SEC Warns on CCO Outsourcing

posted in: Compliance | 0

The SEC recently conducted examinations of around 20 SEC-registered investment advisers and investment companies that outsourced their CCOs to unaffiliated third parties. The general takeaway is that outsourced CCOs sometimes were not knowledgeable about a firm’s business practices, did not have access to its documents and did not communicate regularly with its principals. It seems that many outsourced CCOs were acting as the equivalent of an “off the shelf” one-size-fits-all compliance manual and we know how the SEC feels about that.

I’ve had experience serving as an outsourced CCO as it is one of the services U.S. Compliance Consultants occasionally offers and I can tell you that I developed an algorithm to determine if is feasible:

Culture of Compliance + Personal Liability x SEC Scrutiny = Z (with Z representing the number of sleepless nights).

The National Exam Risk Alert discussing CCO outsourcing can be found here.