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New on SEC agenda: protecting compliance officers

No one can say they haven’t been warned by the SEC (and the authors of the latest Hughes Hubbard FCPA/Anti-Bribery Alert) not to interfere with compliance officers.

Here’s an excerpt from the Alert about the new effort to protect compliance officers:

Recent statements and actions by the SEC demonstrate that the enforcement agency has adopted a broad strategy of seeking to protect and strengthen the position of compliance officers. On August 27, the SEC instituted administrative and cease-and-desist proceedings against Carl Johns, a portfolio manager for, among other things, violating Rule 38a-1 of the Investment Company Act that prohibits fund personnel from taking ‘any action to coerce, manipulate, mislead, or fraudulently influence the fund’s chief compliance officer in the performance of his or her duties.’ Although there is no parallel rule under the Securities Exchange Act, SEC officials have indicated that this enforcement action reflects a broader protective approach that could be extended beyond the Investment Company Act. On October 22, SEC Chairman Mary Jo White cited the Johns case as part of the SEC’s strategy to protect compliance officers and noted that the SEC would ‘be looking for more cases [like Johns] to drive that message home.’ Similarly, in an October 7 speech to the Society of Corporate Compliance and Ethics, Associate Director of Enforcement Stephen L. Cohen stated, in the context of discussing anti-corruption compliance developments (including the FCPA Resource Guide and Ralph Lauren NPA), that the Johns case ‘should send a clear message’ that the SEC would ‘not tolerate interference’ with chief compliance officers endeavoring to do their jobs.

With some follow through, the SEC’s policy shift to protect compliance officers could be one of the most important enforcement trends of 2013.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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  1. I think this is an extremely positive and important development, but should be extended to all whistleblowers and compliance personnel (including Chief Internal Auditors) outside US national boundaries and jurisdiction. I think there is currently a loophole whereby those working in compliance for US registered or listed companies are not pretected under provisions contained in SOX and other important compliance related legislation. Having suffered the extremely negative consequences of this gap in coverage, I would strongly advocate a comprehensive review of current legislation be undertaken, with focus on the rights and protections of non US citizens under US law while operating outside the USA for and on behalf of US registered entities..

  2. The best help the SEC can give us is to take a preventive approach by implementing measurements to ensure that companies to begin with have Ethics and Compliance departments. It is surprising to see how many public companies do not even have an Ethics and Compliance function, much less an effective one. A proactive monitoring program by the SEC to assess compliance with the 7 elements would set the tone across organizations.

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