The SEC's Division of Trading and Markets issued guidance regarding supervisory liability that may arise under the Securities Exchange Act of 1934, concerning the role and duties of chief compliance officers and other legal and compliance personnel at broker-dealers. See http://www.sec.gov/divisions/marketreg/faq-cco-supervision-093013.htm
The SEC may institute proceedings against a "supervisor" associated with a broker-dealer, "if someone under that person's supervision violates" federal securities laws, the Commodity Exchange Act, or Municipal Securities Rulemaking Board rules. The SEC claims to have only filed such proceedings sparingly where the individuals possessed the required degree of responsibility, authority, or ability to affect the conduct of the employee at issue, and compliance ultimately lies with the broker-dealer's chief executive officer and senior management.
The SEC staff explained its guidance in determining if certain facts and circumstances may trigger supervisory liability for compliance and legal personnel, regarding, among others, if the CCO or other legal and compliance personnel may be considered a supervisor "solely by virtue" of their position; what it means to possess the required degree of responsibility, authority, or ability to affect the conduct of another employee; and if compliance and legal personnel may provide counsel and advice to "business line personnel" without being deemed a supervisor under the Exchange Act.
In short, it is still not "fun" to be in compliance or legal at a broker-dealer.
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