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Abstract

In response to a great deal of new rule making by federal agencies in the last few years, corporate compliance departments are becoming larger and more involved in businesses in an effort to eliminate regulatory violations and to reduce fines in the event of an offense. At the same time, chief compliance officers who head these departments are becoming increasingly concerned that they will be held liable for the actions of others at their companies merely because they are in charge of their companies’ compliance programs. This article looks at examples of laws that give rise to compliance mandates and the costs to companies of failing in compliance, the role of the chief compliance officer in firms, theories for holding chief compliance officers liable for compliance failures, and federal actions against chief compliance officers. This article concludes that, of course, chief compliance officers should be responsible for their own affirmative illegal behavior, but they should not have supervisory liability for the infractions of others unless they truly are those persons’ supervisors. To settle this liability issue, the Securities and Exchange Commission should issue clear guidelines using a “control” definition for supervisor that the U.S. Supreme Court has used in another context.

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