Two recent SEC enforcement actions serve as a sharp reminder that Chief Compliance Officers (CCOs) can face personal liability for what they do 鈥 or fail to do 鈥 in the course of regulatory examinations for registered investment advisers (RIAs). In each case, the Commission focused not on systemic firm-wide compliance failures, but rather on individual acts by the CCO of two separate RIAs to cover up prior administrative errors and omissions when producing documents to SEC examination staff.
These actions make clear that the SEC is treating altering, creating, or backdating records during an exam as a standalone basis for charging CCOs in their personal capacity, even where the documents themselves are only required to be maintained under the RIA鈥檚 own internal policies rather than under federal regulations.
July 2025 Enforcement Actions
In two separate matters in July 2025, the SEC sanctioned CCOs for producing altered or newly-created compliance records in response to examination requests.
- In one case, the CCO of a former RIA submitted approximately 170 pre-clearance trading forms in response to a routine SEC request that were altered 鈥 often using whiteout 鈥 to fill in missing information and modify dates to make them appear properly completed as at the time of trading as required by the RIA鈥檚 Code of Ethics. This also included creating new forms and adding traders鈥 signatures to them without the traders鈥 knowledge or approval before sending them to the SEC exam staff. The exam staff did not receive disclosure of these adjustments during inquiries, even when questioning the CCO about 鈥渁pparent alternations鈥 to the forms.[1]
Result: US$40,000 penalty and a three-year bar from compliance or supervisory roles. - In another case, a CCO responded to an exam by drafting, backdating and signing three years of annual compliance review calendars before presenting them as if they had been created in that period. Both the CCO and the firm鈥檚 president signed these documents. The CCO later 鈥渧oluntarily admitted鈥 these actions in testimony to SEC staff.[2]
Result: US$10,000 penalty; no bar.
Though factually different, both actions rest on the same core issue: the CCO knowingly misled the SEC by manipulating documents in response to an exam. The SEC found in both cases that the CCO鈥檚 actions violated recordkeeping requirements under Section 204(a) of the Advisers Act (as well as Section 206(4) and Rule 206(4)-7 with respect to the first action).
Personal Liability in Previous SEC Actions Against CCOs
The SEC has brought similar actions before, most notably in 2020 when it charged a CCO who had backdated a compliance memo related to a sensitive investment and withheld contradictory versions of the memo from exam staff. This led to a US$25,000 civil penalty, a three-year prohibition on acting in a compliance capacity and a one-year ban from appearing before the Commission as an attorney.[3]
In addition, the SEC has previously brought charges against CCOs in their personal capacities for more pervasive and extensive compliance failures, such as the following cases:
- 2022 Case: The SEC took action against an investment firm due to inadequate compliance policies regarding outside business activities (OBAs). The firm’s CCO failed to enforce proper reporting, leading to violations under Section 206(4) of the Advisers Act. [4]
Result: US$15,000 civil penalty for the CCO and restrictions on future supervisory roles; US$150,000 penalty for the firm.
- 2011 Case: A firm faced charges for overcharging clients and failing to properly disclose principal trades, violating multiple provisions of the Advisers Act. The compliance officer and executive management were deemed to have aided and abetted these violations. [5] Result: US$50,000 civil fine and requirements for comprehensive compliance reviews by independent consultants.
In contrast to these precedent enforcement actions, the 2025 cases demonstrate the SEC鈥檚 willingness to pursue personal charges against CCOs solely on the basis of misleading regulators for relatively routine matters, rather than participating in more serious underlying misconduct. In the recent actions, the CCOs鈥 conduct involved completing standard documents like pre-clearance trading forms and annual compliance calendars: documents that might not raise flags for potential enforcement given the absence of alleged harm to the RIA鈥檚 investors. However, intentional and misleading mischaracterizations of records to the SEC can result in personal liability for CCOs.
Strategic Considerations for CCOs and Firms
CCOs and their teams should now prioritize the following:
- Align Practices with Policies: Perform regular internal audits to confirm that operational practices are consistent with your firm’s documented policies. Implement documentation standards that are practical and uniformly enforceable, accurately reflecting daily operations and supporting effective compliance enforcement.
- Develop Robust Exam Protocols: During regulatory examinations, it is vital to maintain the accuracy of information presented to regulators. While addressing incomplete details is important, it should never lead to the misrepresentation of the firm鈥檚 practices, which can invite regulatory consequences.
- Promote Integrity in Documentation: Emphasize in training that honesty and accuracy in record-keeping are critical, even when records are not perfect. Compliance teams should be aware of the importance of document integrity and recognize that improper handling of records during an examination can result in enforcement actions.
The SEC generally aims to encourage qualified individuals to assume the role of Chief Compliance Officer, and it is rare for CCOs to face personal charges for compliance failures. However, the SEC has made its current position clear: CCOs are not immune from personal liability when they mislead exam staff. Efforts to bring documentation into compliance, if not handled transparently, can result in fines, industry bars, and long-term career impact.
If you have questions about the contents of this alert, please reach out to a member of 麻豆直播鈥檚 Fund Formation and Investment Management Team.
