For chief compliance officers, documenting their work is a must if they want to dodge the risk of personal liability.
In fact, an annual survey facilitated by Thomson Reuters noted that this risk has become one of the top concerns compliance officers face, with 48% of the respondents foreseeing an increase in the risk of personal liability.
This concern arose with the recent case of the US Securities and Exchange Commission (SEC) against David Osunkwo, an outsourced chief compliance officer for two now-defunct advisors, Aegis Capital and Circle One Wealth Management.
The SEC alleged Osunkwo of submitting inaccurate information in a filing for the two advisory firms. Particularly, the regulator held him accountable for not properly corroborating estimates on assets under management as well as the number of accounts furnished by the firms' chief investment officers.
Following the charges, Osunkwo was given a fine amounting to US$30,000 and a one-year suspension from holding any position in the securities industry. Additionally, SEC announced the closure of Osunkwo's company the Strategic Consulting Advisors, which is the same firm outsourced by Aegis Capital and Circle One for CCO responsibilities.
Reuters said compliance officers have to respond to all red flags of possible malfeasance and document their probes as detailed as possible.
More so, CCOs at wealth management practices should always seek permission to consult with independent legal counsel if there is discordance with the management executives.
It was also noted that to avoid such risks, COOs should not have any supervisory responsibility over their firms as they should consult with designated supervisors to identify if proper oversight is practised.
Inside Canada’s robo-revolution