How CCOs Can Avoid Personal Liability for Organizations’ Compliance Failures

As the role of CCO becomes more essential at hedge fund managers, CCOs may draw unwelcome regulatory scrutiny and, in certain cases, face personal liability for their organizations’ compliance failures. Despite the SEC’s best efforts to clarify the contexts in which that liability can exist, uncertainty still remains. In light of that, it can be helpful to survey the agency’s enforcement efforts involving CCOs across the landscape to develop a clearer picture of when fund manager CCOs could experience personal liability. That topic was addressed at a recent seminar hosted by the Society of Corporate Compliance & Ethics featuring Jones Day attorneys David A. Applebaum and Arielle S. Tobin, as well as Michael Henry, senior compliance counsel at Boston Energy Trading and Marketing. This article reviews key takeaways from the panel, including regulators’ perspectives on CCO liability; recent enforcement actions in which CCOs were held personally liable; the facts and circumstances that gave rise to personal liability; and best practices for CCOs to avoid liability. See “NYC Bar Report on CCO Liability Calls for More Regulatory Guidance, Transparency and Cooperation” (Mar. 5, 2020).

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