CCO Protection

If you are a CCO, it appears you are a target and the risk of CCO liability continues to grow.  With Code of Ethics reports due this month and next, it is time to move some of that risk off your shoulders and onto those of your employees-where it belongs.

Many of the Codes of Ethics that I have revised of late allow employees to not file quarterly personal securities transaction reports if their assets are maintained at the custodian used by the firm. This practice puts the liability for these reports onto the CCO.  I suggest changing this practice and requiring all applicable employees to file the reports quarterly.  The reports should be signed by the employee and allow for a “nothing to report” box they can check.

Without this signed report, if it is determined that there are transactions that have not been reported, the CCO could be deemed liable.

This same process applies for annual holdings reports that are also due shortly.  Require employees to sign the annual holdings report and allow for a “nothing to report” box they can check.

Be sure to change the Code of Ethics and Compliance Manual regarding this procedure.

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