Most alternatives managers (72 percent) are concerned or very concerned about the fact that the US Security and Exchange Commission (SEC) is more frequently naming and prosecuting individuals, according to results from the C-Suite Survey by Cipperman Compliance Services.
The SEC recently found two chief compliance officers (CCOs) personally accountable in two high-profile cases: the BlackRock conflict of interest case, in which the SEC held CCO Bartholomew Battista responsible for failing to adopt and implement compliance policies; and the SFX Financial Advisory case, in which CCO Eugene Mason was charged for failing to supervise a rogue employee.
The cases have caused more C-suite execs to fear they could be individually charged should their firms face SEC action.
In June, SEC commissioners Daniel Gallagher and Luis Aguilar sparred over this perceived uptick in the targeting of individuals, particularly CCOs. Gallagher spoke out saying CCOs have been “improperly” held accountable, while Aguilar argued that the recent cases do not represent a trend, but rather examples of “egregious misconduct.” Even SEC chair Mary Jo White joined the fray, stating publicly that the SEC would only charge CCOs who “cross a clear line.”
The Cipperman survey also assessed GPs’ attitudes towards their firms’ compliance programs. The majority of respondents (36 percent) only conduct compliance because they have to, describing it as “the cost of doing business,” while 29 percent said it helps them to “sell business and retain clients” and 18 percent said it keeps them “honest and on [their] toes.”
The survey further revealed the cost of compliance programs at alternatives firms. Most GPs (57 percent) spend approximately 1 to 5 percent of their revenue on compliance, while 18 percent devote less than 1 percent of their revenue to compliance and 11 percent allocate between 5 and 10 percent of their revenue.
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