S1:E11 | Lessons From The Front Lines - SEC Enforcement and the Impact on the Industry | Compliance In Context

Welcome back to The Securities Compliance Podcast! On today’s show, we officially launch the Lessons From the Front Lines series. Much like our regular shows, this series will provide the same excellent content to help you put Compliance In Context™, but will deliver that content in a more narrative form—like a fireside conversation with an industry pro. In this way, the Lessons From the Front Lines series will provide you with practical advice and takeaways that focus on real-life, tough lessons other compliance professionals and regulators have learned on the front lines of our industry. 

To help guide us through today's conversation, we welcome in Rob Kaplan and Bruce Karpati. In sharing their experiences as former Co-Chiefs of the Asset Management Unit, Bruce and Rob discuss the role of SEC Enforcement and its impact on the industry. 

Topics:

• What is the role of the Division of Enforcement in the industry, and how does the SEC send a strong message in enforcement cases?
• Review the concept of “regulation through enforcement”
• Were there consistent failures or compliance violations in the cases you saw in the Asset Management Unit?
• Discussion of how negotiations that occur in an enforcement case can result in unintended consequences affecting the industry
• Analyzing the lines between clearly violative activity and “minor” violations
• Identifying the top one or two lessons learned from each of these cases and the biggest takeaways for compliance

Quotes:

“The good public policy way...is when an enforcement matter comes out and it says you cannot do X, right. You cannot have loans to affiliates that are not properly documented because we don't like that. It's when next time somebody comes to the chief compliance officer and says, hey, we're thinking about making this loan to affiliates that they say you know what “[t]here's this enforcement case that says you can't do that,” or the CEO has been waiting or other compliance professional or the GC has been waiting for a case to come out on point to be able to arm them in discussions with the business side to help set the standards.”

“If you’re sitting on the compliance side and you read one of these summaries of these orders and you’re still confused as to what you actually have to do, that’s a real problem.”

“That to me is the risk: Is that you don’t take something small seriously. You have disclosures that ignore it, it snowballs, and then you have a pattern and practice as it goes on, that you could have really avoided and you don’t know how to get yourself clean.”

Resources:

Compliance in Context