Several years ago, the SEC proposed – and ultimately withdrew – a rule (Proposed Rule) that would have required registered investment advisers to adopt and implement detailed business continuity and transition plans (BCPs). The importance of BCPs, and their likely scrutiny by the SEC, has returned to the forefront recently with investment advisers’ widespread reliance on them due to the coronavirus pandemic. To the extent a BCP addresses the departure of key personnel, it typically only covers a firm’s founders, despite sound business and regulatory reasons for extending it – and succession planning in general – to the firm’s CCO as well. Further, when incorporating a firm’s CCO into a holistic succession plan, it is important to weigh risks and issues associated with using outsourced CCOs or having high turnover in the position. This first article in a three-part series outlines residual takeaways from the Proposed Rule, the importance of CCO succession planning, issues associated with using an outsourced CCO and the risks of high CCO turnover. The second article
will examine CCO hiring and onboarding, as well as explore whether managers should separate their compliance departments from their legal departments. The third article
will evaluate the risks of poor succession planning and provide a roadmap for developing a robust succession plan. See “PLI Panel Explores Approaches to GP Succession Planning
” (Oct. 8, 2019).