FINRA Clarifies Stance on CCO Supervisory Liability

The prospect of being held personally accountable for a company’s failures is high on the list of concerns for many CCOs. CCO liability has been the subject of considerable debate within the SEC, and FINRA recently weighed in on the subject. “The CCO’s role, in and of itself, is advisory, not supervisory,” FINRA advised in a recently released notice, concluding that the responsibility for meeting a member firm’s supervisory obligations “rests with a firm’s business management, not its compliance officials.” The notice outlines the circumstances in which a CCO may be held liable for violating FINRA Rule 3110, which sets forth a firm’s supervisory obligations, including the factors mitigating for and against formal charges under that rule. This article discusses the key takeaways from the notice, with commentary from W. Hardy Callcott and Lara C. Thyagarajan, partners at Sidley. See our three-part series on the first 100 days as GC/CCO: “Preparing for the Role and Setting the Tone” (Apr. 14, 2021); “Developing Knowledge and Forging Key Relationships” (Apr. 21, 2021); and “Managing Daily Work, Performing Risk Assessments and Looking Ahead” (Apr. 28, 2021).

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