Hats: Private funds CCOs often wear a lot of them. In fact, three-fifths of private funds CCOs wear multiple hats, according to sister title Regulatory Compliance Watch‘s analysis of SEC data.
RCW’s analysis suggests that oft-heard stories of firms with multi-hatted CCOs getting into hot water for compliance failures may be overhyped. It is true that the SEC doesn’t appear to much like CCOs having more than one role, but it can be more or less a necessity for many smaller firms.
But it will be increasingly important to be sure that, however many hats your CCO wears, your firm has proper policies and procedures in place, and that it enforces those P&Ps appropriately. Last night, I spoke with former director of the SEC’s Office of Compliance Inspections and Examinations, as well as former chief risk and strategy officer at FINRA, Carlo Di Florio – now global chief services officer at ACA Compliance – who says the OCIE’s recent private funds risk alert is a “blueprint” for where regulators’ focus will be in the coming years, especially as more of the investing world turns to private markets.
Particularly telling, perhaps, was the SEC’s settlement with Ares Management earlier this summer over alleged material non-public information issues. The SEC didn’t charge Ares with breaking insider trading rules – it charged the firm primarily with not appropriately enforcing its P&Ps. The lesson here: the SEC and OCIE are likely going to continue enforcing not just against crimes themselves, but processes and regulatory sins of omission that could allow crimes to happen.