Dear Securities and Exchange Commission Chair Mary Jo White:
Welcome to the SEC. By this point, you may be wondering why you agreed to serve. Trust me: after your first few months in office, it gets worse.
As an alumnus of the agency who served more than two decades in a variety of SEC offices and divisions, I appreciate your willingness to serve. I also hope I can presume to offer you advice. As the new leader of the agency, with a new leadership team, you have an opportunity to take the Commission in a new direction. This is not a criticism of the prior incumbent and her team. A transition in leadership is always a good time to think about goals and lessons learned. This months CorpCounsel.com column proposes four ideas for your consideration:
1. Encourage Compliance
Compliance professionals are dedicated to the same mission as the SEC: a fully compliant securities business. They are not an adjunct to the agency. Indeed, if they ever became your adjunct, they would lose much of their effectiveness. Instead, they represent a new and unique development: a private sector profession dedicated to raising business standards.
Given compliance professionals role, one would expect the Commission to admire, favor, and support them. Unfortunately, in recent years, many compliance professionals believe they have been under assault. The SEC seems to have developed an appetite for suing them under a variety of theories: failure to supervise, failure to establish adequate procedures, failure to consider a risk during the annual compliance review, and others. In many of these cases there was no suggestion that the compliance professional engaged in misconduct. The liability was collateral and the conduct negligent, at worst. One can understand why compliance professionals are worried.
The SEC chairmanship gives you a bully pulpit to address their concerns. Just as importantly, though, when your staff brings you an enforcement recommendation against a compliance professional, you should ask, Did he or she engage in affirmative misconduct? If the answer is no, then you should ask, Whats wrong with an examination letter? If the current trend continues and compliance professionals become regulatory guarantors of their firms, the future of the profession may be at risk. You should not let that happen.
