The SEC fined and censured a Chief Compliance Officer and his firm for violating the Compliance Rule (206(4)-7) because the firm had inadequate compliance procedures and failed to follow other procedures.  The SEC also charged the firm with altering compliance records to comply with SEC exam requests.  The firm had adopted procedures requiring certain certifications to ensure that the RIA did not misuse material nonpublic research information collected by the affiliated BD.  The SEC alleges that the firm did not follow the procedures and did not maintain evidence of proper supervisory reviews.  The firm also failed to do an annual compliance review.  The SEC also alleges that the firm prepared certifications to make compliance records appear complete as part of an SEC exam.  The SEC charges the CCO with aiding and abetting violations of the Compliance Rule.

OUR TAKE: The firm made two serious compliance blunders: (1) failing to follow its own procedures and (2) misleading the SEC during and exam.  While the SEC has not often pursued CCOs directly, the enforcement staff will take action where the CCO makes no little or no effort to test whether the firm properly implemented policies and procedures.

http://www.sec.gov/litigation/admin/2010/34-63323.pdf