Liability of Compliance Personnel at Financial Institutions

Summary

This practice note discusses individual liability of compliance officers and personnel at financial services firms, including its basis, development, and enforcement. Chief compliance officers, anti-money laundering compliance officers, and other compliance personnel (CCOs) serve as gatekeepers of a financial services firm to prevent; detect; and remedy violations of laws, regulations, and firm policies. Increasingly, regulators have held CCOs personally liable for deficiencies in a firm's handling of its compliance obligations on the theory that, if a CCO is properly executing their duties, they should detect and prevent securities law violations at the financial services firm. This note explains the statutory framework for assessing the liability of CCOs, discusses recent Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority, Inc. (FINRA) disciplinary actions against compliance personnel, and offers strategies to avoid potential liability.