The US Department of Justice and Federal Bureau of Investigation announced the first-of-its kind indictment of an “insider trading” scheme involving non-fungible tokens (or NFTs).
On May 25, 2022, the US Securities and Exchange Commission (the SEC) proposed amendments (the Proposal) to Rule 35d-1 (the Rule) under the Investment Company Act of 1940, as amended (the 1940 Act). The Proposal comes over 20 years after the original adoption of the Rule and seeks to greatly expand the scope of the Rule in the name of investor protection and modernization. The Proposal includes the following primary amendments to the Rule:
From Brian Rubin and Amy Albanese in this month’s column for NSCP Currents:
Many compliance officers believe they have targets on their backs. Indeed, according to industry-wide surveys conducted by the National Society of Compliance Professional (NSCP), 72% of compliance professionals are concerned that regulators have expanded the role of compliance officers and the scope of their responsibilities in imposing personal liability and 63% believed that personal liability will be imposed even where compliance did not participate in the violations caused by the company or other executives. Is it any surprise that compliance officers seem to believe that regulators look at them the same way that Mrs. Gamp viewed the living young man: “He’d make a lovely corpse.”
By reviewing FINRA’s monthly disciplinary reports, press releases and online database, Eversheds Sutherland (US) Partners Brian L. Rubin and Adam C. Pollet identified the following key takeaways:
Every year, FINRA brings hundreds of cases, many alleging that firms have inadequate policies and procedures. In the overwhelming majority of those cases, the Chief Compliance Officer (CCO), who FINRA considers to be “a primary advisor to the member on its overall compliance scheme and the particularized rules, policies and procedures that the member adopts,” is not charged. With regard to Anti-Money Laundering (AML) cases, AML compliance officers (AMLCOs) are also infrequently charged. Questions that always follow such cases include the following: When are violations “firm issues” and when should the compliance officer get charged?
Despite the relatively small percentage of cases brought against compliance officers, they are (unsurprisingly) concerned about being in the cross hairs of regulators, and being subject to personal liability. Compliance officers are usually the firm’s central point of communications with regulators, responsible for responding to regulatory inquiries, producing documents, and answering questions. In many investigations, they must provide on-the-record testimony, even if the case does not directly involve their core functions.
Due to these concerns, on January 10, 2022, the National Society of Compliance Professionals (NSCP) proposed a “Firm and CCO Liability Framework” (NSCP Framework) to “provide guidance to regulators, chief compliance officers (CCOs), and firms regarding perceived or actual CCO liability.” The NSCP Framework developed nine questions to be “considered by regulators where a compliance failure may have occurred,” to evaluate CCO liability.