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In remarks to the New York City Bar Association&nbsp;Compliance Institute on October 24, 2023, the Director&nbsp;of the SEC’s Division of Enforcement, Gurbir S.&nbsp;Grewal, commented on certain aspects of compliance&nbsp;enforcement, including cooperation credit and enforcement&nbsp;actions against compliance personnel, among other things.

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Emphasizing proactive compliance, including “[t]hrough&nbsp;leadership, training, constant oversight and the right tone&nbsp;at the top,” Mr. Grewal stated that if, despite such efforts,&nbsp;a securities law violation is detected, “the best thing to&nbsp;do would be to self-report and cooperate.” With respect&nbsp;to cooperation credit, Mr. Grewal stated that the staff has&nbsp;“aggressively rewarded meaningful cooperation, most&nbsp;notably by recommending that the Commission impose&nbsp;substantially reduced penalties—or even no penalties at&nbsp;all.” He noted that circumstances or actions that have&nbsp;resulted in reduced or no penalties have included:

preemptively remediating and ceasing the unlawful behavior;

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proactively providing compensation to victims;

providing detailed financial analyses, explanations and&nbsp;summaries of factual issues to the staff;

proactively identifying key documents and witnesses that<br>the staff has not yet identified; and

facilitating interviews of former employees.

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Enforcement Actions Against Compliance Personnel 

Mr. Grewal asserted that the Enforcement Division “do[es]&nbsp;not second-guess good faith judgments of compliance&nbsp;personnel made after reasonable inquiry and analysis,”&nbsp;describing enforcement actions against compliance&nbsp;personnel as “rare.” Still, Mr. Grewal identified three&nbsp;situations in which the SEC typically brings enforcement&nbsp;actions against compliance personnel:

when compliance personnel affirmatively participate in misconduct unrelated to the compliance function;

when there is a wholesale failure by them to carry out their compliance responsibilities.

In circumstances of apparent “wholesale failures,”&nbsp;Director Grewal noted that “there was no education, no&nbsp;engagement and no execution.” He reiterated, however,&nbsp;that cases against CCOs are rare, alluding to a “handful”&nbsp;out of the more than 1,000 standalone enforcement&nbsp;proceedings during his tenure, and noted that the staff has&nbsp;“no interest in pursuing enforcement actions taken against&nbsp;compliance personnel who undertake their responsibilities&nbsp;in good faith and based on reasonable inquiry and&nbsp;analysis.”

A copy of Director Grewal’s remarks is available <a href="https://www.sec.gov/news/speech/grewal-remarks-nyc-bar-association-compliance-institute-102423" target="_blank" rel="noreferrer noopener">here</a>.

SEC’s Enforcement Director Comments on CCO Liability, Self-Reporting and Cooperation

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