June 09, 2021

Jim Lundy Examines the NYC Bar Association’s Proposed CCO Guidance With Law360

In the Law360 article “NYC Bar Proposal Could Quell Persistent ‘Fear’ CCOs Face,” SEC and regulatory enforcement defense partner Jim Lundy discussed how a new proposal from the New York City (NYC) Bar Association aims to provide more clarity about U.S. regulators’ decisions regarding whether to bring enforcement actions against chief compliance officers (CCOs).

The publication noted that the NYC Bar Association’s proposal outlines over a dozen factors it wants regulators, including the U.S. Securities and Exchange Commission (SEC), to weigh when deciding whether to take enforcement actions against CCOs.  

Lundy explained that the current SEC framework for assessing CCO liability stems from the Gutfreund standard and from an array of subsequent rulings, guidance and statements from SEC members.

“The standard is opaque, and that’s what’s frustrating,” Lundy said. “What the NYC Bar Association is proposing is a way to assess the facts and the circumstances related to what the SEC is investigating and to give the guidance for how those facts and circumstances should be considered when applied to the standard.”

Lundy also noted that cases against CCOs are rare, but “they’re so sensitive and so controversial, and so decimating to the individuals who are charged, that the compliance industry is on alert.”

Additionally, there are nonpublic SEC investigations into firms’ compliance functions and their CCOs — probes that “we never know about” but that contribute to the “chilling effect” on the profession, Lundy said.

The full article is available for Law360 subscribers.

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