Former CCO Charged for Altering Documents during SEC Exam
SEC Releases
Introduction
The SEC charged the Former CCO and Vice President of an RIA on July 15th, 2025, for modifying compliance documents requested by the SEC during an Examination.
SEC Examinations can be intimidating for compliance departments that have not properly prepared, and it is vital that compliance programs are run by experienced personnel with the proper resources.
What Happened?
According to the SEC:
- The RIA’s Code of Ethics required pre-clearance for the purchasing or selling of securities in their personal accounts utilizing a “Securities Transaction Request Form”.
- Forms were often not completed until after transactions were made, because it was reported that verbal approval was often obtained prior to transactions with the form being filled out after.
- During an examination in 2022-2023, the SEC requested the Firm’s pre-clearance policies and procedures and documents related to personal trading activity of one of the Firm’s Portfolio Managers.
- Approximately 170 forms were modified by the CCO in an attempt to show compliance with the Code of Ethics and policies and procedures.
- The most common change made was backdating the forms to match the trade dates.
- At times, whiteout was used to remove the original date on the form.
- For transactions by the Portfolio Manager that did not have any form, the CCO created a new form and put the employee’s signature on without the Portfolio Manager’s knowledge or authorization.
- The CCO is prohibited from compliance activity for three (3) years and will be required to pay a civil penalty of $40,000.
Vigilant’s Conclusion
This charge is an example of a time when the attempt to mitigate a problem created significantly worse problems.
Firms can avoid these situations by creating a strong culture of compliance at a Firm, with leadership investing resources into their compliance, and avoiding situations where an Officer has to be a Dual-Hat CCO. Additionally, taking proactive steps like requesting a Mock SEC Exam can help a Firm be prepared for requests made by examiners.
Vigilant Compliance offers an extensive list of Solutions for Firms that need Compliance Support. These vary from supplying trained staff that can support the CCO, as-needed consulting, or providing an Outsourced CCO. We tailor our Services to the needs of your business, so you can focus on your business goals while we handle the compliance.