CFO Forum: SEC’s mission not to ‘go after’ CCOs

There was much concern surrounding the liability of chief compliance officers (CCOs) at private equity firms last year, but Jennifer Duggins, current co-head of the Private Funds Unit at the US Securities and Exchange Commission (SEC) and a former CCO, confirmed that the SEC isn’t in the business of charging CCOs at the 2016 PEI CFOs and COOs Forum last week.

The SEC charged CCOs in a couple of cases last year, prompting a heated debate regarding CCO liability. Duggins reassured CCOs that the SEC doesn’t typically like charging CCOs as a rule, but that there are some specific situations that can require it due to blatant negligence or fraud.

“It’s not our mission or business to go after CCOs,” she told the audience, adding that, having been a CCO herself, she understands the pressures they face.

“We are going to assess quickly whether a CCO is not doing his or her job and we have the ability to determine whether that may be because the CCO has too many responsibilities or whether he or she is not getting the resources they need,” she said.

Duggins joined the SEC in July as a senior specialized examiner and the new co-head of the Private Funds Unit in the Office of Compliance Inspections and Examinations alongside Igor Rozenblit. She previously worked at KPMG as a director in the advisory practice and as a CCO at Chilton Investment Company.

As far as outsourced CCOs are concerned, Duggins reminded the audience of some of the takeaways from a recent SEC risk alert.

“We'd like to see a strong interaction between the outsourced CCO and the firm and what we mean as an example of a strong interaction is that employees recognize the CCO upon site and that may evidence a presence at the firm,” she said. “You know his or her name, you've met him or her perhaps for compliance training, which we think may demonstrate that the CCO has made ample personal appearances in the office and interacted effectively.”

She added that the SEC also expects the outsourced CCO to be able to articulate and understand the business that they’re representing and the associated risks, and that they’re an independent resource helping to assess a firm’s risk profile. 

For more coverage from the 2016 PEI CFOs and COOs Forum, see the March issue of pfm.