Mitigating Personal Liability Risk for Chief Compliance Officers

Chief compliance officers (CCOs) increasingly face personal liability for corporate wrongdoing and regulatory violations as a change of guidelines and a string of federal enforcement actions have transformed the environment in which CCOs operate. Now, regulators are pursuing cases of negligence where the CCO was neither involved in nor aware of the wrongdoing. CCOs are concerned that their personal assets may be at risk if regulators pursue them for unintentional wrongful conduct.

CCOs are questioning whether they can rely on corporate indemnification and insurance to pay for defense costs and any settlement or judgment that may result if they are pursued for unintentional wrongful conduct. Directors and officers (D&O) liability insurance and Side A difference-in-conditions (DIC) insurance provides some protection, but in the event of a regulatory enforcement act may be insufficient.

In “Mitigating Personal Liability Risk for Chief Compliance Officers” we explore the history of COOs being held personally liable for corporate wrongdoing and review:

• How state and federal regulators are approaching CCO liability in light of the recent “Yates Memo," Securities and Exchange Commission rulings, and other proceedings.
• The role of D&O liability insurance in protecting CCOs, its limits, important policy definitions, and stipulations.
• Steps CCOs can take to limit personal liability risks.

As their jobs become more perilous under the current enforcement trends, CCOs are well-advised to evaluate and understand regulatory expectations of their oversight of compliance policies and procedures. They should examine and review current and available insurance protection against regulatory investigations and proceedings CCOs and their companies should work with their insurance advisor to understand how D&O and other available coverages work.

For more information on CCO personal liability, read the full paper.