Earlier this week I told investment advisers CCOs not to lose sleep. I suggested that during this 45 day period until registration you should systematically review your compliance and supervisory policies and procedures. I missed the fun yesterday. Yesterday at the Investment Adviser Association Investment Adviser Compliance Conference Robert Plaze, Deputy Director of the SEC Division of Investment Management warned that the new Asset Management Unit in the Division of Enforcement is “dedicated to suing you”. To make matters worse the newest SEC Commissioner Daniel Gallagher took the opposite position. He encouraged the robust engagement of both legal and compliance staff, while acknowledging that such engagement “puts them at risk of being deemed to be “supervisors” subject to liability for violations of law ny the employees they are held to be supervising.” He later said that ” [i]n resolving the uncertainty, we should strive to avoid attacking or penalizing the willingness of compliance and legal personnel to be fully involved in firms’ responses to problematic actors or acts.”
Aside from the fact that neither of them are speaking for the Commission– we all know that speech–I am putting my money on Robert Plaze, long time friend of the securities industry. I am not sure why the SEC would dedicate themselves to suing the people who can actually make the SEC’s job easier, but there it is on the table.
So if you are robustly engaged and miss something you will get sued by the SEC and if you sit in the corner and do nothing you may get fired. As I said “Don’t Just Wait” but be mindful that as never before the SEC sees you as their enforcement arm at your firm. No more mister or misses nice guy.
(c) 2012 Copyrighted by Sharon M. Davison reuse with attribution.