The Securities Compliance Podcast Season 4 Episode 12 – Revisiting CCO Liability and the NSCP Framework

Podcast

Securities Compliance Podcast: Compliance in Context

In Season 4 Episode 12 of The Securities Compliance Podcast: Compliance in Context, host and Calfee Partner Patrick D. Hayes welcomes Brian Rubin to discuss the current state of CCO liability, revisit the NSCP Firm and CCO Liability Framework, and review its impact on the investment management industry nearly two years after its original publication. In the Headlines section, Patrick looks at recent data collected on the growth of the accredited investor population and reviews the SEC’s denial of a Coinbase petition for digital asset rulemaking. Finally, the episode wraps up with a review of how a recent Supreme Court hearing could signal the end of the SEC administrative proceeding as we know it.

Show 

Headlines

• Review of the accredited investor definition

• SEC denial of Coinbase petition

Interview with Dalia Blass

• When does the Commission typically bring enforcement actions against compliance personnel?

• Are compliance officers on the front line?

• Are compliance officers responsible for implementing and executing policies and procedures?

• Do compliance officers need to become experts in everything?

• What is a wholesale failure?

• Did Grewal cite any examples of CCOs being charged for purely compliance-related failures?

• Are there other instructive examples of CCO liability cases?

• What was the SEC’s approach to determining CCO liability in the Hamilton case?

• How could the SEC have applied the NSCP Framework in the Hamilton case?

• How do you see the issue of CCO liability evolving in the future?

What’s On My Mind

• U.S. Supreme Court case on SEC could have a wide impact on agency enforcement.

Quotes

11:42 – “I would tend, I think, to slightly take a different perspective than Mr. Grewal and agree with you that I think traditionally, the way most of the time I think about compliance, it's not that it's the front-line supervision. I do think that compliance, just in as much as they are another person at the firm who should engage in practice compliance. Compliance as a functional area inside a firm may have dedicated professionals that live within it, but everybody at the firm should practice compliance.” – Patrick Hayes 

22:54 – “So, unfortunately, I don't think the phrase 'wholesale failure' helps anybody at all. It just leads to more questions. That's one of the reasons why we developed a framework.” – Brian Rubin 

25:25 – “Yeah, so it was odd that he cited that case as an example of ‘Here's a really good case where he charged the CCO,’ because, in fact, in that case, he was wearing multiple hats. He wasn't just the CCO, he was the founder of the firm. He was the sole owner of the firm and the shareholder of the firm, and he was the CEO and he was, according to the order, the only individual responsible for implementing and developing compliance policies and procedures. and the code of ethics. And he was charged because he was responsible for implementing the policies and procedures. And again, implementing sounds like a business function. It doesn't sound like an advisory function. So in my mind at any rate, it didn't make sense that he said, ‘Here's a great case where he charged a CCO for failing to act as a CCO should be acting’ because this guy was in effect the firm. And we often talk about compliance cases where people wear multiple hats and those cases are different from cases where somebody just is acting in a compliance function and is charged for acting in that compliance function.” – Brian Rubin 

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About the Securities Compliance Podcast: Compliance in Context

Introducing the Securities Compliance Podcast: Compliance in Context presented by Calfee, Halter & Griswold, and the National Society of Compliance Professionals and hosted by Patrick D. Hayes, Partner and Chair of Calfee's Investment Management practice.

Designed as a personal master class for the securities legal and compliance professional, this podcast embodies Patrick’s passion to help you put Compliance In Context™ by combining the technical expertise of industry thought leaders and innovators with the practical experience of doers and key decision makers.

Listeners will find the podcast on Apple Podcast, Google Podcast, Spotify, and Stitcher.

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The opinions expressed by guest speakers and panelists during Securities Compliance Podcasts may not necessarily reflect the viewpoints of the attorneys and professionals of Calfee, Halter & Griswold LLP or its subsidiaries or affiliates. Calfee’s educational content is intended to inform and educate readers about legal developments and is not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results.