CCO Personal Liability in Focus for 2024: InnReg on SEC Commissioner Remarks

Best Practices for Protecting CCOs Against Liability

Our extensive experience in compliance consulting and as an outsourced compliance provider supporting fintechs has uncovered the following key tips to help protect CCOs and keep them out of the crosshairs of regulators:

1. Establish a thorough compliance program: As the first order of business, CCOs should create a comprehensive compliance program to ensure compliance with laws and regulations. The program should also include a system for monitoring and reporting compliance-related issues.

2. Build a team for scale: CCOs should be empowered to have the staff and resources required to help them manage and implement effective compliance policies with the appropriate authority to manage and supervise the compliance program.

3. Conduct periodic firm risk assessments: CCOs should regularly monitor and assess their firm’s compliance risks and identify appropriate remediation strategies.

4. Ensure employees are well-trained: CCOs should provide employees with regular training and education on the firm’s compliance policies and procedures.

5. Foster a culture of compliance: CCOs should set a “tone from the top” to create a culture of compliance in all aspects of the business. This includes promoting ethical behavior, encouraging employees to speak up about compliance concerns, and ensuring the firm’s leaders are committed to compliance.

6. Keeping up to date with regulatory developments and emerging risks: CCOs operate in a complex and rapidly evolving regulatory environment, where laws and regulations can change quickly and without warning. It is essential for CCOs to stay informed of the latest regulatory developments and understand how they affect their organization’s compliance obligations.

7. Maintain constructive dialogue with regulators: CCOs should seek to maintain positive relationships with regulators, for example, by cooperating with investigations and heeding regulators’ guidance when taking corrective actions.  

We cannot overstate how critical CCOs are in ensuring their firms comply with a wide range of laws and regulations cannot be overstated. However, with that responsibility comes a significant risk of violating those laws and regulations.

CCOs can be held personally liable for any compliance failure, which can lead to significant legal and financial consequences and overall reputational harm for both the firm and the CCO. To manage these risks, CCOs must follow the above best practices to help protect their firms and themselves.