Legal and compliance professionals working within securities firms face a wide range of unique problems and demands – a fact that the Securities and Exchange Commission’s (“SEC’s”) Commissioner David Gallagher acknowledged during a speech on May 12, 2014, in Washington, DC. An “ever-broadening array of complex and novel financial products, new trading and communication technologies, and multiple, diverse market venues”, along with exponential increase in laws and regulations, have contributed to the growing, multivalent role of compliance professionals in the financial world.
Gallagher’s speech, according to some, sought to alleviate “concerns…that the Commission is actively targeting compliance and legal professionals,” particularly on the “failure to supervise” liability. Gallagher stated that the SEC understands the pressure that these professionals may feel to not be deemed inadequate in their already-busy positions in a supervisory role. He also stated that the failure to supervise liability rules should not “act as a deterrent” to these professionals to “discourage them from departing from their clearly delineated roles.” Gallagher cited the SEC’s September 2013 Frequently Asked Questions (“FAQ”) document on this issue which pointed out that much clarity and feedback has been given on the subject, which first arose in the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(4)(E)), and was “nearly” duplicated later in the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e)(6)).
In an effort to provide as much clarity and guidance as possible, Gallagher cited the FAQs as a resource for compliance personnel. Please take a moment to review the FAQs to gain a better understanding of the liability of compliance and legal personnel at broker-dealers under Sections 15 (b) (4) and 15 (b) (6) of the Exchange Act.
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