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SEC Enforcement Director: What Empowered Compliance Looks Like

Jaclyn Jaeger | May 22, 2014

During a keynote speech at the Compliance Week 2014 conference, Securities and Exchange Commission Enforcement Director Andrew Ceresney provided some insight on what an empowered compliance function looks like. He also offered a four-question test that companies should ask themselves to determine the effectiveness of their compliance programs.

“Companies that have done well in avoiding significant regulatory issues typically have prioritized legal and compliance issues and developed a strong culture of compliance across their business lines,” said Ceresney. “I've found you can predict a lot about the likelihood of an enforcement action by asking a few simple questions about the role of the company's legal and compliance requirements:

  • Are legal and compliance personnel included in critical meetings?
  • Are their views sought and followed?
  • Do legal and compliance officers report to the CEO, and have significant visibility to the board?
  • Are legal and compliance departments viewed as important partners in the business, and not simply as support functions, or a cost center?

“Far too often, the answer to these questions is ‘no,'” said Ceresney. This is a problem, because the absence of legal and compliance involvement can lead to compliance lapses, which can lead to enforcement issues, he said.

“You should not hesitate to provide advice when problems to help remediate when problems arise. I do not want you to be concerned that, by engaging, you will somehow be exposed to liability,” Cerensey added. “Our philosophy is that if you have engaged and are operating in good-faith trying to alleviate the situation, I can't conceive that we would be bringing an enforcement action against you.”

Ceresney stressed that compliance officers don't become supervisors solely because they provide advice to, or consult with, business line personnel. Legal and compliance officers that have faced enforcement actions are those who have actively participated in wrongful conduct, he said.

“At the end of the day, legal and compliance officers that perform their responsibilities diligently, in good faith, and in compliance with the law are our partners and need not fear an enforcement action.”