From The Wall Street Journal Risk & Compliance blog (and Samuel Rubenfeld @srubenfeld): Good news for corporate compliance officers whose officers or employees lie to them or mislead them: SEC Stands Up For Compliance Officers
The Securities and Exchange Commission took the side of compliance officers — after a Colorado-based investment adviser was caught lying to one.
Earlier this week, the SEC said its own probe found that Carl Johns, an investment adviser in Louisville, Colo., concealed several hundred trades in his personal accounts after failing to report them by altering brokerage statements and other documents. He later created false documents that purported to be pre-trade approvals, and misled his firm’s chief compliance officer in her investigation into the trading.
Mr. Johns agreed to pay more than $350,000 and be barred from the securities industry for at least five years, the SEC said. The case is the SEC’s first made under a rule of the Investment Company Act that prohibits misleading and obstructing a chief compliance officer.
“Compliance officers should be happy that this case was brought because it will help them fulfill their duties,” said Stephen M. Quinlivan, a shareholder of law firm Leonard Street and Dainard. “If people do lie to them, the SEC’s not going to stand for it.”
Mr. Quinlivan said he believes that the SEC has generally stepped up its examinations of investment advisers, particularly when it comes to hedge funds and private equity.
If a good compliance officer is being lied to, the SEC “could certainly” bring a similar case, Mr. Quinlivan said.
Of course, if you’re a compliance officer and the SEC thinks you’re the one lying or misleading — or just being willingly duped — that’s another problem.