S4:E12 | Revisiting CCO Liability and the NSCP Framework | Compliance In Context

Welcome back to the Compliance in Context Podcast! On today’s show, we welcome in Brian Rubin to discuss the current state of CCO liability and 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 our Headlines section, we look at recent data collected on the growth of the accredited investor population and review the SEC’s denial of a Coinbase petition for digital asset rulemaking. And finally, we’ll wrap up today’s show with another installment of What’s On My Mind, where we review how a recent Supreme Court hearing could signal the end of SEC administrative proceedings as we know it.

Show

Headlines

• Review of the accredited investor definition
• SEC denial of Coinbase petition

Interview with Brian Rubin

• 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 of 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

• US Supreme Court case on SEC could have 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