SEC Guidance Is Arriving for New CCOs

May 18, 2005

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Are you a newly appointed Chief Compliance Officer of an SEC registered investment advisory firm, but not completely sure of the full breadth of your responsibility? If so, you definitely aren’t alone.

Last fall, the SEC’s Compliance Programs of Investment Companies and Investment Advisers Rule went into effect. Although Rule 206(4)-7 requires investment advisors (registered with the SEC) to appoint a Chief Compliance Officer, it doesn’t enumerate the specific responsibilities of the CCO. Guidance from the rule is limited. It provides that the CCO administer the compliance policies and procedures of the firm and be competent and knowledgeable; and the position should also be given full responsibility and authority to develop and enforce appropriate policies and procedures and have a position of sufficient seniority and authority within the organization.

In recent months, the SEC has started to provide additional comments about the role and responsibilities of the CCO. For example, the Associate Director of the Office of Compliance Inspection and Examinations recently spoke on the subject before the Managed Funds Association. During the speech the Associate Director laid out 24 specific duties and functions that he believes all CCOs should perform or consider performing. He also discussed the new rule in more detail and provided direction regarding the selection of a CCO. RIA Compliance Consultants recommends that CCOs read the entire text of his comments. This attempt at clarification is welcomed news, and hopefully a sign of what we can expect in the future.

Posted by Bryan Hill
Labels: Compliance Program