“The Big Chill”: Personal Liability and the Targeting of Financial Sector Compliance Officers

Court E. Golumbic

Volume 69, Issue 1, 45-94

Financial sector compliance officers have been referred to by prominent law enforcement and regulatory officials as “essential partners” in ensuring compliance with relevant laws and regulations. Yet a series of recent enforcement actions in which individual compliance officers have been sanctioned personally have placed strains on the partnership, fueling concern among these professionals that they are being unfairly targeted.

Law enforcement and regulatory officials have responded with assurances that the partnership remains intact. In the rare instances in which financial sector compliance officers have been held personally responsible for program failures, they have stressed, the actions were undertaken only after careful consideration, where the facts demonstrated that the compliance officers “crossed a clear line.”

Efforts to justify regulators’ charging practices have been ineffective, however, for the perception of targeting has endured. Indeed, it has coincided with increased attrition within the ranks of senior compliance officers in the industry. The Author offers several possible explanations for this “chilling effect.”

Regardless of the cause, regulators are confronted with a fundamental policy question: whether the benefits of current charging practices justify the continued exodus of senior compliance professional from their firms or the industry entirely. The Author advances two proposals to reverse the perception of compliance officer targeting and its attendant chilling effect, including the adoption in the United States of a supervisory structure akin to the United Kingdom’s “Senior Managers Regime”

These proposals reflect a clear message. Actions must be taken to reverse the perception of compliance officer targeting before the “big chill” sets in, and the industry finds that this critical function has been robbed of its best and brightest.

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