At a recent speech at the 2008 CCOutreach National Seminar, a seminar for the Chief Compliance Officers of registered investment advisors, SEC Chairman Christopher Cox noted the importance of compliance offices during these volatile times. Cox noted that CCOs are partners with the SEC to ensure that investment advisory firms remain compliant and follow all investment advisory rules and regulations. The speech is reprinted below.
Speech by SEC Chairman:
Address to the 2008 CCOutreach National Seminar
Chairman Christopher Cox
U.S. Securities and Exchange Commission
SEC Headquarters Office Main Auditorium
November 13, 2008
Thank you, Lori [Richards, Director of the SEC Office of Compliance Inspections and Examinations], not only for that kind introduction, but for all that you’ve done to make the CCOutreach National Seminars so successful. Once again, you’ve produced an outstanding program not only for the participants here, but also for the many others who are taking part across the country via the Web.
All of you have no doubt been closely following the dramatic events in our economy and our markets in recent months. But unlike many others, you’ve been following them with a professional’s eye.
And as you do so, I’m sure you realize the very events unfolding around us show why your jobs are now more important than ever. That’s because your role is to focus at the corporate level on many of the same issues that we in the government are addressing at the market-wide and systemic levels.
From internal procedures to regulatory requirements, audits, investigations and controls, you bring structure and order to a company’s operations. By strictly enforcing those rules of the road, you help reduce the market’s uncertainty about a company’s operations, increase the confidence of its counterparties, and protect its investors.
You can’t have a strong company without strong compliance, at every level — from strong CEO and executive support for the compliance team, to rigorous standards and processes, to broad financial and organizational resources for you to fully perform your duties.
That latter point bears emphasis. In a profit and loss driven world, there is always a risk that companies facing an uncertain economic future may choose to cut compliance expenses as a shortsighted way to save money. But experience has taught us again and again that giving short shrift to regulatory compliance subjects a company’s investors, employees, management, directors, and every other stakeholder to unacceptable risks.
As you well know, compliance programs have made huge strides in recent years in becoming more formalized and more robust. Now — in the midst of a financial crisis caused in significant part by a lack of transparency about financial risk in many companies — we must not turn back the clock.
Now more than ever, companies need to take a long-term view on compliance and realize that their fiduciary responsibility requires a constant commitment to investors. That means sustaining their support for compliance during this market turmoil, and beyond it as well.
Today, when the future is uncertain, when markets are unstable, when investor confidence is shaken, this is the time — more than ever — when we need a powerful voice for compliance.
When a company cuts compliance, violations will occur. And if violations occur, punitive actions should and will be taken. In the current environment, that is true now more than ever. There will be no favor granted because a company made a cost-cutting decision to minimize their compliance budget. That’s because now and always, the interests of investors are inextricably linked to strong compliance.
It is equally vital that you, as the leaders of that effort, be vigilant in this difficult environment. You have to be assertive in making it known there must be no tolerance for cutting corners or skirting the law, particularly in disclosures and valuation. You can faithfully report, directly from the SEC, that should we find serious violations, we will not hesitate to bring enforcement action.
The fact that our agency’s partnership with CCOs is so strong is the best protection that your company and your investors can have. That is why our work together in this area is so important, and why I am so glad that all of you are taking the time and opportunity to be here.
Since you will be spending some time with our Division of Investment Management and Office of Compliance Inspections and Examinations teams over the course of the day, I would also like to add a special note of thanks to them. They’ve been making truly extraordinary and commendable efforts to protect investors over this critical time.
These CCOutreach programs, such as the one you’re about to experience today, have proven to be invaluable for all of us. Working with leaders like you to share our knowledge, and to learn from you, helps all of us do our jobs even better. So thank you again for your participation, and thanks for the vocation you have chosen as CCOs.
You have and will continue to play a critical role in protecting the integrity of our capital markets, and all of us at SEC are proud to be your partners.