Five warning areas for CCOs

Only eight cases since 2004 have named CCOs who only had that job position, and of these, only five centered on violations of Advisers Act rule 206(4)-7, Aguilar states. These cases indicate CCOs risk enforcement action for committing any of these five actions:

  1. Failure to implement policies and procedures to prevent an employee from misappropriating client accounts;
  2. Failure to conduct an annual review and making a material misstatement in Form ADV;
  3. Failure to design written policies and procedures for outside business activities;
  4. Failure to report a conflict of interest; and
  5. Aiding and abetting an investment adviser’s failure to adopt and implement written compliance policies and procedures.

“There are those who believe that Rule 206(4)-7 unduly puts a target on the back of CCOs. The record, however, shows that that is simply not the case,” says Aguilar. “I do not believe that these few cases should raise undue concerns.”

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