Rule 206‑4(7) under the Investment Advisers Act of 1940 – the so-called “Compliance Rule” – requires an investment adviser to establish compliance policies and procedures; appoint a chief compliance officer (CCO) to administer those policies; and review the effectiveness of the policies at least annually. Implicit in the Compliance Rule is the requirement that the adviser provide adequate resources to support its CCO and compliance program. Recent SEC enforcement actions against an investment adviser and its CEO illustrate the consequences of ignoring a CCO’s repeated calls for additional resources and support. Specifically, an investment adviser and its CEO settled charges that, among other things, they failed to address known resource deficiencies in the adviser’s compliance program, which undermined the program’s effectiveness and resulted in compliance failures. This two‑part series explains why it is important for investment advisers to provide adequate resources to support their CCOs and compliance programs. This second article provides the key takeaways – including six valuable lessons learned – from the enforcement actions. The first article
outlined the compliance failures in those actions. See our two‑part series “What a Recent SEC Opinion on a FINRA Disciplinary Action Says About CCO and CEO Liability”: Part One
(Jan. 24, 2019); and Part Two
(Jan. 31, 2019).