedge funds to maintain chief compliance officers. And those officers will now be held more directly accountable when compliance failures occur.

Paul McGreal, dean of the University of Dayton law school, told the Wall Street Journal"There's a recognition that to be effective compliance has to be knitted into the fabric of an organization. It's more of a role in the leadership team within an organization."

To ensure fewer failures do not occur -- thereby avoiding becoming a target by the SEC -- hedge funds are beginning to heighten the status of the CCO since finding these failures have become a trend of the SEC's watchdogs.

Thomas A. Sporkin, a partner at Buckley Sandler and a former enforcement lawyer at the Securities and Exchange Commission vocalized the concern of hedge funds in November 2013 in a New York Times report detailing the $1.2 billion settlement that SAC Capital Advisors paid the government in a guilty plea of insider trading: “It is getting much more expensive for hedge funds. What kind of returns are you going to need to make in this business given the compliance and regulatory burdens?”

But even as the compliance regulations have been getting more strict, so rises the importance of the compliance officer, and giving the CCO more direct access to the CEO seems like a good way for most companies to start ensuring that their financial practices are all by the book.


Further reading:

SEC aggression to increase against compliance officers

Co-director of SEC enforcement division to step down

JPMorgan to double compliance budget in 2014

GCs speak out on their 2014 risk and compliance concerns

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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