Enforcement Focus on CCO Liability

There is no doubt that wrongdoers should be held accountable for their crimes. Many years ago in The Wall Street Journal, Arthur Levitt Jr. said ‘hurt people where it hurts most, freedom or their pockets.’ As Mr. Clayton correctly stated, ‘[I]individual prosecution, particularly in the white-collar area, has a significant effect on behaviour.’

To avoid this and ensure we attract and retain people with the experience and skills necessary for an effective CCO, I offer a modest proposal – a safe harbor that would CARVE out liability by asking questions on five key areas:

• Compensation – Is the CCO compensation comparable to other senior executives?

• Access – Does he have access to information necessary to evaluate risk?

• Reports – Does he report directly to the CEO?

• Votes – Does he have a vote on the launch or management of products?

• Executive committees – Does he sit on an executive committee or the equivalent?

If the answer to any of the above questions is ‘no’, then imposing personal liability may not be fair.

The Global Enforcement Review (GER) provides analysis and commentary on global enforcement trends in the financial services industry. To compile this report, we studied published data released by the UK Financial Conduct Authority (FCA), the U.S. Securities and Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission (CFTC), the U.S. Financial Industry Regulatory Authority (FINRA), and the Securities and Futures Commission (SFC) of Hong Kong in 2016 and recent years. We have also explored the enforcement trends in various offshore jurisdictions.